The Smartline Report – June Edition

The month in review: Brisbane

By Herron Todd White
June 2016

We Queenslanders love half time – it’s good for one of two things:

1. A chance to take a breather from running so many tries over in the first half.
2.An opportunity to collectively agree we’ll take our foot off the brake and romp home in a come-frombehind win.

We maroons thrive of being underrated and then over preforming, and it’s hoped this will translate into our property market as 2016 progresses. Now is the opportunity to take stock and see how we’re tracking.

Certainly near city property is doing well. The solid foundation of owner-occupier real estate continues to see good performance in suburbs sitting within 5 kilometres of the CBD. It’s our market’s best performer – particularly detached housing – with most of the past 18 months demonstrating terrific gains. That said, consolidation began in early 2016 and prices seem to have stabilised. We can probably expect more of the same as we travel beyond June with performance being flat to slightly rising.

Step a touch further out and property in the 5 to 10 kilometre band has experienced uplift in value. It’s probably evident of the capital growth ‘wave effect’ which we experience with almost monotonous consistency in Brisbane. As those suburbs closer in become relatively expensive, buyers begin pushing further out and bolstering values in these next-wave areas. This market has also been flattening in 2016, although areas close to infrastructure and facilities continue to perform best.

If you’re flirting with real estate at the urban fringe, there’s been little love in return. Supply is strong and demand is steady… and this is set to continue for some time yet. Don’t expect unbridled capital gains in these areas in the foreseeable future.

There has been a lot of talk about our inner city unit market with an oversupply situation that’s graduated from ‘looming’ to ‘inevitable’. This sector is a huge concern. There are still heaps of projects that are yet to come online or are in the planning phase. They are also predominantly investor driven and this could be a recipe for a lot of heartache – particularly as a large percentage of buyers are interstate and international investors. Add to this the tighter restrictions on lending to foreign investors and you can see where it might all be heading. As we’ve been saying for some time – in terms of inner city units, the best per formers are, and will continue to be, those projects designed with owner-occupiers in mind.

If you’re wondering how tenant demand is tracking, we can confirm current data shows vacancy rates for houses at 2.5% and units at 3.2% (unit vacancy increased by 0.3% year-on-year). The combined vacancy rate for all property types is 2.7%. The general rule is any result below 2% demonstrates an under supply of rentals, 2% to 3% seems balance, and over 3% represents oversupply. From the numbers above, it’s easy to recognise where the weak sector is in the market.

Rental yields are also tracking fairly steadily with most housing achieving 4.5% to 5% gross, while units sit around five to 5.5%. Steady but not stunning.

While there’s still reasonable sales activity within the big, well-serviced residential estates (e.g. Springfield Lakes), most smaller land subdivisions are seeing a rise in sales to investors. This usually indicates developers are beginning to slow down production, particularly in areas such as Redbank Plains.

In case you’re wondering, we have also observed (qualitatively) an increase in mortgagee-inpossession work, although it’s not at concerning level.

So overall, the Brisbane property market is fairly stable and with the election now looming, we’ll be in a holding pattern until after the July poll. Typically, the market in Brisbane is strongest when Sydney and Melbourne prices increase to a point where owners offload their holdings down south and head to the Sunshine State where they can buy a bigger home and still have plenty of cash left over. We’ve yet to see that occur because our State’s job market is performing below expectation. A recent report put our unemployment rate behind all other state’s except South Australia. Confidence is the major issue and until there are signs of an improving economy and jobs growth, our market will remain pretty static.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2016. Australian Credit Licence Number 385325

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