Brisbane’s real estate market continues to prove its resilience, despite the coronavirus shock.
While the long-awaited lift in the housing market throughout late 2019 and early into 2020 has definitely slowed down, Brisbane still looks better placed to weather the storm in terms of fundamentals, …
Brisbane’s real estate market continues to prove its resilience, despite the coronavirus shock.
While the long-awaited lift in the housing market throughout late 2019 and early into 2020 has definitely slowed down, Brisbane still looks better placed to weather the storm in terms of fundamentals, compared to other capitals around the country.
With Brisbane less exposed to the shock pause in international tourism, compared to its close coastal regions of Gold Coast and Sunshine Coast, downside risk is more limited.
It is also expected that Queensland, as a whole, is more likely to be supported by a domestic tourism recovery in the near term future.
Brisbane also has a lower exposure to foreign education and migration, compared to Sydney and Melbourne.
Since 2013, population flows into Queensland have been steadily rising, but obviously the impact of Covid-19 travel restrictions will see a large dent in this trend for the short term.
With the highest level of residents from around the country preferring to relocate to Queensland, it is likely that interstate migration will continue to drive population growth once the state borders are reopened.
Deloitte Access Economics forecast population growth to slip to 1 per cent in 2020 and 0.8 per cent in 2021, but it is encouraging that growth will still occur, just at a lower level.
Sales turnover in real estate was down 40 per cent in Queensland in April, compared to 45 per cent nationally according to Westpac Economics, as the COVID-19 outbreak slowed transactional activity across Australia.
But activity has jumped 22 per cent in May (Westpac Housing Pulse) which is positive for the local market.
Despite this, sales volumes are still some 30 per cent lower than the equivalent period last year in Brisbane, according to Corelogic, which is contributing to a supply-demand imbalance and tilting the market in favour of sellers.
Buyer demand is strong, driven largely by owner occupiers and also first home buyers, according to our agent network.
We are also starting to see investor enquiry pick up, although this segment of buyers are still more cautious about the overall macroeconomic environment.
Property search activity has increased more than 45 per cent from a year ago according to REA Group - another positive sign that seems to be associated with more buyers on the ground at open homes across Brisbane.
Asking prices for Brisbane houses are 0.4 per cent higher for the month of June, according to SQM Research, and 0.8 per cent higher for units.
Asking rents based on SQM data in Brisbane also look optimistic with growth of 1.5 per cent in the housing market and 1 per cent for units for the week ending 28 June 2020.
Price growth based on settled sales in Brisbane according to the Corelogic Hedonic Home Value Index has moderated, rather than faltered with gains remaining unchanged in the housing market (+0.0 per cent change at the end of May) compared to a softening in the unit market (0.6 per cent at the end of May).
Brisbane’s June performance was similar, with CoreLogic reporting a 0.4 per cent fall in median house prices, and a 0.8 per cent dip in unit prices.
Vacancy Rates at a city level have recovered slightly from April to May, but there are some suburbs we consider to be at risk.
Rental vacancies have continued to escalate between March and May on a month by month basis in the CBD (currently at 13.3 per cent), West End (9.1 per cent), Newstead (7.7 per cent) and Herston (7.7 per cent).
Rent discounting is also greater in some of these locations with Domain reporting 24 per cent of rentals were discounted in May compared with 14.9 per cent in February. Two other suburbs with high rates of rent discounting in Brisbane are East Brisbane (15.2 per cent in May vs 8.5 per cent in February) and Milton (32.7 per cent in May vs 10.3 per cent in February).
Property investors need to be aware that Brisbane is not one property market and it is important to understand location and product type before making any investment decisions.
Looking forward, Queensland unemployment has increased to 6.8 per cent in April 2020 (JLL Research), but new payroll data released by the ABS shows jobs in Queensland fell 6.1 per cent between March and May and total wages fell 4.6 per cent, but this was less than the national average in both instances. This is reassuring for our local economy at this time.
With major infrastructure projects already underway, the Brisbane City council announcing further fast tracked projects including the construction of new river crossings and the federal government announcing that the inland high speed rail project linking Melbourne and Brisbane to be pushed forward, this is more good news for our region.
The supply pipeline still remains grim, with residential approvals across Brisbane continuing to decline.
New dwelling approvals fell 17.7 per cent across greater Brisbane to the year ending March 2020 and are likely to decline further due to COVID-19. New completions for apartments are down from 2019 again this year and this trend is also likely to continue.
Brisbane offers affordability, livability, quality schools, great lifestyle and good future economic prospects. These factors all drive the demand for quality properties.
With the current imbalance between supply and demand, the future does look bright despite what is going on around us. For those with a long term horizon, it might be time to think about preparing to get into the market.
