Brisbane among the top few Aussie cities on the property fast track
Brisbane property prices are still going full steam ahead and it would take a brave passenger to get off the capital growth train before it reached its final destination.
Brisbane remains one of the top three fastest growth cities over the last 12 months, as clear divergence between capital city market performances across the country cements itself.
Perth, Adelaide, and Brisbane have consistently been the strongest-performing markets since the pandemic began. These smaller capital city markets show a clear difference in performance compared to others across the country.
The graph below illustrates the cumulative changes in performance among capital city markets from the start of the pandemic through the end of May 2024.
Including data up to the end of June, Perth has experienced the largest increase in home values since the start of the pandemic in March 2020, rising by 66.6 per cent. Adelaide follows closely with a 63.9 per cent increase, and Brisbane with a 61.5 per cent increase.
In contrast, Sydney’s growth during the same period has been 28.2 per cent, Melbourne’s 11.2 per cent, Hobart’s 28.1 per cent, Darwin’s 25.7 per cent, and Canberra’s 32.2 per cent.
Considering long-term growth over the past decade, Brisbane remains one of the top-performing capital city markets in Australia.
This strong performance, both short and long-term, along with the opportunities arising from current fundamentals, is likely driving increased investment interest in Brisbane as the 2032 Olympic Games approaches.
The variations in growth rates between Australia’s capital cities can be explained by the number of home purchases (demand) compared to the number of homes available for sale (supply).
To demonstrate this relationship, the ‘sales to new listings ratio’ can be calculated by dividing the number of sales over a given period by the number of new listings added to the market.
A ratio of 1 indicates a balance between buyer demand and available supply, meaning there is one purchase for every property listed for sale. A ratio greater than 1 suggests strong selling conditions, as there are more transactions than new listings. Conversely, a ratio of less than 1 indicates a weaker market, with more properties listed for sale than are being purchased.
The graph below shows the sales to new listings ratio for the 12 months to May 2024 across the state capitals, along with the number of sales and listings.
This data confirms that stronger markets, including Adelaide, Brisbane, and Perth (and to some extent Sydney), have a sales to new listings ratio greater than 1. In contrast, markets like Melbourne and Hobart, where the ratio is less than 1, have experienced weaker performance.
In Brisbane, supply has been a persistent issue for several years, and it doesn’t seem to be getting better.
According to CoreLogic, in the four weeks ending in June, the number of homes advertised for sale in Brisbane was 34 per cent below the five-year average. Meanwhile, interstate migration rates in Queensland remain well above average, sustaining high demand.
The strong growth in property values and rising rents have drawn investors back to the market, with new lending to investors in Queensland reaching record highs.
Data from PropTrack shows that 27 per cent of enquiries for Queensland properties come from interstate buyers. This aligns with our observations that many inquiries for purchasing Brisbane properties are from interstate buyers seeking the professional assistance of locally based buyers’ agents.
Stamp duty changes’ mixed impact
Strong property demand isn’t solely driven by interstate buyers. This month, the Queensland government announced an increase in the stamp duty concession threshold for first home buyers, raising it from $500,000 to $700,000.
The previous $500,000 threshold had become outdated, making the concession largely ineffective due to the substantial rise in Brisbane property prices. The higher price cap now extends eligibility to more homes, offering first-home buyers greater options. However, this change could also contribute to increased demand for properties that fall within the new criteria.
These changes are expected to have the greatest impact in areas where median prices are near the caps. With the current median house price in Greater Brisbane at $953,028 and for units at $622,567, the effects may vary across different types of properties.
The new $700,000 threshold means only 20 per cent of houses in Brisbane fall within the new price caps. Therefore, first-home buyers will predominantly focus on apartments, as 60 per cent of units in Brisbane are eligible under the new caps.
This disparity is more pronounced in many city areas. For instance, in Capalaba, 84 per cent of units would be eligible under the new cap compared to just 1 per cent of houses. Similarly, in Sandgate, 78 per cent of units meet the new caps, while only 4 per cent of houses do.
In more affordable outer regions, there is a more balanced distribution. For example, in Ipswich Inner, 84 per cent of units and 63 per cent of houses would be eligible under the new caps, while in Caboolture, 94 per cent of units and 55 per cent of houses would be eligible.
Even with the increased stamp duty concession threshold, many first-home buyers will likely need to compromise on location or property type to find an eligible home. Nevertheless, incentives like these are expected to boost demand, leading to increased competition for properties priced under the $700,000 threshold.
In June, dwelling values in Brisbane rose by 1.2 per cent, showing a slight deceleration from the 1.4 per cent increase observed in May. Quarterly growth also moderated slightly from 3.9 per cent in May to 3.7 per cent by the end of June. The median value for dwellings in Greater Brisbane has reached a new high of $859,240, climbing by $16,010 from the previous month and $41,676 from three months ago.
Like most other capital city markets, Brisbane has seen slower growth in upper quartile dwelling values over the past three months. In contrast, the lower quartile, representing more affordable price points, has shown stronger conditions. This trend is further supported by the stronger performance of unit values compared to house values in Brisbane over the last quarter.
Rental market in Brisbane
Vacancy rates in Brisbane remain steady at 1 per cent citywide, being unchanged for the last three months.
The annual change in house rents in Brisbane has eased slightly to 7.3 per cent at the end of June, slightly lower than last month’s 8.2 per cent.
Additionally, the annual change in unit rents in Brisbane is now at 8.5 per cent, a slight decrease from last month’s 9.6 per cent.
Both segments of the rental market in Brisbane have now experienced a slowdown in rental growth over the last 12 months.
While rental growth appears to be easing, rents are still growing well above long term averages throughout Brisbane.
The gross yield for housing in Greater Brisbane currently stands at 3.5 per cent, easing slightly from last month. For units, the gross yield has decreased slightly to 4.8 per cent month on month.
Gross rents in both segments of the market have declined throughout June as property values continue to rise at a faster pace than rental prices.
Brisbane property into 2025
The Brisbane market remains robust and the outlook is also one of strong underlying fundamentals.
There are a few drivers that are likely to continue to maintain strong demand for Brisbane property in the foreseeable future, at a time when the availability of listings remains well below long term averages.
Firstly, Stage 3 tax cuts will increase disposable incomes for most households, in turn increasing borrowing capacities for many households.
These tax cuts have the potential to further inflate housing prices through stronger underlying demand and increased purchasing power.
Many are hoping that housing supply will lift to match strong demand, however, per capita building completions and approvals are both at historic low levels. This discrepancy in price between existing and new properties is another challenge for new development of both houses and units.
While there is strong demand for new housing, construction costs have risen so much that in many parts of the country replacement costs are more expensive than what existing homes are selling for. For these reasons, the Brisbane market will remain undersupplied for some time into the future.
Whilst the latest data from APRA for the March quarter shows mortgage arrears are rising, they appear to be contained. Some households may be starting to experience financial hardship due to rising mortgage costs and cost of living pressures, however the total mortgage arrears remain slightly lower than levels experienced before the onset of Covid.
Brisbane’s market is not slowing down any time soon. If you are in the market to buy, now is the time to do so given the momentum of price movement that is being experienced month-on-month.