Southerly change to Brisbane investment
The signposts across our inner city have been positive for some time with rental supply easing quickly, vacancy rates dropping and rents slowly rising. Brisbane home prices are also up a smidgeon. So it’s no surprise the Brisbane market is attracting renewed interest.
The irony is this latest focus on our market, the fresh interest in Brisbane investment property, might actually be due to factors far south of the border!
Many locals are unaware that a sizable chunk of our rental homes are owned by interstate investors. In many apartment buildings, especially those built since 2000, there can be upwards of 35% blue-jersey-wearers. These apartments are commonly sold off-plan through investment channels that target the huge equity and borrowing capacity of southerners, and especially those in Sydney. We’d argue that our massive surge in construction from 2014 to 2017 was largely driven by the spike in Sydney house prices, investment dollars finding a home in the promise of a less-heated market. Brisbane looked so cheap, the rent returns so healthy and the potential for growth so tempting. No wonder they came north in their droves.
So fast forward to November 2019 and here’s one headline this week: “Sydney and Melbourne house prices rise for fourth straight month.” And another: “Price revival accelerates, steepest gain since 2015“. Sydney’s median home is back up to $818,000 while Brisbane is still just $493,000. What we’re now seeing feels like the early stages of a trend: equity-rich southerners back in Brisbane’s market again, looking for value and opportunity. But this time around there’s not the smorgasbord of new apartment offerings here, so there’s increased interest in established real estate.
The market stats have been encouraging for some time, but local investors have been relatively slow to act. Here’s some of the numbers causing a “southerly change”:
The supply of rental dwellings in Brisbane is growing at snail’s pace. The latest RTA data shows we added just 18 homes in the last quarter across the whole of Brisbane City. Two years ago we loaded 3,350 new rentals into the market in the same period! Construction has ground to a halt.
With scarce new supply the logical change in homes available for rent has followed. The graph shows inner-Brisbane’s vacancy rate and we’re now dipping below the 2.5 to 3.5% band the REIQ says is a balanced market. Brisbane’s landlords are moving back into the box seat.
With supply tight and demand continuing to grow we’ve already had more than 12 months of rents rebounding. Not yet in large numbers, with the market still sensitive to poorly presented or located dwellings. But inner-Brisbane rents hit a new record high of $500/week in the latest data. The uptrend in rents is well-established.
And the cherry on top for those considering a Brisbane investment? Brisbane home prices rose 0.8% in October, according to CoreLogic. The consensus among many market commentators is that our prices are at the bottom (apartments) and already starting their recovery (houses). Respected valuation firm Herron Todd White have had those marks on their property clock for some time.
There may also be some pent-up demand: the recent activity from property investors is well down on long term averages (CoreLogic say they’re now 26% of new loans compared with a decade average of 34%).
But of course investors sometimes ignore market evidence and keep their wallets firmly in their pockets. Sometimes the hands of these property clocks don’t move for months or even years. But on-the-ground our sales team are witnessing more interstate interest in Brisbane investment. More weekend visits to tour our inspections.
Brisbanites may like to think we’re all grown up as a major urban city. But when our rich southern cousins come to visit in big numbers they often have a significant impact on our real estate market.