Brisbane’s recent performance has been disappointing for investors who are expecting big things in this market. But will this be the year when Brisbane finally delivers?
Brisbane’s growth has been painfully slow compared to Sydney’s and Melbourne’s. During the year to June 2015, median dwelling values grew by just 3.4% as Sydney prices surged 16.2% and Melbourne median prices climbed 10.2%. Adelaide even outperformed Brisbane with its 4.5% year-on-year growth.
Despite this, Linda Phillips, senior economist at Propell Ltd, believes Brisbane remains a good bet for investors.
“When you think about the problems that Queensland has experienced in the last couple of years, with a change of government, dramatic cuts to public spending and the end of the mining boom, it’s a surprise that Brisbane house prices did not fall, by and large,” she says.
While Phillips agrees that the 3.5% growth in median dwelling values is modest, she says Brisbane still has lots of potential for investors.
“If that’s what happens to prices in a poor economy, what will happen when the economy finally starts improving? Will we see significantly higher growth in Brisbane? The potential seems to be on the upside,” she says.
“Brisbane has long been regarded as the next economy to show house price growth. We are still waiting, but this next year could finally be the one where we see it, in which case this is a good time for investors to start positioning themselves in the market.”
According to Brock Shearn, residential manager QLD/NT at Propell, the Brisbane market started improving in mid-2015. “You’re starting to get higher auction clearance rates in the inner-suburban area. Suburbs such as Ashgrove, Bulimba, Tarragindi, Yeronga, Clayfield, Norman Park and the like – particularly for well-presented properties at or above the million-dollar mark – are in high demand. This in turn has produced a ripple effect in surrounding areas.”
Shearn adds that the intense interest was also fuelled by the slight drop in better-quality stock being offered to the market, and the current low interest rates.
“Well-informed investors and second and third home buyers clearly believe the time is right to acquire quality dwellings.”
Rosy forecast
Despite recent subpar growth, Angie Zigomanis, senior research analyst at BIS Shrapnel, is upbeat about Brisbane’s prospects. “The Brisbane market remains patchy, but it’s expected to experience broader price growth in 2015/16 as buyer confidence improves,” he says.
“We’re expecting the median house price to grow by a total of 13% over the three years to 2018, and the median unit price to rise by 6%. Significantly, Brisbane is expected to be the only capital city that will not experience a decline in median house prices in real terms in the next three years,” he says.
Inner-city apartments looking dodgy
The sunnier outlook, however, only applies to houses, Phillips says.
“The apartment market in Brisbane is heading for oversupply due to the many projects underway. Buyers are attracted to the apartment market due to the relatively low entry price point. The inner-city location and the fact that rental levels are stronger close to the city and around the universities are also attractive to buyers. However, the high numbers of apartments being added continuously will likely weaken rental levels over the next couple of years. Capital growth is unlikely in the short term,” she warns.
Phillips says there has also been an increase in off-the-plan purchases – no doubt driven by competitive pricing and available discounts, given the sheer number of newly constructed apartment complexes near the CBD. This, along with growing interest in land or dwellings with development potential, due to recent Brisbane City Council rezoning, has led to an increase in general market transactions.
Next growth hotspots
Phillips expects to see growth in properties within 8km of the CBD of 6% plus in the next year, eg in Tarragindi in the inner south, Wilston in the north, Norman Park to the east and St Lucia to the west. Elsewhere she expects growth to average 3%. Areas to watch are:
- Holland Park, 6km southeast of the CBD. Median price is $630,000 with price growth of 13% in the past year.
- Norman Park, 4km east of the CBD. Median price is $780,000 with price growth of 14% in the past year.
- Paddington, just northwest of the CBD. Median price is $880,000. Prices were stable in the past year, but this inner-city suburb has so much going for it.
SUBURB TO WATCH
Kedron: Inner-Brisbane suburb with big potential
With its welcoming tree-lined streets and renowned friendly community, it’s no wonder Kedron is popular part of Brisbane. This inner-northern suburb is just 7km from the CBD and about 6km from Brisbane Airport, and bus services are excellent. Residents enjoy the proximity to Westfield Chermside (the third-largest shopping centre in Queensland).
Properties on Jardine Street and Moree Street are a good choice for families. They are within walking distance of sought-after schools such as Padua College, St Anthony’s Primary School and Mount Alvernia College. Three-bedroom houses may be $50,000 or so above Kedron’s median price, but this desirable location ensures they are worth it.
Housing options include a variety of Queenslander-style and post-war dwellings, modern apartments and townhouses.
There is just 1.1% of stock on the market and the vacancy rate is 2.44%. OnTheHouse predicts 7% pa growth over the next eight years.
