Are you wondering what will happen to the Brisbane property market moving forward?
Well… based on how the market has been performing so far it’s likely that will see high double-digit Brisbane house price growth in 2021, with most segments exhibiting strong price appreciation other than the inner city and high-rise apartment market.
And despite Covid related challenges buyers and sellers are still transacting and Brisbane property values:
- rose 0.5% in the last week and auction clearance rates were at boom time levels over the weekend
- increased 2.0% over the month of July, and
- increased 15.9% over the last year.
And there is still plenty of growth left, as Brisbane property is still very affordable compared to the other east coast capital cities.
What a turnaround from all the pessimistic forecasts all the banks made in the middle of last year.
Currently, the Sunshine State capital is shining but it’s not too late to be early in this cycle – there is plenty of growth ahead – for the right properties.
BRISBANE DWELLING PRICE TRENDS – Source: Corelogic September 2021
Outstanding demand for lifestyle areas as well as extremely strong demand for detached houses in Brisbane, particularly in the inner and middle ring suburbs has delivered 5.3% overall growth in the last 3 month, with Brisbane’s more expensive properties outperforming.
The resurgence of buyer interest in the Brisbane property market has meant that auction clearance rates have consistently been in the 70% range, which is unusual for Brisbane considering this city is not known for its auction culture like its southern cousins, but this is just another suggestion that there are more buyers than there are sellers and this always leads to higher property prices.
At Metropole’s Brisbane office we are noticing more investors are getting into the Brisbane market recognising that while there are no bargains to be found, in 12 months time the properties they purchased today will look like a bargain.
Not that long ago Westpac Bank updated its forecasts and tipped Brisbane prices to surge 20 percent between 2022 and 2023, meaning Brisbane is likely to be one of the best performing property markets over the next few years.
Of course, while some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long-term investments, certain submarkets should be avoided like the plague.
Increased demand for Brisbane houses has been underpinned by increasing consumer sentiment, historically low-interest rates, and internal migration considering the relative affordability of houses in Queensland compared to Sydney and Melbourne.
Similarly, popular areas of the Gold Coast and Sunshine Coast have enjoyed strong demand considering the increased flexibility of being able to work from home and commuting to the big smoke less frequently.
At the same time, property investor activity has been strong, particularly for houses, not only coming from locals but from interstate investors who see strong upside in Brisbane property prices as well as favourable rental returns.
But be careful…there is not one Queensland property market, nor one south-east Queensland property market, and different locations are performing differently and are likely to continue to do so.
Houses remain a firm favourite of prospective home hunters, with demand rising post-lockdown and it remains significantly elevated compared to last year.
However, apartment demand has been sliding and, in general, apartments in Queensland are a higher risk investment than houses, particularly due to a high supply of apartments that are unsuitable for families or owner-occupiers.
To help you make an informed investment decision, I’m going to examine what’s going on in the Sunshine State in detail in this article.
But be warned…it’s a little longer than normal, so if you’re looking for a particular element of the Brisbane property market, use these links to skip down the page.
There are multiple markets in the diverse sprawling city of Brisbane; divided by geographic location, price point, and property type.
And just to make things clear…I’m talking about the property market in Brisbane – not the Queensland property market.
That’s a very different animal!
If you’ve been following my property investment strategy, you’ll know I only invest in capital cities and that’s why I avoid the Sunshine Coast, the Gold Coast, and Queensland’s regional markets which have very different (and fewer) growth drivers than Brisbane and are therefore more volatile.
And not all Brisbane properties will perform well.
In Queensland, houses are the preferred style of accommodation over units, and investors who buy rental apartments in high supply areas are taking high risk with both equity and cash flow risks materially increasing over buying the right house.
So…is it the right time to get into the Brisbane property market?
Anyone who buys an A-grade home or investment-grade property in Brisbane now will look back in a couple of years’ time and recognise they bought a bargain, as this new property cycle still has some years to run.
There is a perfect storm of positive growth drivers that will have Brisbane house prices performing strongly in 2021 and 2022 and the recent announcement of Brisbane winning the 2032 Olympic games will underpin strong infrastructure growth, economic growth and population growth over the next decade.
This suggests that South East Queensland will continue to be a preferred destination for many Aussies from interstate due to lifestyle, health, and affordability reasons.
But, as I have explained, there are multiple housing markets within Brisbane, based on price point, geography, and type of property and as always, you can’t just buy any property and count on the general Brisbane property market to do the heavy lifting over the next few years, so careful property selection will be critical.
Fast facts about the Brisbane property market
1. Brisbane House Prices
CoreLogic reports that Brisbane’s dwelling values are up 10.6% over the last year and are now at new highs, but as always the housing market in Brisbane is very fragmented.
Digging deeper into the stats some properties have far outperformed others and freestanding Brisbane houses with 5-7 km of the CBD or in good school catchment zones have grown in value strongly.
It’s really a tale of 2 cities- while some properties overperform, while others underperform.
The worst performing segments of the market are:
- apartments in high-rise towers and new and off-the-plan apartment sales.
- properties in the blue-collar areas and new housing estates where young families are likely to have overextended themselves financially and with many people will be out of work for a while.
Over the last few years there was a real acceleration in interstate migration towards Queensland and generally speaking, Brisbane is the first port of call in Queensland.
Population growth that saw the Sunshine State gain a net 7237 people from interstate in the September quarter of 2020– while NSW shed 4110 and Victoria lost 3749 – has compounded a recovery that was already underway after the apartment-building boom triggered a private rental market vacancy rate that REIQ figures show peaked at 4.1 per cent in December 2016.
Realestate.com reported a significant increase in property searches in Queensland earlier this year but this has slowed down a little now.
2. Brisbane’s Property Market Trends
Now don’t get me wrong. Not all Brisbane property values will rebound strongly moving forward.
Properties located in the inner ring suburbs, particularly in gentrifying locations, will outperform cheaper properties in the outer suburbs.
The reason being, Covid19 has adversely affected low-income earners to a greater extent than middle and high-income earners who are likely to recover their income back to pre-pandemic levels more quickly, while many have not been hit at all.
High-rise apartment towers in and near the Brisbane CBD which were already suffering from the adverse publicity of structural problems prior to Covid19, will now become the slums of the future as they are shunned by home-owners and investors.
And like after every downturn, there will be a flight to quality properties and an increased emphasis on liveability.
As their priorities change, some buyers will be willing to pay a little more for properties with “pandemic appeal” and a little more space and security, but it won’t be just the property itself that will need to meet these newly evolved needs – a “liveable” location will play a big part too.
To many, liveability will mean a combination of:
- Proximity – to things like parks, shops, amenities, and good schools
- Mobility – access to good public transport (even though this may be less important moving forward) or a good road system
- Access to jobs
The bottom line is that for those with a secure job and who have their finances under control, now could be the best opportunity in a decade to set themselves up for the opportunities that will present themselves as our property market head into a perfect storm with a confluence of growth drives in 2021-22.
Changes in Brisbane property prices over the past two years
During the height of Covid-19, Brisbane’s housing market defied the odds, shone through, and even came out relatively unscathed.
Sure the markets are moving forward strongly now, but not all properties are going to increase in value at the same rate – and some sectors of the market will continue to languish.
Currently, there are more buyers for A grade homes and investment-grade properties than there are properties for sale in Brisbane meaning we are in a strong seller’s market where asking prices keep rising:-
Source: SQM Research
Brisbane has seen a distinct outperformance of house values relative to units.
Since the onset of COVID-19, house values across Brisbane have increased 15.5%, compared to just 5.0% across units.
But the gap between house and unit values has risen fairly consistently since mid-2015, and 5 years annualised growth rates sit at 4.3% for houses, compared with a -0.1% decline in units.
Unit construction across Brisbane rose substantially through to late 2016, creating an overhang of stock when investor activity began to decline off the back of changes to macroprudential policy in late 2017.
The house price premium across Brisbane shows little sign of slowing down, as monthly growth rates over June continued to show a bigger uplift in houses (2.2%) compared to units (0.7%).
This could also reflect interstate demand for relatively affordable Brisbane houses, as the normalisation of remote work through COVID has promoted more movement from Melbourne to Queensland over 2020.
Source: Corelogic 29th July 2021
Brisbane housing market’s drivers
There are multiple factors that have contributed to an increase in demand across the state alongside low mortgage rates.
Interstate migration to Queensland has remained a tailwind for housing demand.
Migration data suggests that the Sunshine state has been particularly popular since the onset of COVID-19.
The latest (provisional) data for the December 2020 quarter suggests that net interstate migration to Queensland reached 9,763, the highest volume since December 2003.
More detailed data on recent quarters of interstate migration suggests that 27.5% of the quarterly increase in arrivals came from Melbourne.
Together, Melbourne and Sydney’s departures accounted for 42.5% of interstate arrivals to Queensland in the December quarter.
Affordability is another key driver
Another appeal of housing markets across Brisbane and the rest of Queensland is that values remain relatively low, particularly relative to the recent acceleration of values across the other east coast cities of Canberra, Melbourne, and Sydney.
With typical mortgage rates at record lows, CoreLogic estimates around 41 % of properties across Greater Brisbane would be cheaper to service a mortgage than rent.
This compares to 30.3% of properties across the ACT, and just 3.3% of properties across Melbourne, and 2.1% of properties across Sydney.
The high share of properties that may have cheaper mortgage serviceability than rent is also a function of fairly robust growth in rents across Brisbane, where house rents increased 6.4% in the 12 months to April, and unit rents increased 2.1%.
From economic events like the stock market crash in the early 2000’s to the Global Financial Crash to round out the previous decade and a mining downturn also didn’t help.
While most states went on to recover, Queensland faced a range of natural disasters from floods to cyclones that also took their toll on our economy.
So, despite all of that, these are very impressive figures.
While I am not suggesting the same amount of growth will occur in the next 20 years, I would certainly like to evaluate these suburbs and understand why they stood out.
What do these Suburbs Have in Common?
Here are the top 4:-
- 80% of these Suburbs are located within 10km of the Brisbane CBD.
- 80% of these suburbs have a train line
- 80% of these suburbs have a highly desirable school catchment
- All of these suburbs have incomes well above the Queensland average
For those that know these suburbs more than half of them have all 4 of these key drivers – so why fight the big trends when looking for your next investment property?
Some advice for new Brisbane investors
1. Look for Brisbane’s best properties in the inner- and middle-ring suburbs.
Research shows that those suburbs close to the city center generally perform better than all others over the long term.
Our research at Metropole Brisbane shows that (in general) properties closer to the CBD and closer to water increased in value faster than those further from the CBD and further from water.
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