According to leading property data provider CoreLogic, Australia’s housing correction marks its twelfth month anniversary with values down around 2.7% since they peaked in September last year. Half of Australia’s capital cities saw values track lower over the past 12 months, and the Australian housing market continued to weaken in September, with national dwelling values falling 0.5% last month.
However, as rental rates edge higher and national dwelling values trend lower, gross rental yields have consistently improved in most regions compared to 12 months ago. The exception to this is in Darwin, where weekly rents have fallen at a faster rate than dwelling values, and in Hobart, where rents aren’t keeping pace with the rapid rise in housing values.
Key drivers and challenges moving forward include the affect of heightened levels of regulation across the finance sector, the decrease in net overseas migration, and a higher level of housing supply. But while the housing risk profile is somewhat heightened, economic conditions remain healthy and mortgage rates are set to remain low into 2020.
Economic environment
In terms of Brisbane property values, the drag on growth from the end of the mining investment boom seems to have passed, and Queensland’s economy will continue to be fuelled by increased population growth, improved commodity prices and services exports through tourism.
Queensland’s labour market has continued to strengthen with the number of people being employed growing by 3.5% over the 12 months to June 2018. The unemployment rate also decreased form 6.4% o 5.9% over the same period.
$5.2 billion was also committed to transport and other infrastructure projects in Queensland in the 2018/2019 Federal budget. This includes the Cross River Rail, Brisbane Metro, Howard Smith Wharves and Brisbane Airport’s second runway.
Supply and demand
In terms of Brisbane real estate, detached housing remains in demand due to vendor discount rates and a lower time-on-market compared to apartments. Detached housing approvals continue to rise across greater Brisbane –
a total of 24,974 dwellings were approved over the year to June 2018. 59% of these were detached houses and construction has continued to be concentrated in the south western corridor.
The sales volume for houses has declined 8.3% over the past twelve months up until May, although at a suburb level, the most recent data indicates that house price growth in prestige suburbs continued to outperform that of apartments.
Investor demand in the apartment market also remains slow due to tight credit conditions and the unfavourable conditions surrounding the inner Brisbane apartment oversupply. The number of apartments and semi-detached approvals fell 8.5% and 25.8% respectively over the year to June 2018. And although no apartments within the prestige areas experienced positive growth over the past year, the downturn does seem to be slowing.
The elevated supply levels of apartments has also affected the rental market and continues to place downward pressure on apartment rents. However, detached house rentals continue to grow and measured vacancy remains moderate. On the plus side, Greater Brisbane rental yields remain higher than those of Melbourne and Sydney for both units and houses, however on the downside, vacancy still remains a risk to investors in some of the inner Brisbane suburbs.
The outlook
The good news is that the demand within Brisbane’s apartment market is anticipated to stabilize over the next 12 months, and the market for detached housing is expected to strengthen over the short term. Construction in the sector has also declined this year and will continue to fall sharply in 2019.
Rental rates for detached houses are expected to grow fuelled by improving rental demand from increasing overseas and interstate migration, although in the short to medium term they are likely to stagnate as the heightened supply remains an issue.
In terms of the Brisbane real estate market overall, the future is looking more positive as increased infrastructure investment and strong population growth boosts underlying demand. Apartment prices are set to stabilize into 2019, and the fundamentals for Brisbane’s residential property market should steadily improve. Furthermore, Brisbane’s relative affordability compared to states like Melbourne and Sydney will continue to remain an attractive incentive for both buyers and investors.
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Disclaimer: Please note that the information provided is general information only and should not be relied upon as legal advice, as individual circumstances may differ.
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