Brisbane’s unit market is weighed down by oversupply, while houses near the capital offer value for money
Brisbane is the market to be in if you’re looking for cash flow, but apartments are being weighed down by excessive development. Brisbane’s dwelling values slipped by 0.6% over July 2017, according to CoreLogic data.
“Pricing in particular is subdued, and growth is subdued. Vacancy rates are rising for apartments,” says Nerida Conisbee, chief economist at REA Group.
“I think the problem areas are places where stock may have been developed to sell to investors – maybe lower-quality stock. Some of the stuff that’s not selling well or is seeing high vacancies is stock that people don’t particularly want to live in. Stock that will do well are the better-quality, better-located developments.”
By contrast, houses are performing well in this area, especially with the recovery of the state economy.
“The Queensland economy is growing, and it’s still seeing population growth. Job growth is fairly mild at the moment, but it will get stronger,” Conisbee says.
Yields pull investors
in For Philippe Brach, CEO of Multifocus Properties & Finance, Brisbane’s allure lies in its high potential for rental returns.
“Cash flow for a property in Brisbane is going to be a lot better than cash flow for a property in Sydney, simply because of the national yield of the market. If you buy a property in Brisbane today, it’s probably going to be slightly cash flow positive.”
Suburbs that are in particular demand are those situated 20–40km from the Brisbane CBD. They offer good value for money at affordable prices, while generating a high yield.
“If you can’t find a place 12–20km from the CBD, and you realise that your yield is around 4.8–5%, then it’s still a good investment,” Brach comments.
However, he advises against investing in areas like Coomera, the north of the Gold Coast and the area west of Brisbane, given the considerable construction happening and the small chance of capital growth.
Herron Todd White’s Month in Review report for August 2017 says investors are also looking into duplex and dual-occupancy properties in the metro, especially interstate buyers from Sydney and Melbourne. Meanwhile, local investors limit the risk of apartment investments by considering townhouses and detached housing.
“There has been a slowdown in investor activity of late due to a confluence of factors. Uncertainty around price movements in units has been exacerbated by the oversupply. Negative media exposure and restrictions imposed by lenders responding to regulators are other factors that are seeing investors take a breather,” HTW states.
SUBURB TO WATCH
MUNDINGBURRA: Investments for under $200k
Investors looking for an affordable opportunity may want to pay close attention to Mundingburra as it’s one of the few city suburbs with a median unit price below $200,000.
The suburb is 6km southwest of the Townsville CBD, but buyers here can expect to pay an average of just $197,000 for a unit, while a house in this predominantly residential area will only cost around $341,000.
However, rental rates of both houses and units are fairly low and have dropped by around 9% over the last 12 months, in response to Townsville’s struggling economic conditions. Currently, houses bring in an average of $300 per week, while units can expect an average of $228 a week.
