Brisbane’s modest growth persists as investors wait for more signs of recovery in the market
The latest results don’t look too bad. At 3.9% growth in dwelling prices during the past 12 months, Brisbane was the third best performing capital city in Australia.
But investors were expecting more than low single-digit growth. And it’s long overdue.
“We were expecting Brisbane to be one of the top-performing markets this year behind Sydney. We’re expecting it to grow by more than 10%, certainly at least 10%. Unfortunately, it’s certainly not going to happen at this stage. Brisbane has really flattened this year. There was hardly any price growth,” says Andrew Wilson, chief economist at Domain.
Wilson points to the underperforming local economy and fragile buyer sentiment as reasons for the lack of buyer momentum and price growth in Brisbane.
Low investor confidence
While prices are attractive in Queensland compared to Sydney and Melbourne, this is not enough to lure investors into the state just yet.
“I think, overall, confidence remains fragile in Brisbane,” says Wilson. “I think Brisbane still has a bit of a journey before it’s up and running. Brisbane is suffering because Queensland is suffering. There’s no doubt about it. The resources sector is really winding down in Queensland, especially the coal industry. That’s really having an impact overall on most housing markets.
“It’s just a big-picture economic issue. I think the job shedding that has been going on in the resources sector in central and northern Queensland has really weighed on confidence.”
Reasons to be optimistic about Queensland’s prospects
The numbers may not reflect it yet, but the Sunshine State has some powerful positives working in its favour, according to Deloitte Access Economics.
“Queensland’s economy is in better shape than most people realise,” it says in its Business Outlook report. “It is true that there are some important negatives revolving around a slowing China, as well as low commodity prices in general and rotten coal prices in particular, and the associated drop-off in mining-related construction work, yet those factors are still only half the story. But that lower commodity prices and weaker spending on resource projects have generated responses by both markets (the lower Australian dollar) and by the authorities (the Reserve Bank has cut interest rates almost a dozen times since 2011). That combination means pretty powerful positives for Queensland. In particular, its tourism and farm sectors are lapping up a lower dollar, and the weaker currency also spells good news throughout the mining sector too.”
Beware of Logan?
Just like Melbourne, Brisbane is also seeing the return of buyer activity to the budget markets west and north of the city.
“These areas are showing early signs of a sustained revival,” says Wilson. “We’re seeing a bit more investor activity there now.”
However, Wilson warns about buying in Logan at the moment.
“I know there’s been a lot of talk about Logan. I think the publicity doesn’t reflect the reality there to a certain extent. We’re seeing prices falling in Logan. I think investors need to be circumspect about looking there now.”
Wilson says the high level of unemployment in Logan is causing the market to stagnate.
“Until there’s a sense of a revival, and that would come off the back of an improving unemployment rate, I would think twice about buying there now.”
A better place to look in his view is the suburb of Ipswich, as it continues to attract buyers and its fundamentals are more solid.
SUBURB TO WATCH
St Lucia: Infrastructure to fuel future growth
The inner-Brisbane suburb known as St Lucia has benefited from some excellent infrastructure projects, including the $1.5bn Legacy Way tunnel that opened a few months ago. It is also right next door to the Indooroopilly Shopping Centre, which is the largest shopping centre in Brisbane’s western suburbs and just last year underwent a $450m refurbishment.
This suburb is particularly popular with students, as shown by the median age of just 23, which is 14 years below the Australian average, according to the ABS. This is because the University of Queensland is nearby, which has more than 50,000 students and is a major source of employment in the area. The suburb is also popular with young professionals, who tend to favour units over houses.
Apartments in Bellevue Terrace are close to the University of Queensland, Toowong Village and the Ironside State School. Two-bedroom units there can be picked up for under $440,000.
