Brisbane property market showing great potential

An exploding population and a downturn in building approvals is all driving supply and demand in Brisbane and its surrounding regions, writes Jordan Navybox, General Manager of Cohen Handler Queensland.

With Sydney’s median house price hitting $1.1 million and Melbourne nudging $800,000, there is understandably widespread discussion about whether other parts of Australia offer viable alternatives for property investors and residential buyers.

The supply and demand of population growth and housing approvals are the back-bone of all Australian property markets and are key factors for property buyers considering potential price growth in any city or region.

South East Queensland has been on the radar for a while and for Southerners there is much more to it than just offering easy access to Noosa! We believe Brisbane and its surrounding areas offer very strong short- and long-term opportunities and as a market it has a lot of room to grow.

Building Approvals

There is a lot of talk about a current ‘over-supply’ in Brisbane, especially in the inner city unit market but this now seems to be self-correcting.

In 2015/2016, there was definitely cause for concern with over supplied inner suburbs resulting in high vacancy rates and decreases in rents even in surrounding areas.

However, the latest data from the Australian Bureau of Statistics shows trend building approvals are down for the 13th straight month. The Brisbane Times quotes REIQ Chief Executive Officer, Antonia Mercorella as saying that this was an expected result due to the cyclical nature of the market.

‘The cyclical nature of these markets means that demand builds, then supply catches up, meets that demand, and then slows down,’ Ms Mercorella said.

‘Demand continues to grow and builds, putting pressure on supply levels until construction levels rise again and more supply is delivered to meet those demand levels.’

With this recent pull back in building approvals and Brisbane’s strong population growth (see below), in the last three months, we have begun to see a steadying of vacancy rates and rental returns (even in Brisbane’s inner city unit market) as reported in monthly SQM Research reports. Cohen Handler’s Qld property management team has also seen strong ‘on-the-ground’ signs of a recovering rental market.

According to Michelle Barnes, Cohen Handler’s Senior Property Manager, Qld: ‘We are experiencing shorter turn-around time for vacant properties (2−4 weeks on average) as opposed to a 4−6 week average vacancy last September through February this year. Even in inner city suburb New Farm, properties are recently being leased after only one or two open inspections. Plus they are renting at the previous rate or at an increase.’

These rental trends will continue to gain momentum as the pull back in new housing approvals and increase in population compound.

The two diagrams below show the reduction in vacancy over the past three months for greater Brisbane as a whole and also a rather steep tightening in the CBD vacancy rates.

 

Population Growth

The latest census data puts Brisbane as the ‘second fastest growing capital city’ showing 1.8% growth last year above the national average of 1.4%. That’s a population of 2.35 million people (excluding the Gold Coast and Sunshine Coast). Melbourne had the largest population growth at 2.4%.

Queensland as a state was third with 1.4% growth behind Victoria (2.1%) and ACT (1.5%). Adelaide had the weakest growth of 1% compared to the other capital cities.

With this kind of population growth, Infrastructure Australia has warned that QLD will need 700,000 homes for 1.4 million people in the next 15 years. Yes, it raises political discussion around the need for better roads and public transport, however the underlying problem will create positive price increases in the property market.

With Brisbane being the second fastest capital city in the country and the pull back on building approvals, investors are very attracted to the city’s long term outlook. In addition to this, we are finding investors are taking advantage of the current negative sentiment in the market for both inner city units and suburban houses to achieve below market prices. This will prove highly rewarding as the market continues to grow in both Brisbane and the Gold Coast. Examples of recent sales include:

Annie St, New Farm Townhouse

  • Purchased for $480,000 in March 2017 − $45,000 less than the last sale in the complex in 2015
  • Currently renting for $495pw

Brake St, Burleigh Heads

  • Purchased for $525,000 in April
  • Full beach and ocean views
  • Rental of $520pw

Whilst investors are still very much attracted to the unit market, we are seeing an increase in demand for houses 10−12km from the CBD which can still be purchased for sub-$600,000 in quiet streets, out of flood zones and carrying above 4.5% yields.

The Gold Coast has had strong growth in the past 12 months and our purchases in the region are up 60% from last year. We believe this is due to market affordability, but also the upcoming Commonwealth Games which has created a lot of jobs for the area, and also appeal for the region leading to strong overall population growth.

Cohen Handler can help you get the right property at the right place. If you would like to know more about the property market in South East Queensland, please contact us today.

up icon