The Brisbane property market is rewarding investors for their loyalty, with annual growth inching towards double figures.
But it’s the opportunities on offer just south of the big smoke that have piqued interest in investing circles
Brisbane’s property market has surged ahead in the 12 months to June, with BIS Shrapnel reporting an increase in median values of 8%. That said, the market is still well below its June 2010 peak in real dollar terms – so while the market is on the move, it remains affordable to the average investor.
“The pieces are falling into place for the Brisbane residential market to continue to strengthen,” says Angie Zigomanis, senior manager with forecasters BIS Shrapnel.
From a fundamental perspective, he notes, the Queensland capital is gearing up for long-term prosperity. New dwelling construction has fallen below underlying demand and as a result, in recent years and an underlying deficiency of dwellings has emerged, with vacancy rates in Brisbane of 2.3% in March quarter 2014.
Even with rebounding values, the low interest rate environment has resulted in “affordability being at early-2000s levels”, Zigomanis adds.
“This is all beginning to have an impact on purchaser sentiment, with upgrader and investor demand increasing and encouraging price rises,” he says.
“However, the pace of price growth is likely to be moderate, with economic conditions still relatively subdued and net interstate migration inflows are at low levels.”
All eyes on the BNE-GC growth corridor
Even with recent growth, Brisbane remains a popular investment destination with landlords who are leveraging low interest rates to generate both strong cash flow and strong growth in a capital city market.
“Brisbane’s definitely moved, but it has the underpinning of strong infrastructure and being a capital
city to maintain that upward momentum moving forward. Even though it’s already going up in value, it still offers a good entry point compared to Sydney,” explains Paul Wilson, property specialist with We Find Houses.
“What I find really interesting, however, is that the level of development and infrastructure going between Brisbane and the Gold Coast is really closing the corridor between those two areas. This means that the Gold Coast is becoming a good location for investors, as there is enough demand and growth drivers to entice landlords into the market.”
Indeed, house prices on the Gold Coast have “generally moved in tandem with Brisbane”, confirms Zigomanis, who says the Gold Coast is benefiting from the same drivers of population growth as the capital: primarily net interstate migration inflows and, to a lesser extent, overseas migration.
Large construction projects including the $670m redevelopment of Pacific Fair and the staging of the Commonwealth Games on the Gold Coast are expected to contribute to local employment, as is the beginning of a recovery in residential construction.
“Consequently, further price growth is expected, totalling 13% over the three years to June 2017,” Zigomanis says.
Regional markets enter recovery phase
The great state of Queensland is comprised of hundreds of different markets and when we review regional performance, it’s clear that each market is being impacted by its own set of influences.
While Townsville’s property market has been weak over the last 12 to 18 months, prompted largely by falling resource sector investment and resulting lower housing demand, the downturn in Cairns appears to be stabilising. In Cairns, BIS Shrapnel reports that the post-GFC collapse in construction is finally turning around and had resulted in “a dwelling deficiency”.
REIQ figures show that in the 12 months to March 2014, sales volumes in Cairns increased by a healthy 15%, and median property values have “begun trending upwards, following two consecutive quarters of positive results”.
The Townsville market is forecast to remain relatively weak over the next 12 months, according to Zigomanis, who expects vacancy rates to tighten from mid-next year as a result of weak dwelling construction.
Local economic conditions in both markets are expected to strengthen on the back of rising residential construction, boosted by low interest rates and improved tourism growth contributing to employment.
“Sharp rises in insurance costs after recent cyclones in Queensland’s north will impact on the financial equation for investors, and may have a dampening effect on investor demand until further rental growth comes through to compensate,” Zigomanis says.
Suburb to watch
Logan
The strip of towns and suburbs between Brisbane and the Gold Coast has enjoyed a massive influx of residents in recent years, making the region a prime destination for property investors.
However, as savvy investors know, not all real estate markets are created equal: property specialist Paul Wilson says would-be landlords must remember that there are “markets within markets”, and while some suburbs in this area have enjoyed strong growth to date, others have lagged.
Consequently, although Queensland may seem ripe for the investment picking, investors need to thoroughly research the market before deciding which areas – and which types of properties – to focus their search on.
“I wouldn’t necessarily be advocating high-rise residential towers; I’d be more interested in seeking out family homes, as there is still a shortage of homes on the rental market that offer more than a basic two-bedroom unit. Family-style properties are still in high demand,” Wilson says.
Opportunities for investors may stretch as far west as Ipswich, Wilson adds, although his pick is the shire of Logan, a collection of over 60 small suburbs that sits between Brisbane and the Gold Coast.
“With Logan being so close to Brisbane and with suburbs like Loganlea on the highway, it offers a good entry point to the market,” Wilson says.
“It’s got an older, slightly lower socio-economic demographic, but it’s emerging and there’s a big, proactive push by the Mayor to move the region forward. It’s one to watch for good capital growth.”
