Is Brisbane's property market turning a corner?

The news around property market movements in Brisbane, based on CoreLogic data, has suddenly become more positive due to a rapid easing in the pace of decline in dwelling prices throughout February. 

According to PropTrack, Brisbane has now seen its second consecutive month of small median price gains.

Regardless of which data companies are used to assess market changes, it is evident something has shifted in the last couple of months, and the question to ask is have the worst conditions now passed or is this improvement trend unsustainable?

The uncertainty around rising interest rates was definitely a contributing factor to the changes in market conditions throughout the second half of 2022 in Brisbane. Buyer confidence dropped away, and even the numbers at open homes and auctions thinned out. 

Despite Tuesday marking the tenth successive rise in the official cash rate and more rate rises expected in the coming months, it is widely accepted that we are much closer to the peak in this cycle. So, perhaps buyers are now pricing in their worst-case scenario and moving ahead with their purchasing decision regardless of what further rises might lie ahead.

With the Queensland State government as well as the Federal government striking a $7 billion deal for the Brisbane 2032 Olympic and Paralympic Games in February, this is a huge injection of funds into new infrastructure for Brisbane.

This is set to have a long-term and transformational impact within Brisbane. The city will become a global city, thus boosting economic activity, employment opportunities and its long term prosperity.

Brisbane’s listless listing volumes

Throughout all of Greater Brisbane, CoreLogic data confirms that listings are down 29 per cent compared to the five-year average. Over the last 12 months the number of new listings has plummeted 22.4 per cent.

It is evident that, in general, sellers are holding back from listing their property for sale and this is constraining supply. It also suggests that there is little evidence of panicked or forced selling. 

Despite the broader trend, there are still markets within markets. According to PropTrack, suburbs including Greenbank, Park Ridge and Burpengary East have seen a surge in new properties available for sale over the last 12 months, whereas suburbs such as Thornlands, Eagleby and Calamvale have seen listing volumes plummet. 

Buyer activity up in Queensland capital

There is an increased level of buyer activity that has built upon the number of buyers who were out and about throughout January.

It is not just the volume of people at open homes and auctions that has been increasing, but also the average number of registered bidders at auction and the percentage of active bidders who are participating in auctions through Brisbane. Clearance rates have also been improving month-on-month throughout the city.

According to Apollo Auctions data, Brisbane auctions were attracting crowds on average of 34 people (January was 28) with an average of 4.9 registered bidders (2.5 in January) and 60.35 per cent of those registered, actually putting up their paddle (compared to 58.6 per cent in January). These numbers were also elevated compared to the latter months of 2022.

Clearance rates in Brisbane for February were an average of 58.5 per cent according to CoreLogic. Apollo Auctions have their auction clearance rate for Brisbane throughout February at 71.2 per cent. Both values are much higher than the latter months of 2022.

There are also more potential buyers per listing since the Spring selling season of 2022, confirming our own on-the-ground observations over recent weeks.

The low listings environment is most likely compounding this effect across Brisbane.

Because of this, quality listings are more popular and sales agents are again starting to reduce the timeframe between listing and selling when the buyer depth allows for this. This has also led to a pickup in competition among potential buyers, with some properties attracting multiple offers.

Dwelling values stabilising

The slowdown in the rate of price falls in Brisbane is reflected in dwelling values falling 0.4 per cent throughout February, compared to a 1.4 per cent decline in January.

The quarterly change is rapidly slowing as well. 

At the end of January the quarterly change in Brisbane dwelling values were down 4.8 per cent, whereas by the end of February this had decelerated to a decline of 3.2 per cent. From the start of Covid through to the end of February 2023, Brisbane dwelling values are still 31.7 per cent higher, despite the recent falls.

The median value of a dwelling in Greater Brisbane according to CoreLogic is now $694,495.

Brisbane house prices still slipping

House price changes continue to lag behind the performance of the unit market in Brisbane. 

During February 2023, house price values retracted 0.4 per cent across Greater Brisbane, compared to a 1.6 per cent slide in January.

The quarterly change in house values is down 3.7 per cent this month compared to a fall of 5.5 per cent last month. Again, this indicates a strong change in the downtrend. The median value of a house in Greater Brisbane is now $767,781 according to CoreLogic data.

The alternative view presented by PropTrack is that Brisbane house values actually increased marginally (0.09) per cent throughout February off the back of a small drop of 0.13 per cent house price changes in January. PropTrack data placed the median value for a house in Greater Brisbane at a more generous $798,000.

Brisbane’s unit market continues to outperform the housing market month-on-month.

In February, according to CoreLogic data, Brisbane unit values held firm with no change. Unit values have increased over the last 12 months in contrast to Brisbane house values.

Rental market crisis persists

Brisbane’s rental market adjusted again in January with city wide vacancy rates back to 0.8 per cent after a seasonal increase in December to 1.1 per cent.

In short, there are still not enough properties available to rent compared to the number of prospective tenants looking for a place to call home.

There will be no short-term solution to the rental crisis in Brisbane. Like many other areas around Australia, this issue has been unfolding for many years as our population has continued to grow in the absence of any plan to provide housing for the number of people who need it.

For this reason there may be opportunity for property investors to capitalise on the yields being pushed up due to property values retracting in recent months at the same time rents have been escalating.

CoreLogic data shows the gross rent for a house in Brisbane has increased 11.9 per cent over the last 12 months. For units the rent price growth has been even higher, at 15.6 per cent.

At the peak of the market in July 2022, the gross yield for houses in Brisbane were just 3.2 per cent. The unit market in Brisbane demonstrated a gross yield of 4.6 per cent in June 2022. Since then, yields have recovered rapidly across the city.

Gross rental yields for houses are now sitting at 4.1 per cent across the city. For units the gross rental yield is currently at 5.3 per cent. These numbers certainly become more attractive for investors, especially considering the long-term growth prospects for Brisbane. 

Buyer volume expected to deliver price stability

In the absence of any significant increase in the number of properties that become available for sale, prices can be expected to remain stable. There are simply too many buyers and not enough stock for major price falls to occur.

There is also not expected to be a large influx of properties becoming available for sale in the months ahead.

Even discussions around the fixed rate mortgage cliff are not a major concern. 

Property owners who have taken out loans two or three years ago on fixed rates that will be expiring, would already be aware of this fact.

They would, or should, have made plans to meet the additional mortgage repayments that they know will be coming.

It has also been confirmed by APRA in a recent statement that the three percentage point serviceability buffer will remain in place for any new loans being assessed.

This means access to money will not become any easier. It has been pointed out many times that increasing interest rates do not impact all people in the same way, as they tend to effect lower income earners more so than higher income earners.

While there are certainly still some headwinds that remain in place for the months ahead, it is also important to consider on-the-ground observations from attendance every weekend at auctions and open homes throughout Brisbane. There has been an undeniable lift from December 2022 through to now in buyer activity in Brisbane.

This is especially evident within the Brisbane city council region in suburbs closer to the CBD.

Despite this rise in activity, there are still a lot of nervous buyers in the market.

There is uncertainty about the direction of the market and therefore where the property values might sit.

Buyers are looking for bargains and yet sellers are holding firm on their price.