Investors are back in Brisbane thanks to high yields and solid growth prospects
Like many other markets around Australia, Brisbane is patchy. Great value opportunities exist in some areas, but other suburbs are still struggling.
Possibly the most important data to come out of spring, however, has been the first median house price growth for an extended period. The report, from Australian Property Monitors, suggests Brisbane medians are finally ready to start creeping forwards once more.
“The growth was just 0.3%, so it was just above the line, but the significance is that it was the first rise recorded in eight consecutive quarters,” says Andrew Wilson, senior economist at APM. “Our data showed the Brisbane median house price had fallen for two years, so there is a sense it has bottomed and the ABS confirmed that with their latest established house data release.”
Savvy investors and upgraders have been taking advantage of the mixed state of the markets in sought-after suburbs.
“There are some bright spots in the Brisbane market,” says Wilson. “The prestige market is showing some life, particularly in some of those riverside areas that were affected by the floods. A lot of people are starting to move back into these suburbs. Areas such as New Farm, Newstead and Hamilton are strong in terms of prices growth and buyer activity, particularly for unit developments.”
Investors land big yields
Investors have been on the move in some of Brisbane’s property markets; driven undoubtedly by the favourable conditions that separate the Queensland capital from almost every other major city in Australia – gross rental yields.
“A lot of activity recently has been generated by the highest gross yields for investment properties of any capital city in Australia,” says Wilson.
“This reflects the fact that Brisbane has the cheapest median of any mainland capital, but also one of the highest rents in relation to that median. Gross rental yields are in the mid-5% range, which is a really good return when you consider we’re more than likely at the bottom of the price cycle, so there’s capital growth potential going forwards, too.”
Much of the investor activity has been centred in the apartment market according to Wilson, who points to indicators such as tight vacancy rates as drivers of the big yields.
Financial firm Jones Lang LaSalle recently rated Brisbane as having the strongest commercial property market in the developed world, while fellow resource industry beneficiary Perth could only manage seventh.
“That is an example of how resource driven Brisbane is,” says Andrew Peterson from The Next Hot Spot. “The city hosts all the peripheral businesses that get into bed with the mining companies and even the Queensland government has invested in a major office tower on the Brisbane River, which gives you an idea of what they think about the market.”
The long-term outlook for Brisbane is fantastic, according to Peterson.
“It might do it hard for a year or so, but in the big picture, it is an obvious standout,” he says.
“It’s got employees coming in, plenty of fly in, fly out workers spending money and paying taxes, and a lot of dough about to come through the administrative offices.”
Steer to port
The mining sector has laid the foundations for Queensland to join Western Australia and Northern Territory as one of the best economies in the country.
However, the action is all taking place away from Brisbane and the south-east coast, which is suffering the effects of poor tourism conditions.
Areas such as Townsville, Mackay, Gladstone and Rockhampton are enjoying a more favourable investment per capita ratio, according to Peterson.
“In Brisbane, the benefits of the resources investment are diluted by a greater population,” he says. “Gladstone – with only 60,000-odd people – collects a lot more benefits than a city of Brisbane’s size.”
Peterson believes most of the major port cities in the state are primed for growth.
“Townsville is fantastic, because it’s got so many tiers of industry,” he says. “There’s plenty going on up there and it gets the secondary benefit of being something of a home for fly in, fly out workers. We know that’s where they spend their money and where they live, not where they turn up to work.”
As the resource towns propel Queensland forwards, areas like the Sunshine Coast are pulling it back into line. That region, like the Gold Coast, relies heavily on tourist dollars which, thanks to our over-performing currency, are being directed overseas.
“The lifestyle areas don’t have the industry to drive them,” says Peterson. “The Kawana Waters project is likely to give the Sunshine Coast a lift in some of the cheaper pockets.”
The project involves the installation of hospital and education facilities to the area, which is at the southern end of the Sunshine Coast. The flow of staff, students, patients and others in and out of those types of facilities is likely to benefit surrounding areas.
“There are 25,000 people who commute to the uni or the hospital, and they want to live fairly close,” says Peterson. “We saw the same effect with Flinders University over in Adelaide.”