04 Jul Property Market: Brisbane update 2017
It is timely to provide a detailed update on property investments in Brisbane, and what the future holds for this market. The three main Key Investment Drivers of growth in the Brisbane property market have always been population growth, economic growth and infrastructure spending. The stars are now aligning in this emerging ‘world city’, and will soon reward investors who have already entered this market.
We are commonly asked why did we not invest in Sydney last year, as the capital growth was significantly more than other markets. At this stage, we remind people that property is not an asset class you can enter and exit freely (i.e stamp duty, purchase and selling costs), and it must be viewed as a longer-term investment. For this reason, we prefer to look forward at the next 5-10 years, not backward at what a market has just done in a year. The graph of cumulative growth below shows that Sydney and Brisbane have had the same growth over the past 17 years. Each market has just done different things, at different times. That is why we bought in Sydney 6 years ago!
There is mounting evidence of a massive turnaround in the Queensland economy. Tourism is strong, exports are booming and up 42% last year, the resources sector is surging again and energy projects proliferate. Spending on infrastructure, a key factor, is rising – including a $14 billion building boom in the tourism sector.
Brisbane’s Population Growth:
Brisbane is now the hottest capital city for property investment, according to a recent survey by PIPA. New data showing Brisbane is now the No.1 city for interstate migration has reinforced the population movement away from the unaffordable southern markets of Sydney and Melbourne.
There are over $10 billion of infrastructure projects underway in Brisbane itself. According to Kim Stephens (news.com.au), the $3 billion Queen’s Wharf Brisbane is being touted as a transformative project for Brisbane, reconnecting the activity of the Brisbane CBD to the river. It will deliver a $1.69 billion annual increase in tourism and 1.39 million additional tourists per year, along with $4 billion to the Gross State Product. The $3.8 billion Brisbane Airport New Parallel Runway Project (NPR) is the biggest aviation project in Australia.
Based on Sound Property’s ‘Debt Ratio’ between household incomes and mortgages, relative to Sydney incomes, Brisbane is now 40% more affordable to pay interest on a mortgage.
Although there has been an increased number of units delivered to the market in recent times (this was a national phenomenon), this is showing signs of massive slow down with a reduction in new apartment sales of 70% over the past year in Brisbane. Predictions as far back as 2013 that Melbourne and Brisbane were building more apartments than they could absorb, and would be swamped by a wave of settlement failures, have so far failed to realise. That’s because developers held back on starting new projects as existing ones have wound down, largely in response to tighter controls banking regulator Australian Prudential Regulation Authority placed on investor lending in December 2014 – and which it strengthened in recent months, with a new round of measures. We have also noticed the boutique developments our clients have been purchasing into, or ones that have an owner occupier focus with a premium finish, have been performing well with rental yields of 4.5%+, and significant local demand.
Further reading into these areas can be found on the links below:
- Brisbane is Australia’s hottest capital city destination for internal migration
- $10b of infrastructure projects underway from Brisbane
- New apartment sales drop 70%, constraining supply
At Sound Property, we always invest counter cyclically, or at the bottom of a market rather than the top. As a result, it can take time for a market to enter its new growth phase. With the above evidence, we are confident Brisbane is now beginning this phase. It will be important to have selected well located, quality property. Large investor-grade developments, or greenfield land estates on the edge of the urban sprawl, will be outshone by owner occupier focused property, with higher demand and limited supply.
Sort the fact from fiction with a FREE Suburb Profile Report to see how the 15 Key Investment Drivers look in your suburbs of interest!
This article is provided for general information only and does not constitute personal advice, as it does not take into consideration your personal circumstances. Please consult a licensed tax or financial advisor before making any decision to invest.