Brisbane's 2023 prospects a mixed bag after latest declines
In the face of declining prices, the Brisbane real estate market's fundamentals remain strong and wild property price rises or declines appear unlikely.
Depending on whose data you accept, property prices in Brisbane have continued to decline on a monthly basis at anywhere from just 0.18 per cent (PropTrack) to a far more concerning 1.5 per cent (CoreLogic).
According to CoreLogic’s latest national snapshot, which revealed the country’s real estate prices had declined at record pace in the past nine months, Brisbane’s monthly decline was only outpaced among the state capitals by Hobart’s slide of 1.9 per cent.
PropTrack, however, suggests Sydney and Melbourne were marginally worse performers last month in terms of capital growth.
Whatever statistics we turn to, it’s clear it has been a year of transition for the Brisbane property market.
It has gone from a fast moving, rapidly growing market at the beginning of the year, to one where properties were taking longer to sell and median values were declining month-on-month.
At the beginning of 2022 commentators were predicting strong price gains for Brisbane throughout the year.
The reality turned out a bit differently, with CoreLogic data showing property values actual fell 1.1 per cent.
When Brisbane suffered another huge flood event in February 2022, it marked the first sign of the market dampening since the post Covid-19 boom. Then the federal election prompted some buyers to hit the pause button.
Global supply chains were mired in delays and materials shortages and inflation above 6 per cent eroded asset values and household budgets. The RBA reacted by increasing interest rates well before they had originally anticipated.
Combined with the subsequent media negativity, consumer confidence dived.
Like all city property markets, Brisbane’s is widely varied, yet so many people rely on large macro data trends in their decision making. It is a mistake we have seen many less educated buyers make.
The fundamentals in Brisbane
The fact is that property volumes available for sale remain low.
In November 2022 there were 21,049 properties for sale, according to SQM Research. A year earlier, Brisbane had 33,205 properties for sale, a decline of 36 per cent.
Rental property listings have also halved in the past three years.
Interstate migrants are also propping up property prices, while sales volumes are still above the five-year average for Brisbane, despite being down 11.4 per cent year on year. In Sydney and Hobart, sales volumes have now dropped below the five-year average.
This means more people are transacting in property sales than the long-term average, but fewer properties are available for sale or rent in the city.
These are strong fundamental drivers for maintaining the balance between supply and demand.
Additionally, Queensland has seen a huge improvement in job opportunities with jobs growth in September 2022 at 4 per cent. This is well above the 20-year average of 2.4 per cent. These strong employment figures will help to contain mortgage stress levels.
Nationally, wages growth saw an increase of 1.2 per cent in the September quarter to its highest level in more than a decade. Households, in general, have a very strong equity position, with house prices increasing in the majority of locations across the country over the last three years.
Despite eight official cash rate rises throughout 2022, several banks recently confirmed that their customer mortgage arrears remained at record lows throughout 2022.
It is worth watching with caution, as it has been reported that 35 per cent of outstanding housing credit is on fixed terms at the moment. Approximately two-thirds of these loans are set to expire in 2023, falling over the so-called mortgage cliff.
Finally, there’s the tens of billions of dollars in infrastructure spending by private companies as well as the Government, building a better Brisbane that will be ready to host the 2023 Olympic Games.
Brisbane units performing (relatively) well
During December, the median value for Brisbane units declined 0.4 per cent, as reported by CoreLogic.
It’s an improvement on the last two months when unit values declined 0.9 per cent and 0.5 per cent respectively.
Over the last 12 months Brisbane units have grown 6.7 per cent. This is evidence of the fact that the unit market in Brisbane has been far more resilient than the housing market, which is down 2.5 per cent for the year.
The median value for a unit in Brisbane is now $492,059, compared to $786,198 for houses.
Brisbane rental market tight
Vacancy rates in Brisbane, according to SQM Research, remained at the very low rate of 0.8 per cent in December 2022. This rate has remained unchanged since September 2022, reflecting the consistency in relation to the tight supply of rental properties throughout the city.
House rents appear to be stabilising, although growth in rents still tops the nation. Last month saw the annual change in rent for houses in Brisbane climb another 13.4 per cent and this month it is still at 13 per cent annual growth.
Unit rents in Brisbane still appear to be on the way up, with annual growth increasing from 14.3 per cent last month to 15 per cent this month. Brisbane has experienced the second highest growth in unit rents across the capital cities, just slightly behind Sydney, which sits at 15.5 per cent growth in this segment of the market.
2023 a mixed bag for Queensland capital
While the fundamentals remain strong, it may take some time for consumer confidence to return, but wild price rises or declines appear unlikely. A turning point is likely to be when interest rates find their new level and people have confidence in planning their outgoing expenses.
Some segments of the market will outperform others.
Quality homes in sought-after locations close to the Brisbane CBD remain popular.
Those that appeal to the owner-occupier, in good school catchment zones with family friendly floorplans and in desirable neighbourhoods have not defied broader market conditions in recent months.
New builds in established suburbs close to the CBD also remain very popular, with strong demand from buyers wanting to move in with nothing more to do.
Due to the demolition control measures that are part of the Brisbane City planning scheme, new builds with modern floorplans are usually scarce in areas dominated by character Queenslander homes. This makes them very popular with buyers wanting the perks of a modern home in some of the most desirable neighbourhoods throughout the city.
Renovator properties experienced far less demand throughout the last few months of 2022 due to the difficulties associated with escalating construction costs in the building industry. As this industry stabilises this year, we expect renovators will again become more popular in the latter months of 2023, especially those in sought after neighbourhoods.
Properties on the outskirts of Greater Brisbane areas where higher volumes of interstate investors have been chasing high cashflows for several years may lose their popularity in a higher interest rate environment.
Units in areas close to the CBD remain resilient and this segment of the market should continue to perform relatively well. Affordability will drive the demand for quality units and townhouses in premium locations.