Balancing act as Brisbane buyers contemplate timing, prices and rent
As Brisbane property values decline overall, investors are now left weighing up which portions of the market are still delivering capital growth and the value offered by rising rental yields amidst record low vacancy rates.
Rents are rising, the overall market is declining and investors are weighing up the value of entering the Brisbane real estate market.
Property values fell again this month, evidenced by falls across both houses and units, according to CoreLogic data.
But other data by PropTrack suggests less severe falls. The question being asked is, are prices across the city really tumbling, or is the composition of which properties are selling simply changing?
Rents, and rental yields are still on the way up in Brisbane, presenting property Investors with buying opportunities.
Amid lower competition for properties, yields strengthening on rising rents and lower sales prices, and favourable long-term growth prospects, investors are now assessing which parts of the Queensland capital present the best investment potential.
Some owner-occupier buyers, including first-home buyers, are also active.
During September new listings were down 13.3 per cent according to PropTrack data, compared to the previous month. This is a decline of 6.0 per cent in 12 months.
The same data has reported that total listings are now up 12.3 per cent in Brisbane compared with 12 months ago. There has been five consecutive months where total listings have increased, resulting in the choice for buyers starting to improve despite total listings still being down compared to the long-term trend.
The median days on market in Brisbane has almost doubled in the last 12 months.
In September 2021 properties were listed online for just 15 days. Now properties are taking 28 days to sell. At the same time sales volumes are down just 2.4 per cent across Brisbane over the same period of time.
The uncertainty around rising interest rates and inflation continues to be the main cause of the lack of buyer confidence.
Buyers are still nervous and uncertain. Many are trying to time the bottom of the market.
History has shown that markets can turn very quickly and as soon as buyer confidence improves, competition levels spike, which is when buyers find themselves thrust back into a competitive environment.
Top end of town hardest hit
According to the Hedonic Home Value Index by CoreLogic, Brisbane median dwelling values declined by 2.0 per cent throughout October.
This equates to a quarterly fall of 5.4 per cent, even though the annual gain is still 8.4 per cent. The median value for a dwelling in all of Greater Brisbane is now $728,615.
Sales at the top end of the market appear to be declining at a faster rate than sales at the bottom end of the market in Brisbane, according to the quarterly change in the stratified hedonic dwellings index from CoreLogic.
We know the unit market in Brisbane has been less impacted by median price changes recently and units are going to fall within the lower price brackets within the combined dwellings data.
Depending on the data source, there can be discrepancies in what is reported. For example, the PropTrack Home Price Index showed Brisbane dwellings declined more slightly throughout October. This data reported a more modest change of only 0.9 per cent.
Houses versus units
Median house values in Brisbane declined 2.2 per cent in October, according to CoreLogic. The median value for a house in Greater Brisbane is now $817,684. Houses are still 8 per cent higher today than 12 months ago.
Unit values in Brisbane, according to CoreLogic, declined 0.9 per cent throughout October.
The changes in unit values have been less dramatic than changes in house values.
The annual change in Brisbane units is now 10.7 per cent, confirming units are outperforming the house market throughout the city. The median value for a unit across Greater Brisbane is now $494,785.
Shy investors eye rental market
Vacancy rates in Brisbane remained unchanged this month at 0.7 per cent, according to SQM Research.
Supply of rental properties has been declining over recent years. The latest lending figures show the share of overall lending to property investors has been below the long-term average since mid-2017. This has contributed to the supply challenges in the rental market in Brisbane.
New rental listings, according to PropTrack data, show that in September 2022 listing volumes were 21 per cent below the decade average.
In Brisbane, the year-on-year change in new rental listings is down 12.6 per cent. Additionally, total rental listings in Brisbane are down a massive 22.7 per cent.
This data also shows the year-on-year change in the number of potential renters per listing has jumped 25.9 per cent in Brisbane.
Fewer property investors have been entering the market at a time when more and more people have been relocating to South East Queensland, causing demand to peak.
This imbalance is causing rents to escalate, which means tenants will find it difficult to find accommodation for the foreseeable future.
Rent price growth has been the stronger in Brisbane over the last 12 months than every other capital city and regional market in Australia.
For conditions to change, Brisbane needs more property investors to enter the market to increase the supply of rental properties.
Alternatively, Brisbane needs to see more tenants buy their own homes to alleviate the demand pressures. These changes will not be quick and the expectation is that rents will continue to increase in the foreseeable future.
Market nearing its nadir
There has been a slowdown in the pace of transactions on the ground in some market sectors, but not all.
For quality properties, buyers still need to act fast.
New builds that are brought to the market in inner city locations are selling very quickly. Many townhouses and units in inner city locations are also selling fast.
Buyers usually have a little more time for middle ring or outer ring properties in Brisbane at the moment. The same applies to some properties that need improvement works. There is no general trend.
The increased costs associated with borrowing to buy remain a strong headwind for property buyers.
But with interest rates likely to reach their peak next year, the ceiling for borrowing costs might be near.
The economy is performing well, unemployment is close to a 50-year low and this will eventually generate wages growth, in turn improving borrowing capacity.
With strong fundamentals, the expectation is that the bottom of the market is near and given the volume of buyers on the sidelines waiting to pounce, the recovery could come sooner rather than later.