Experienced investors know that there’s no such thing as ‘one’ property market, with dozens of micromarkets operating at any one time in every state, city, suburb and even street.
This is proving to be the case in Queensland, where the rental market is operating at two speeds, reports the Real Estate Institute of Queensland (REIQ).
Vacancy rates remain below 3% in the popular southeast precincts; however, they’re growing substantially weaker in regional markets.
From Gympie (around 160km north of Brisbane) down to the Gold Coast and west out to Toowoomba, rentals are reaching “almost historically tight levels”, says REIQ CEO Antonia Mercorella.
“We’re seeing strong demand for rental properties in areas like Caloundra and Noosa, with both registering a 0.9% vacancy rate, and while a small level of this demand is seasonal, it is good news for investors who have certainty around finding tenants for their properties,” she says.
Brisbane’s vacancy rate remains healthy at 2.8% in the most recent reporting quarter, although a rash of new big-box unit developments being released to the market are having an impact on rentals and vacancies.
“New apartments in Brisbane are reportedly being snapped up by investors and owner-occupiers, although the vacancy rate softened slightly, from 3% to 3.3%. Local agents are telling us that in order to secure a tenant, rental incentives are being offered,” Mercorella says.
“Asking rental prices are also said to be softening in response to the level of supply. However, it is evident that the tenant demand is still there.”
Vacancy rates swell in the regions
Elsewhere in Queensland, the Gold Coast’s vacancy rate dropped from 2.3% to 1.7%, and the greater Sunshine Coast area fell from 1.6% to 1.3%.
Further north, however, the market is softer, with Gladstone in particular suffering as its resource-based economy struggles to support the city’s workforce. Gladstone’s vacancy rate lifted from 5.2% to 7.1%, although Mercorella believes promised infrastructure projects in the region will soon see the situation turn around.
“With potential projects slated to go ahead, such as the Eden Bann Weir and the Gladstone to Fitzroy River pipeline, employment should improve, and with that the property market,” she says.
Vacancy rates aside, most landlords will rarely have trouble finding a tenant for a quality property in a blue-chip suburb. Lutwyche, a residential neighbourhood situated just 5km from the CBD is a prime example.
Of course, the only potential issue for landlords seeking to secure one of these properties is that these investments are not always priced within an everyday investor’s budget.
Blue-chip property boom
Mark Taylor, sales partner at LJ Hooker Brisbane Central, confirms that houses within a 5km to 10km radius of the CBD are currently in high demand with investors, owner-occupiers and renters alike. “Inner-city housing has been crazy busy for a couple of years now. That’s mainly what people want, but not always what they can afford,” he says.
“I mainly deal with inner-city units, so that attracts the investors and the occasional first home buyer [who are] looking to get into the market to start off their investment portfolio.”
While apartments do offer a lower price point to enter these markets, the capital growth isn’t always as robust.
The Australian Housing Outlook 2015–2018, prepared by BIS Shrapnel for QBE, suggests that over the next three years house price growth will be the highest in Brisbane “among all state capital cities”. Apartments, however, are not expected to fare as well.
“Rises to interest rates through 2016/17, together with weaker economic conditions forecast in 2017/18 and the emerging oversupply in the unit market, are likely to have a broader impact in negating demand for houses as well. By June 2018, the forecast median house value in Brisbane of
$575,000 will be 13% above the median at June 2015,” it reports.
“[We] expect to see unit prices stabilise and even show a modest increase in 2015/16 and 2016/17. Prices are forecast to weaken again in 2017/18 as new units are completed and become available for occupation, impacting on both rents and prices. The median unit price is forecast to rise by a total of 2% to $420,000 in the three years to June 2018.”
SUBURB TO WATCH
Lutwyche: New infrastructure boosts desirability
Lutwyche has experienced renewal and dramatic change in recent years, with the construction of new main roads and a major busway providing convenient access to nearby Brisbane City.
Along with transport infrastructure, Lutwyche is also experiencing a boom in new housing developments due to recent rezoning.
“We were rezoned to high density and mixed use,” says Ray O’Brien, principal of LJ Hooker Lutwyche,” which means that instead of having a two- or three-storey limit on heights, in some areas it can go up to 12 storeys.”
While the transport construction was disruptive to locals for several years, O’Brien says there’s an upside.
“There are large parcels of land where shopping infrastructure will be replaced in a modern way. Because of the mixed-use zoning, you’re allowed to have shops and restaurants as well as apartments above it.”
With a median house price of $858,000 and strong capital growth over the past 12 months, the market is recovering confidently from the recent upheavals. The introduction of contemporary shopping facilities and a modern facade will further bolster Lutwyche’s popularity as a lifestyle suburb near the city.
“The continual revamping of Lutwyche now includes the removal of older-style homes in rezoned areas, because it’s walking distance to the new infrastructure,” says O’Brien. “The trend here is regrowth.”
