In October, leading bank Westpac announced their revised capital city property price forecasts in which saw Brisbane lead the way for the nation's capital cities.
The economists at Westpac expect Brisbane property prices to surge 20% between 2022 and 2023.
The 5 main reasons Brisbane is expected to grow 20% in the coming years:
1. Positive early signs.
Brisbane house prices increased 0.4% to $596,316 over the September 2020 quarter, making the previous quarter’s fall short-lived.
Unit prices grew 1.7% to $383,585. This is the first quarterly growth since mid-2019.
Vacancy rates in the last 3 months have been consistently dropping across the third-largest city in Australia. The vacancy rate in Brisbane as a whole fell from 2.2% in July, 2.1% in August, and 2.0% at the end of September.
As Australia continues to move forward post-pandemic and the supply and demand fundamentals continue to improve, this should only have a positive influence on property prices for the sunshine state capital [1,2].
2. Affordability.
Housing affordability nationally has improved over the last 2 years. Falling interest rates, and the downward turn in median house and unit prices have lowered interest repayments. Undoubtedly, the economic downturn associated with the COVID-19 has served as a strong contributor to negative sentiment and had a detrimental impact on housing values in most major capital cities.
While many capital cities experienced a noticeable decline in dwelling values declining across all between March and September 2020; Brisbane housing prices were stable over the 12 months to September 2020.
The declines in dwelling values have to lead to substantial improvements in the affordability measure across most capitals however, Brisbane continues to be the strongest performer of all eastern capital cities.
According to our Meridian Investor Panel Members at BIS Oxford Economics, the affordability measure for Brisbane was measured at 18.7%. this figure represents the lowest in a decade and down from 21.0% a year earlier [3].
3. Market Activity.
The value of housing loans and the availability of credit has improved largely on the back of government stimulus measures including first homeowner grants and the HomeBuilder scheme.
Queensland specifically had experienced positive economic activity mid-year providing strong momentum within the property sector moving into the spring season.
BIS Oxford Economics reveals positive numbers for mid-2020; the upgrader/downsizer market has grown almost a third in value, which is a bounce back to pre-pandemic activity [3].
First home buyers have grown 27% during June/July and also increased 38.4% year on year in total, expressing a new record level of activity. Investor purchases are also up, releasing a total increase of 19.5%, illustrating the growing demand within the Queensland property market.
4. Population Growth.
The global pandemic had put a freeze on overseas migration into all states and capital cities across Australia due to the closing of the borders. It will be some time until restrictions ease, overseas travel commences and Australia opens its doors to overseas migration once again.
Pre-pandemic, migration levels were stronger than ever and Brisbane (2.1%) had the second-highest population growth rates during 2018-19 receiving an additional 52,587 residents in total (2.1%).
In 2018-2019 Brisbane had the strongest internal migration in the country, realising a net gain of 15,914. Over the same period, Sydney had a net loss of just over 25,555 people.
A huge driving force behind the positive interstate migration levels was simply that properties were more affordable in Brisbane accompanied by key lifestyle aspects and amenity offerings, attracting new residents from other states across the country.
BIS Oxford Economics also sights the expectation that Queensland will bounce back in the coming years to positive migration levels.
Population growth is expected to slow to 0.8% in 2021, before recovering across 2022 (1.2%) and 2023 (1.6%). Longer-term, Queensland is expected to continue growing ahead of the national average [4].
5. Infrastructure Spending.
Vital investments in critical infrastructure are changing the Brisbane city landscape in new and exciting ways.
With a long-term commitment to infrastructure delivery, the Queensland Infrastructure Plan has allocated $49.5bn under its capital works program over four years.
The program will directly support private-sector jobs, with the $12.9 billion capital works program in 2019-20 estimated to directly support 40,500 jobs across the state.
Supporting population and employment growth in Brisbane and the South East Queensland region through improved public transport is reflected in key plans and policies at all levels of government.
Labeled the 'Infrastructure Capital of Australia' with billions being spent in key areas of the city including:
Development of secondary CBD’s
Expanding the airport ($2.9bn)
A new city entertainment precinct ($4bn+)
Strongly improving access to and from the city centre
This continuation of infrastructure expenditure by both the private and public sector will ensure that Brisbane's liveability is improved.
A glimpse into a portion of some of the leading projects in Brisbane.
Cross River Rail $6.8 bn
Artist’s impression of Albert Street station
Brisbane Live $2 bn
Artist’s impression of Brisbane Live arena
Queen's Wharf Precinct $3.6 bn
Artist’s impression of Queen’s Wharf Precinct
Key Takeaways
The early signs are positive for the Brisbane property market as the country continues to move on post-pandemic. The third quarter indicates initial signs of a recovery with Brisbane house and unit prices increasing and vacancy rates restricting for three consecutive months.
As the fundamentals for capital growth continue to improve, Brisbane property prices are expected to be supported by the historic low-interest rate environment, improved affordability, ongoing support from federal and state governments, as well as strengthening economic recovery. Read more about Queensland's Budget.
So, what can we learn from the above?
While we are far from out of the woods just yet, the significant cash injections into various infrastructure projects will serve as a catalyst for job growth and economic activity in the short to medium term.
Due to the magnitude of the economic downturn, the recovery will likely take time however, there are some green shoots appearing with national markets showing growth for the first time in 7 months.
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Jarryd Gauci – Property Investment Consultant
P: (02) 9939 3249
Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.
References:
[1] SQM Research
[2] Domain
[4] ABS