Property prices in Brisbane have been slowly creeping up over the last 12 to 18 months, and it’s not just one type of buyer that is driving growth.
Instead, it is broad interest from a range of interested parties that is pushing prices north, according to Dr Diaswati (Asti) Mardiasmo, national research manager at PRDnationwide.
“Over the 12 months to December 2014, there has been an increase in second and third homebuyers from interstate who are taking advantage of the low interest rates, increased equity in their homes, and a slower median price increase in comparison to Sydney and Melbourne,” she says. “First homebuyers are also claiming their stake in the property market, with many purchasing new dwellings within 15-20km of the CBD.”
One of the key factors explaining the city’s appeal is its affordability, Mardiasmo explains.
Last year, a lot of attention was on Sydney and because of that, Sydney’s affordability has decreased considerably, and Brisbane is suddenly more attractive by comparison.
“Back in 2012, buyers with a $500,000 to $550,000 budget could get access to 26–30% of Sydney’s metro area. That has shrunk to just 5.4%, while in Brisbane that budget can still access 36% of Brisbane’s property market,” Mardiasmo says.
“I can definitely see more attention turning to the Brisbane market as buyers can get more bang for their buck, with a strong level of rental yield and future growth.”
Double-digit growth in 2015?
Many suburbs of Brisbane recorded solid, double-digit growth in 2014, and Zoran Solano, senior buyers agent at Hot Property Specialists, sees no reason why this isn’t achievable again in 2015. “The Brisbane market has been on the move now for 12 months, with key suburbs experiencing strong growth, and I think this year that growth will continue,” he explains.
“In my view, 10%-plus growth this calendar year for certain suburbs isn’t out of the question.”
Terry Ryder from Hotspotting.com.au is of the same belief, and explains that the Brisbane real estate market “has been building up to this being a strong year”.
“Last year, we saw some moderate growth, and some specific locations have done a lot better than the average. But while we haven’t seen double-digit growth [across the city] yet, I believe that Brisbane is the city most likely to challenge Sydney in 2015,” he says.
That’s not to say that all of Brisbane is tipped to experience double-digit growth, Mardiasmo clarifies.
As with all markets, it’s crucial to investigate the drivers of growth at a micro-level, to ensure you park your funds in a suburb set for strong performance, rather than relying on the overall growth of the market to move your investment forwards.
“People tend to make blanket statements about capital cities that the whole of the region is growing. But if you look into each individual suburb, there may be some suburbs that are stagnant or even going backwards, while others are experiencing strong growth,” Mardiasmo says.
“There are some suburbs that will have immense growth on one side, but on the other side growth will be sluggish for certain reasons; in Brisbane, it could be a flood-affected area. So when it comes to property, you can never make blanket commentary as it’s dangerous to suggest that one-size-fits-all.”
Risks in the Brisbane market
In spite of all of the positive sentiment about Brisbane, it’s important to note that this market does have its risks.
In Brisbane, that risk is highly visible, says property investing coach and founder of We Find Houses, Paul Wilson – all you have to do is look up.
“When talk turns to inner city high rise apartments, the sky is the limit – quite literally!” he says.
“Vacancy rates [in the inner city unit market] are already at 3.5% and climbing, and it’s been reported that there is about 10 years worth of supply planned to hit the market in the next two years. This will also have an impact on units in surrounding suburbs, particularly those older units.”
Investors considering off-the-plan investments may find themselves in serious trouble, he warned, as a significant over supply increases the risk that the property will ultimately be valued lower upon completion than the price paid, creating issues when the buyer attempts to settle finance.
Owing to these risks, Wilson doesn’t expect Brisbane to see “anywhere near the same growth as Sydney has experienced”.
“That doesn’t mean Brisbane won't see good healthy price growth,” Wilson adds.
“Median prices have risen by 11% over the past two years and the rate of price growth is expected to increase more this year. Having the election behind us, lower interest rates, tight vacancy rates outside of the CBD, affordable housing compared to Sydney and Melbourne, and a shortage of the right type of stock, should see solid but not necessarily spectacular growth take place over the next 12 months.”