Brisbane May 2017

The month in review: Brisbane

By Herron Todd White
May 2017

In order to explain what will change our market’s direction, we first need to describe exactly where it’s at!

So, what does the market look like now? At present, we’d describe our detached housing market like a decent coffee on a concrete slab –stable and strong.

We’ve been doing fairly well because of relative affordability. This helps attract buyers across our borders and probably stimulates a few well-informed locals to hurry up and purchase a piece of our city before the eventual price rises come.

Buying property interstate has never been easier for out-oftowners.

Market data is accessible and relatively inexpensive, airfares are cheap and for those who don’t want to make the journey, buyers’ agents and other professionals are on hand to help (just make sure they’re independent and working only for you). Under these conditions, Brisbane housing is benefiting mightily.

This strength is being experienced in both the inner city detached markets and housing on the city fringe. We’re seeing the $700,000 to $1 million bracket being most keenly sought after.

One of the strongest sectors within this price bracket are entry-level and renovatable homes, which give buyers a chance to start at the bottom of a desirable suburb’s property ladder with hopes of strong capital gains.

It’s a different story with attached housing, of course. Apartment stock is feeling the pinch of overbuilding, both in the CBD and inner addresses, as well as suburban high-density nodes. Both existing and yet-to-be-completed stock needs competitive pricing to find buyers. We’re even hearing reports of off the plan units being discounted in order to clear the books.

For anyone looking to put tenants in their small investment unit, it’s not great news. In order to get and keep tenants, your rent must be competitive. There are plenty of options for tenants at present and older units are bearing the brunt of the problem. It’s hard for them to compete for tenants with new apartments, many of which have a higher level of amenity and may even be offering rent incentives. If you have an older unit and you’ve been trying to snag a tenant for some time, be prepared to discount the asking rent.

On the flipside, house and land product in our corridor addresses seems to be doing well. To the north, suburbs such as Mango Hill, Griffin and Narangba are finding plenty of interest, while in the west, Redbank, Redbank Plains, Springfield Lakes, Ripley, and Collingwood Park have new developments where clever developers are reducing land sizes to produce homes at the circa $500,000 price point. This price appeals to first-time buyers in particular.

So, what drives these various markets? In the CBD, CBD fringe and suburban nodes, infrastructure keeps things chuffing along by ensuring residents can get to where they’re going, or have enough nearby facilities to make life worth living.

The same goes for the corridor markets, although you can add in the element of affordability. When buyers can’t get a piece of expensive real estate close to town, they look to buy in the corridors.

The multi-million-dollar question is, what will it take to stimulate prices and crank up activity?

The baseline measure for Brisbane is increased population growth and the magic figure in the past has been a rise in net interstate migration numbers… but achieving that isn’t necessarily easy.

We need employment growth. Southern capitals have been providing great job options to Australians, so it’s no surprise really that population numbers down south have been on the up. For Brisbane prices to really start ramping up in terms of capital gains, we need to see more jobs, proactive town planning and infrastructure spending. These factors bring in jobs, which drive population growth with a flow-on rise in demand for our real estate.

If you need evidence, have a look at our boom runs last decade where major employers realised how competitive our property prices are. Many businesses relocated head offices to Brisbane in the early 2000s. If that sort of corporate thinking starts to roll around again, then we’ll be in for some very good capital-gain years. At the very least, it would help ease the current downward price pressure on units. If you were trying to track the measures that would result in a price slowdown in Brisbane, then interest rate rises would be a big one.

Another would be changes around lending guidelines for investor loans. If regulators start directing banks to pull back on their investor books again, then the inner-city apartment oversupply problem and resultant price softening is likely to deepen.

Property is a confidence-driven industry and there are signs affordability is helping drive investors to our city, but to help build the momentum, government and private industry need to play a role.

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