The end of the mining boom has had a muted effect on the Brisbane market, but capital growth rates could be driven by speculation
While Sydney has cooled its jets since the December 2015 quarter, Brisbane has maintained an upward pace as sales activity shows modest but steady market increases.
“The Queensland economy, unlike the other resource states, is slightly more diverse and therefore the Brisbane market has been resilient in spite of divestment from mining,” says Eliza Owen, market analyst at OnTheHouse. com.au. “Accommodation services have grown in revenue almost 20% in the
2014/15 financial year, suggesting tourism is picking up in the economy, which may stimulate dwelling demand as well.
“Steady capital growth rates suggest there is demand for dwellings in Brisbane, the Gold Coast, the Sunshine Coast, and parts of regional Queensland,” says Owen. “The question is whether that demand is fuelled by people who wish to live in the area, or by investors from Sydney who are looking for cheap properties to acquire.
“If it is the latter, then this is a more risky, speculative kind of demand we are seeing in the market.”
It seems confidence in the Brisbane property sector is high. The Knight Frank Australian Residential – Review reports an 8.6% increase year-on-year in housing finance commitments in the final quarter of 2015, to $10m.
Vacancy rates throughout the state are a mixed bag, as some regions enjoy higher demand while others ease into dangerous territory.
The lowest vacancy rate award goes to Noosa, which recorded a tightening of vacancies from 0.9% to 0.7% in the December quarter, figures from REIQ show. CEO of REIQ Antonia Mercorella stated in a February report that “in many regards, the story of Noosa is a fairytale, with the area really struggling through the GFC years, and now is thriving, with good growth in median house prices and also low vacancy rates, showing that investors have great opportunities if they buy in the right price bracket”.
Mercorella attributes population growth to increasing demand on the Gold Coast, which recorded its lowest-ever vacancy rate of 1.1%. “As we get closer to 2018 and the Commonwealth Games our expectation is that more accommodation will become available and that rate will ease slightly,” says
Mercorella.
The Queensland Government Population Growth Highlights and Trends 2015 report shows that historically, in the decade to 2013, the Gold Coast alone contributed 17% to Queensland population growth. However, the most recent ABS statistics reveal the Gold Coast recorded its lowest population increase in 10 years of 1.64% in 2014.
Growing in both reputation and population, the city of Ipswich was named the fastest-growing region by the Queensland population report. Home to 190,000 in 2014 (ABS), Ipswich’s population is expected to reach 435,000 over the next 15 years. While REIQ figures show that the vacancy rate eased from 1.3% to 2.5% in the December 2015 quarter, it maintains a steady 5% rental yield and good development opportunities for a low median house value of $325,000.
Areas of concern include Mount Isa, where the vacancy rate increased dramatically by 3.1% over the September quarter to 9.4% in December. Fellow mining town Mackay, where house values dropped 24% over the 12 months to February 2016, recorded a 9.3% vacancy rate in December, which is testament to the volatility of the mining sector.
Conditions in Brisbane are positive but subdued, showing none of the heat of the Melbourne and Sydney markets. CoreLogic figures show houses were up 5.72% in value to $539,700 in the year to
February 2016, and units have risen 3% to a median value of $405,000.
The city has a 2.8% vacancy rate, putting it near the back of the pack in capital city comparisons. Demand is an issue in the inner ring, where the rate has eased to 3.8%, according to REIQ figures.
In a February Month in Review report, Herron Todd White researchers warn buyers to “watch their step with inner-city, off-the-plan units”, due to the amount of investor stock nearing completion. “Add to this the number of proposed projects, along with the signs of declining rents because of rising supply, and you’ll realise why product designed specifically for the investor market is of the most worry”.
Units in the suburb of Spring Hill, 2km north of the CBD, are the big winners for rental returns in the inner ring, at 6%, according to OnTheHouse.com.au, and their median unit value is $410,000.
While demand in the inner ring is easing as supply steps up, suburbs in Brisbane’s middle ring are benefiting from higher demand, and the vacancy rate tightened to 2.1% at the close of 2015.
In its report, Herron Todd White recommends investors look for “second-hand unit stock in areas with a large potential tenant base this year. Buy well-laid-out but unrenovated stock in a quiet location. Keep yourself within 5 kilometres of the city and make sure there’s potential to improve the unit”.
SUBURB TO WATCH
Waterfront affordability gives Carrara an edge
Pulling in the highest population growth figures in Queensland, the Gold Coast is increasingly drawing more buyers from the overpriced southern capitals, who find property values comparatively inexpensive.
Carrara, centrally located 15 minutes from the Southport CBD and popular dining and entertainment hotspots Surfers Paradise and Broadbeach, is one such suburb boasting a low median house price of $499,500 for its large blocks, leafy streets and luxury living.
New waterfront villas on the Nerang River are fetching half a million, while older-style detached homes on generous riverfront blocks are on the market for $850,000. Units and townhouses away from the water are averaging above $300,000, many with potential for quick rejuvenation.
Carrara’s performance to date has been steady, achieving 12-month growth of 7.3% to January 2015 and a high rental return of 5.5% for houses and 6.3% for units. It ranks 15th in Queensland on Real Estate Investar’s lowest vacancy rate list, at 1.14%, which tightened from 3% in January a year earlier.
While Carrara is convenient for access to the M1, which offers a direct route to Brisbane in an hour, or south to the NSW border in 30 minutes, properties located around Michelmore Drive bear the brunt of the road noise. Properties east of Papas Way are in excellent proximity to amenities, quality schools and major roads, while avoiding the associated noise.
