Brisbane units holding on but houses at a turning point

Brisbane house prices fell at a rate 20 times more than units in September, as the amount of quality apartment stock diminishes and higher interest rate payments and tighter credit limits chip away at the housing market.

Apartments and high rise living building in Kangaroo Point, Brisbane.
Brisbane apartments, such as these in Kangaroo Point, are currently proving more attractive to buyers than houses. (Image source:

The question of whether the worst is now behind the Brisbane property market is a matter of perspective.

The answer depends on whether you are a buyer, seller, landlord or tenant.

Interest rates have risen 250 basis points (2.5 per cent) in six months, which is the fastest tightening cycle since 1994.

This has had an undeniable an impact on buyer demand.

According to PropTrack, there are now 29.4 per cent fewer potential buyers per listing for houses in Brisbane.

For Brisbane units there are now 12.6 per cent fewer potential buyers per listing, compared to the peak. The drop in demand has been more severe for houses compared to units across Brisbane.

The change to the number of potential buyers per listing for houses now, compared to the pre-pandemic period is 79.8 per cent. For units, the buyer activity in Brisbane for the same period has increased 126 per cent.

This confirms that buyer demand has slipped over recent months but it remains strong looking back at the period before the pandemic.

While demand is lower according to these indicators, more people were turning up to property inspections throughout September, compared to the previous two months, perhaps due to buyers having less choice in the market.

Some conclusions about seller psychology at the moment can be drawn from the market’s current performance.

Firstly, sellers are less motivated to list their properties for sale, especially in the last two or three months, in part because they are uncertain about the price that they might achieve

Secondly, there are no signs of forced selling.

And thirdly, some sellers are less willing to meet the market, or buyers are becoming more selective about what they will buy, which is why days on market are trending higher, as evidenced by increasing levels of older stock.

Apartment resilience

Domain auction clearance rates have been improving across Brisbane since July. The monthly average clearance rates in July were 39.8 per cent. By August this increased slightly to 40.25 per cent and for September it was out to 53 per cent.

Rising interest rates have also been impacting the amount of money prospective buyers can borrow.

Even with cash rate increases of 225 basis points borrowers’ maximum loan sizes were reduced by around 20 per cent. With a further 0.25 per cent rate rise in October, this is now further reduced.  This means that the pool of buyers who are able to purchase higher-valued properties is reducing.

The median value price falls in Brisbane are being led by the more premium end of the market.

Dwelling Value Income Ratio Oct 2022

Source: CoreLogic.

Across September, according to the CoreLogic Hedonic Home Value Index, Brisbane dwelling values declined 1.7 per cent. Like most other major capital city markets, this demonstrates a loss of momentum in the pace of price falls compared to last month. The median value for a dwelling in Brisbane is now $746,017, which is $16,267 less than last month.

The Queensland capital remains a more affordable market than Sydney, Melbourne, Hobart and Adelaide when we assess the dwelling to income ratio of capital cities throughout Australia.

This is despite being one of the highest growing capital city markets over the last 18 months. It is perhaps another reason that the Brisbane market has been less impacted during the current downturn.

Housing values are leading the downturn in Brisbane as evidenced by a greater month-on-month decline in this sector, compared to units.

For the last three months, median Brisbane house values have declined. The rate of decline recovered slightly in September. Units have seen declined for the last two months, although there have been relatively minor median value changes in this segment of the market.

In September, houses declined a further 2 per cent, with quarterly falls now at 5.1 per cent. The median value for a house in Greater Brisbane is now $841,923, down by $50,210 from the market peak in June where median House values were $892,133.

Unit values are proving more resilient.

Brisbane Houses vs Units Oct 2022

Source CoreLogic.

This is perhaps because they are a lot more affordable, compared but the oversupply of units in the years following peak construction in 2016 has now corrected and there is a lack of quality unit stock being built – hence lower levels of supply.

Throughout September, Brisbane units saw prices decline by just 0.1 per cent, but quarterly growth remains in positive territory at 0.4 per cent. The median value for a unit in Brisbane is now $501,255, just $3,265 off the recent peak, which was $504,520 at the end of July 2022.

No vacancies

The rapid rise in rents in Brisbane over the last 12 months has been building for some time.

Since 2017, the residential vacancy rate has been falling in Brisbane, as it has across the country.  According to SQM research, the city now has month-on-month record low vacancy rates at just 0.7 per cent.

Nearly 30 per cent of rental dwellings have been stripped from the Queensland market in two years.

The 2022 PIPA Annual Investor Sentiment Survey found during this time more than 160,000 investment properties were potentially sold to homebuyers throughout the State. This means rental stock in Queensland has potentially fallen by an extraordinary 29 per cent in just two years.

The PIPA survey showed that 19 per cent of investors nationwide have signalled they intend to sell even more property within the next 12 months.

The number one reason cited in this survey was the fact that Queensland’s proposed new land tax law would penalise owners of property in other states/territories. With the proposal now scrapped, it is possible that these projected numbers will change.

Brisbane Income to service rents Oct 2022

With rents rapidly increasing in Brisbane, the portion of income required to service new rents has reached its highest level since 2009.  Affordability is starting to be challenged for those who are renting properties in Brisbane.

For investors who are looking for some solid returns, especially those lured by higher yields, there is likely to be some strong income growth in the months and years ahead.

Looking ahead

July demonstrated the lowest level of activity in the Brisbane market. August showed a slight improvement, but there was a definite improvement throughout September.

The initial shock of rising interest rates has passed, although if interest rates continue to rise rapidly this may create additional headwinds. The good news is that the October rate rise was less aggressive, and inflation appears to be slowing, which might see the RBA start to ease back on the rate hiking cycle that commenced in May this year.

Overall, the Brisbane property market is not in a terrible state. Supply is tight, unlike other capital city markets around the country. This is a significant point of difference.

Demand is picking up again. Buyers are out and there are plenty of shoes at the doorstep of open homes.

Despite such strong price growth over the last 18 months, relative to incomes, Brisbane property values are still very affordable.

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