Despite hopes for stronger performance, Brisbane continues to disappoint with its subpar growth. Experts are also increasingly worried about the current apartment sector building boom
Solid recovery seems to elude the Brisbane market. Despite the stimulus of a lower interest rate and the advantage of having lower-priced properties, strong growth just can’t seem to get off the ground there.
Even as local experts talk up the prospects of an imminent strong rebound in prices, the latest data is a stark reminder of the challenges facing the Brisbane market.
Recent CoreLogic RP Data figures show median dwelling values falling by 0.5% during the May quarter to $569,500. During the past 12 months the median house price grew by just 3.4%.
Domain is also seeing weaker prospects for Brisbane and the Queensland market in general, which has prompted chief economist Andrew Wilson to downgrade its growth forecast.
“We’re a little bit more pessimistic about Brisbane,” he says. “We’ve tracked a weakening in activity in Brisbane this year.
“I think what’s happening in Queensland that we picked up is that a lot of the consequences of weakening resources have been felt more quickly in Queensland than expected. Even the RBA has been quite surprised at how the resources sector has weakened so fast, particularly in WA but also Queensland.”
Therefore Wilson is now expecting the Brisbane market to grow by up to 5% compared to a more bullish 7% forecast a short while back.
“No doubt there are still a lot of concerns about the Brisbane economy, and that reflects the wider Queensland economy in light of the accelerated resources downturn, so we need to keep an eye on that,” he says.
“A lot of the coal-mining towns of Queensland are now looking like they’re in for a significant shake-out.”
Apartment sector worry
Another area worrying some analysts is the new apartment sector, particularly those properties located in inner Brisbane.
Angie Zigomanis, senior research analyst at BIS Shrapnel, says there is a real risk that supply will get ahead of demand, which would cause price stagnation at the very least, or a price drop as the worst-case scenario.
“The new apartment sector in Central Brisbane is worrying. There’s a big pipeline of new construction getting close to finishing, and once they come online a lot of people who bought these apartments are likely to struggle on resale.
“When apartments are sold off the plan, you have more markets such as local buyers, interstate buyers and overseas.
“When you’re onselling, you lose the overseas market, because they can only buy new or off the plan. You also lose some depreciation benefits.”
Already, there are signs of a weakening in prices. During the past 12 months, the unit price stagnated while house prices grew by 3.4%.
Bright spots
While the Brisbane market is sluggish as a whole, Wilson points out that some sectors are actually showing a promising recovery – in particular, in the budget end of town where he says the market is more buoyant.
“It seems that the lower interest rate is starting to work its way back into those markets,” Wilson says.
“Interestingly enough, we’re starting to see a pick-up in the outer fringes. We recorded a strong March performance for Ipswich, which has been flat for more than a year, but it’s starting to pick up a bit. A lot of the activities are coming from the new estates.
“We’re seeing the same thing in Moreton Bay and North Lakes to the north of Brisbane, which is a very strong new-build area.
“We’re expecting a big lift in FHB activity in Brisbane. The numbers are still fairly low, but we expect them to rise. With the low interest rate working its way back to the middle to upper range till the end of the year, the market will rise again.”
SUBURB TO WATCH
Oxley: Beautiful Brissie suburb with great amenities
This leafy suburb with a solid sense of community is perfect for young families. Oxley is just 11km from the Brisbane CBD, and the Ipswich Motorway and local train station provide great transport options. A good range of shops, Canossa Private Hospital and two golf courses are also in the suburb.
Some older properties in Oxley are perfect for renovators. But note that some areas have been affected by floods in the past. Current demand is illustrated by a vacancy rate of just 1.6%, says Real Estate Investar, and Onthehouse.com.au predicts a healthy 6% pa growth over the next eight years.
Properties on O’Connor Street benefit from being in a quiet cul-de-sac that isn’t affected by floods. It is within walking distance of restaurants and the train station. Three-bedroom, two-storey houses can be bought there for less than $450,000.
