Brisbane is starting to live up to all of the expectation and hype but most experts believe there is still more to come!
If you are an owner of real estate in Brisbane right now, you would be a very happy individual. Having just been dubbed the most stable city in Australia and having consistently hit the news headlines as everyone’s pick to spearhead growth across the next few years, it seems there is plenty more to come.
Having just reached 16 straight quarters of median price growth across more 4 years it is now really starting to live up to the expectations, in terms of its potential to sustain longer growth outcomes for owner occupiers and investors alike.
Although median house prices are only one part of a measured approach to analyse real estate, when looking at macro volume numbers it is one of the more common methods used in determining growing or declining market trends.
Having now achieved over 14 percent growth across almost five years, it seems the desire for larger blocks or newer townhouses are what owner occupiers and investors are wanting.
Whether you are a family looking for size and lifestyle for the kids with pets, or a downsizer wanting your own property with zero maintenance, it seems these two products are continuing the growth in and around Brisbane.
It is well publicised about the oversupply of apartments not only in Brisbane but across the board. This fact is not lost on anyone, who understands basic supply and demand models. Given it has been a good time to develop property with more efficient lending options, along with a growing marketplace and Australias love for real estate, it is combining to create the perfect time for the big players like Mirvac, Metro and Meriton to continue to build their apartment blocks.
Yes this will create a short term market shift in yields for apartment owners mostly and have some slight wash off effect on the broader market, however what many aren’t considering in their assumptions of supply outweighing demand is that in Brisbane (and most major cities), the ABS population growth estimates are still tracking in line with the amount of stock hitting the market now and in the next 15 years. As it stands, Brisbane is expected to gain almost 1,000,000 more people by the year 2030 on top of the current population. That is due to many factors such as better standards of living, climate, Universities, infrastructure and overseas incentives for people to park their money in Australia.
There will no doubt be a slight market correction now and across the next year given it won’t be a linear release of apartment stock in the city but this has happened many times before and will continue to do so. Many investors will suffer some reductions in rent and yield due to their property being predominantly expose due to its state, age, proximity or lack of up-keep. What many investors don’t realise is that a lot of Brisbane is made up of run down 1920 style queenslanders. Dilapidated often needing work and in this climate many without air conditioning and modern amenities. In the last decade these properties have still fetched amazing returns for their owners, due to more demand than supply. Now the tables have shifted a fraction and meant that properties that simply dont stack up to what the market demands will miss the boat.
When looking at vacancy rates it is extremely difficult to get accurate numbers to analyse. SQM seems more attuned than most out there, but even they don’t have the ability to dissect the difference between vacancies within suburbs and segregating apartments to townhouses and houses. This can result in huge inaccuracies and misnomers to the uneducated . For example if a suburb like Albion has three new apartment blocks that are completed and then instantly has all three release 300+ apartments at the same time, then that month or quarters vacancy rate as a whole may move from 3% to 7% based on this anomaly. Yes it may indeed be true, but it doesn’t all of a sudden mean that all properties in Albion are going to be affected or that it’s a poor place to invest. It may mean other dated or similar apartment buildings now have more competition, which will drive down the prices for that product that they may have fetched in the past. This will be a factor for a small period of time, until the market has had time to correct this additional release of stock and then “right itself” again.
The harsh reality however is that when councils elect to alter their town planning regulations to cater for a growing population who are constantly wanting new quality housing, close to the city, it opens up the potential for developers to take advantage of this opportunity and to make some good money along the way.
It seems this is a growing sector of the investment marketplace for many more savvy investors who are looking to achieve a greater bang for their buck. Those who have invested in the past are looking to expand their ability to potentially use property as their vehicle to transition out of their day job. They are wanting to drive an outcome within 18-24 months, rather than the slow approach of the buy and hold strategy over 10+years. Although the buy and hold can be a safer way to invest, many feel they are still at the mercy of the market without any potential to add any value and create additional returns.
Small lot developments can create this outcome for those who have the right risk profile, some experience and most importantly the financial capacity to complete it.
Matt Wall, one of the directors at PPI Advice, is humbled by the amount of interest and client engagement that has occurred by investors across the country wanting to get into the development space. “Most of our enquiries come off the back of those looking to find a site that is able to be developed, which has certainly superseded the amount of interest coming from those wanting to implement a buy and hold strategy. I suppose like anything, when there is an opportunity to take advantage of a dynamic marketplace and fast track your financial outcome then it is more appealing to most than a longer term strategy.
These days we have had to keep up with the demand from these investors who have seen an opportunity and are wanting to take advantage of that but dont have the time or skills to achieve it. Its this need that has necessitated our expansion to provide a full service solution. From property advisory to our buyers agency service to our integrated project management division… .they all work hand in hand to deliver a seamless integrated solution for investors both locally, interstate and quite a number overseas”.
The market demand isnt going away for investors in Brisbane with many properties consistently fetching more than what we believe they should be achieving based on our in depth experience and analysis. REIQ chief executive Antonia Mercorella said sellers were experiencing higher returns on what they paid for properties and buyers and homeowners could have confidence in the market because of the steady growth.
“We prefer this consistent, sustainable growth over a period of time rather than a booming market,” she said.
“This allows consumers, both vendors and buyers, to have confidence in what the market is doing so there are no nasty surprises around the corner.”
Ms Mercorella said there was a level of fear when buying and selling in Sydney and Melbourne, fear that was just not there in Brisbane.
For those now worried the rising house prices will push them out of entering the market, Ms Mercorella said there were still plenty of properties on the cusp of Brisbane that sold for an average of $500,000.
“Sydney and Melbourne are no comparison when it comes to affordability — when it comes to that, Brisbane is way out in front,” she said.
“We are always conscious of becoming too expensive and yes some people will feel nervous about the Brisbane median hitting the $632,000 mark but the affordability is still strong outside of the Brisbane local government area.”
Real Estate Institute of Queensland chief executive Antonia Mercorella says Brisbane is a great place to own a home at the moment. Picture: Romy Bullerjahn
Brisbane is transforming and thriving and Ms Mercorella said that was making it a more desirable place to live.
“We are seeing lots of new units and apartments coming up in the inner city area and we are embracing a new style of living,” she said.
“We also have a number of exciting developments like the Queen Wharf project, which is going to completely transform the face of Brisbane.”
Ms Mercorella said many run down and derelict properties around Brisbane were also being demolished, making room for newer homes.
It is also developing a laneway culture, which Ms Mercorella said was modernising and maturing the city.
The median housing price is a new record for Brisbane and Ms Mercorella said there were great investment opportunities in the city at the moment.
“Whether you’re a local or interstate investor, we have some of the strongest rental returns around the country,” she said.
“Not only are you able to pick up an asset less than what you’d pay in Melbourne or Sydney, but the rate of return in many instances is greater in Brisbane.”
Some of the best opportunities are proving to be within the 10 kilometer ring of the CBD of Brisbane. Places like Windsor, Coorparoo, Taringa, East Brisbane, Wilston, Gordon Park, Camp Hill, Ascot and Greenslopes are all in a list of the top areas to own a home within QLD according to realestate.com.au