Earlier this year, I asked whether or not the Brisbane property market would boom. My answer was that it wouldn’t, although there would be localized price growth within Brisbane’s middle-ring suburbs, particularly for homes and townhouses under $600,000. I also said that the Brisbane inner-city unit market would likely fall in value. So how did these predictions fare? How has the Brisbane property market performed? And what can investors expect for Brisbane property in 2017?
How has the Brisbane Property Market Performed in 2016?
CoreLogic has recorded the following performances for Brisbane property, as at August 31st 2016.
- 1.9% - Year to Date Growth
- 4.9% - Last 12 months Growth
- 9.4% - Total 12 month Return
- -0.5% - Year to Date Growth
- -0.4% - Last 12 Months Growth
- 5.0% - Total 12 month Return:
Overall, this has put the Brisbane property market in the middle of the pack of Australia’s five biggest cities, behind Sydney and Melbourne, but ahead of Adelaide and Perth. It’s certainly not a boom, but for houses at least, price growth has comfortably exceeded inflation. Units have stagnated and in many cases gone slightly backwards, which is no surprise given the amount of new supply coming on to the market.
The performance of the overall market is only a snapshot of much more complicated picture at the ground level. However, before we delve more deeply into Brisbane’s suburbs, let’s look at why Brisbane hasn’t boomed like its bigger cousins in the south.
Why hasn’t Brisbane boomed?
Put simply, Brisbane has not experienced the population or jobs growth of Sydney and Melbourne. Population growth is down substantially on its average, particularly amongst interstate migrants, which is the kind of population growth that leads to more property being bought (as opposed to babies being born!). Migration is heavily influenced by jobs growth, and Brisbane has only produced 8000 new jobs in the last 12 months (half as many as the Gold Coast). Income growth has been subdued as well.
At the same time, there are has been some major issues with oversupply in the unit market. The number of units settling in Brisbane in 2016 is double the total number of average yearly unit sales (both new and established). This is an extraordinary figure. This wave of new supply isn’t getting soaked up, because there is not the demand either among the young professional or downsizer markets these properties cater for. As a result, prices are falling and vacancy rates are rising in these areas of new supply.
In summary, softer demand and pockets of oversupply have led to relatively modest price growth. This isn’t all bad news for investors though. It means:
- There is less competition in the market
- Prices are much more sustainable relative to incomes than in Sydney and Melbourne
- Rents are strong in many areas
- Interest rates are at all time lows
It does mean that investors hoping to buy in the market and experience the kind of lazy capital growth seen in Sydney are likely to be disappointed. You’ll need a more strategic approach than that. We’re now going to dig a little deeper and see how events have unfolded on the ground in Brisbane’s individual property markets, and what to expect in the future.
What property in Brisbane has performed well in 2016?
As predicted, the most consistent growth has occurred in detached housing in Brisbane’s inner to middle ring suburbs. Brisbane’s northside has generally performed better than the southside, with growth rates on average between 4-5% versus 2-3%. Brisbane’s inner west has also been a strong performer. Some of the standout suburbs have been:
- Nudgee: 11.0%
- Everton Park: 10.0%
- Kenmore 8.4%
- Toowong 8.4%
The prestige market has been shakier, with some big falls in blue chip suburbs such as Clayfield, Ascot and Balmoral. Outer suburb growth has been modest. Double digit growth is very hard to find in any of Brisbane's suburbs.
Our research suggests that if you bought a house in the $450,000-$650,000 bracket, in a well-located area with limited new supply, you had a good chance of outperforming the Brisbane average.
What is likely to perform well in the Brisbane Property Market in 2017?
With the market balanced between low interest rates on one side, and weak jobs and income growth on the other, the main driver of property price growth over the next 12 months is simple – supply and demand. So for property investors looking for return, we need to ask ourselves: where is demand likely to outstrip supply?
Demand is greater than supply for detached housing in most of Brisbane’s middle-ring suburbs, which should lead to some price growth or at worst price stability. Demand for detached housing is strongest in the following areas:
$350,000-$450,000 – Brisbane Southwest. Houses in Forest Lake, Durack and Inala are achieving strong rental returns and are affordably priced given they are under 20kms from the Brisbane CBD. The area has a fair bit of gentrification still to occur, but prices are coming off a low base and should perform above the average.
$450,000-550,000 – Brisbane Northeast. The suburbs of Arana Hills, Ferny Hills and Keperra are seeing arguably the strongest demand for property in Brisbane. Properties at the sub $500,000 price point are particularly attractive amongst first home buyers, looking to buy in this leafy pocket only 13kms from the city.
$550,000-$650,000 - Brisbane South. There are pockets of strong demand throughout Brisbane’s south, including Holland Park, Salisbury, Sunnybank Hills and Mansfield. These suburbs are well located with good schools and transport infrastructure, and are close to most of the major employment hubs of Brisbane.
What is likely to perform poorly in the Brisbane Property Market in 2017?
The Northside Unit Market - with so much supply coming on, it's hard to see much growth occuring here. Worst affected are Windsor, Chermside, Lutwyche, Albion and Kelvin Grove. The worst performers are likely to be medium to high-rise apartments, many of which are located on busy roads, have little amenity and no unique selling points. It's hard to see people paying $450K+ for apartments like these, unless they're an uneducated investor, and with all the negative publicity on apartments it seems that this particular jig is up.
Vacancy rates are also climbing beyond 4%, driven by a lack of demand amongst renters for this kind of product. Expect to more incentives being thrown at both buyers and tenants to try to entice them to purchase this kind of stock.
The Luxury Housing Market - This market seems to have peaked, and there's not a lot of heat in it at the moment. Rental yields are looking more like those of Sydney and Melbourne suburbs. Until the higher-end job market starts picking up, it's hard to see prestige properties booming.
OTHER OBSERVATIONS on the Brisbane Property Market
The Outer Suburbs - There is strong demand for both houses and units in the cheaper established outer suburbs, particularly in the Logan area. Without rising incomes, however, it's leading more to rental growth than capital growth. Properties in these areas can make good entry-level investments, but be very careful to stick closely to the median price, particularly with new builds. Overpaying by $50,000 for a new unit or $100,000 for a new house in these suburbs can cost you years worth of growth.
Brisbane Property Market 2016 - Case Studies
Our job at Aquila is to put this kind of market research into action, to help investors find the right properties in Brisbane for their investment needs and to help them avoid making a costly mistake. Below are two properties we've bought in Brisbane over the last 12 months. The key is not just finding the right suburb, but also flexible property types that will achieve a good rental return and are attractive to range of buyers.
21 Fabian Place, Bracken Ridge
Bought for clients in January 2016 for $446,000, this property returns $460 per week. With strong demand among families in the suburb for modern homes close to the city, Bracken Ridge has performed at an above average 5.6%.
20 cootha st, everton park
Purchased for a client in February 2016 for $578,000, this dual-income property rents for $620 per week. With very little supply in the detached house market, Everton Park has already grown by 10% in 2016.
Considering an investment in the Brisbane Property Market?
We help our clients to buy high-performing properties in Brisbane at below market value. Our service is the difference between buying an investment property, and owning a quality asset that achieves the return on investment you are aiming for.
If you'd like to learn more about the Brisbane property market, then you can book a free consultation with me at a time of your choosing. In the consultation I'll provide you with:
- Our exclusive Brisbane Property Market Forecast for the next 20 years
- What to buy and what not to buy in the Brisbane Property Market
Andrew Wegener is an experienced Property Adviser and Buyers Agent, who has bought numerous properties for clients in Brisbane. Coming from a military background, Andrew bring a strong focus on genuine analysis, ethics and professionalism to his important role.