Can Brisbane finally deliver the long-awaited growth?
Investors are still waiting for that much talked about recovery. Can Brisbane live up to the expectation and how soon can it bring it on?
If you’re getting tired of waiting for that much touted rebound in the Brisbane market, you’re not alone. Experts have been predicting this turn around since last year.
So far, Brisbane has been slow to deliver. And it appears that the nascent recovery is still struggling to take root.
The recent data from Domain shows Brisbane’s recent housing market resurgence has stalled over the March quarter with both houses and units falling in values.
Brisbane was the second worst-performing market with median house values falling by 0.7% to $484,374. Units fared even worse with median values dropping by 2.3% to $354,246. Unit values have been dropping sharply for the third consecutive quarter.
Some experts are concerned that Brisbane’s unit market is approaching an oversupply situation and are even warning against buying new units in the area. “Brisbane is facing a potential oversupply due to the many projects currently under way, so investors are right to be concerned about this and some caution is advised if purchasing in this market,” says Linda Phillips, head of research at Propell.
Eliza Owen, research analyst with Onthehouse.com.au says that while there are exceptions to the rule, the new units being developed in Australia’s biggest capital cities may not give the best capital growth returns.
Owens points out that although units will present as relatively affordable, “it is clear they do not produce higher capital growth returns, particularly now when the unit market is showing signs of oversupply.”
Not all doom and gloom
There are a number of positive indicators that show growth should resume soon.
The latest auction clearance rate stats from CoreLogic RP Data shows a solid 8.8% increase to 55.5% compared to a year ago.
Investors appear to be fairly active, with the number of mortgages sold for Queensland property investment purposes climbing to 36.7% in April from 33.3% in March according to mortgage broking firm AFG.
Phillips says that as sales for residential properties grows steadily, median values could rise by up to 6% in the greater Brisbane area over the next 12 months. “This is especially true in the case of those assets within a 10km radius of the CBD,” she says.
“With recent changes to the Brisbane City
Council planning scheme, investors are focusing on residential sites which have development potential.” Phillips points out areas close to the CBD and in the inner north and inner south as areas to target if you’re looking to ride the impending recovery. These include suburbs such as Bulimba, Balmoral, Norman Park and the inner north suburbs such as Milton.
“We have noted increased activity in the $1m-3m dollar prestige house segment, however, purchasers in this category are highly selective in their decisions,” she says.
“While the jury is out on the new state government, there is a feeling that the focus on infrastructure, health and employment is a move in the right direction. There are some early signs of improving consumer confidence.”
Areas to watch, and avoid
Phillips recommends the following areas to check out and watch.
These suburbs are currently flying under the radar and they’re showing solid fundamentals for growth.
- Norman Park is located around 4km from the CBD, and is ripe for the picking if you’re looking for properties with redevelopment potential.
- Carina is located 7km from Brisbane CBD, and is benefiting from the new transport system being put in place. Houses on large blocks of land offer opportunity to redevelop.
- Paddington is just 3km away from the CBD, making it a desirable place to live for renters and owner-occupiers.
- Hawthorne is currently undervalued and underrated, and being only 3km away from the CBD should underpin future growth in value.
Areas to be wary of include the suburbs to the south and some parts of the Gold Coast which are still suffering from oversupply according to Phillips.
SUBURB TO WATCH
Norman Park: Underrated inner suburb
Norman Park, located just 4km from the Brisbane CBD is one of those suburbs currently flying under the radar as the spotlight shines on its more famous neighbours. In Norman Park’s case, it’s Bulimba getting all the attention.
Yet, looking closely, the suburb has fundamentals to support a solid growth in property values in the future, thanks to its extensive parklands that are continuing to attract families. The tranquil environment is also attractive to retirees who want to live closer to the CBD.
Residents enjoy a range of public transport options including trains, buses and ferries or city cat.
The suburb also boasts a number of high quality schools including the Norman Park State School, Seven Hills Primary School and St Thomas’ Catholic School.
“Long term, potential is for Norman Park to outperform – its proximity to the city, its diversity of residential opportunities, and the investment in main road upgrades all allow for buyers to capitalise as Norman Park enters a growth cycle,” says Lachlan Walker, director with Place Advisory.
Norman Park’s residential market is diverse – with opportunities ranging from prestige riverfront (some of the highest recorded house sales) to more affordable post-war homes according to Walker. “As an investor, you should be looking for property close to transport. Also investigate some of the smaller, new boutique residential buildings coming out in the area at very affordable prices,” he says.
For the renovators, post-war homes and Queenslanders are scattered throughout the area – look to add value with these properties.