Brisbane’s property market is running hot and on the brink of hitting a new record high for dwelling values.

The conclusion of the third quarter of 2023 has further solidified the ongoing recovery in property price growth across Greater Brisbane.

In October, Brisbane appears likely to hit that record high, with property values now standing just 0.6 per cent below their previous peak, as per CoreLogic data.

Remarkably, since January, prices have surged by an impressive 9.1 per cent, even in the face of a higher inflation and interest rate environment.

Source: Streamline Property Buyers

Nearly half of this year’s growth has occurred in the last three months, suggesting the pause in the interest rate cycle may have boosted buyer confidence.

With the Reserve Bank of Australia (RBA) maintaining the cash rate at 4.1 per cent for the fourth consecutive month in October, buyers seem more willing to factor in the cost of borrowing, possibly sensing an imminent interest rate peak.

Buyer confidence in Brisbane is on the rise, yet the available property options remain limited.

Despite significant median price drops in the latter months of 2022, it’s evident Brisbane has largely recovered these price adjustments throughout 2023. This resurgence is driven by robust migration, tight rental markets, and a shortage of housing.

Heading into 2024, buyers should anticipate fierce competition and be prepared to act swiftly, as desirable properties are once again selling quickly.

For sellers, this may be an opportune time to list your property, as a multitude of eager buyers and intense competition are exerting upward pressure on prices.

These conditions are likely to sustain price growth in the medium term.

Brisbane currently stands as the second most affordable capital city market in Australia, trailing only Perth.

According to the PropTrack Housing Affordability Index, affordability across all of Queensland is better today than it was during the 2007-08 mining boom.

While housing affordability has become more challenging in Queensland over the last two years, relative affordability compared to other east coast capital cities continues to drive demand for housing in and around Brisbane.

Mortgage serviceability easier in Queensland

PropTrack data indicates that an average of 31 per cent of income is needed to service a mortgage in Queensland, compared to 39 per cent in NSW and 35 per cent in Victoria, South Australia, and Tasmania.

This makes Brisbane an attractive destination, particularly for cross-border property investors seeking a low-risk investment option.

This may help explain the increase in the proportion of investors in housing finance commitments in Queensland, with ABS data confirming a rise to 37.8 per cent of all housing finance commitments in August, up from 34.7 per cent the previous month.

Buyer demand continues to outpace supply in many Brisbane suburbs, with new listings remaining frustratingly low between July and August.

SQM Research reports a month-on-month decline of 0.57 per cent in new listings and a total listings decline of 0.24 per cent. CoreLogic data also reveals that new listings in Brisbane are 13.3 per cent lower than this time last year, and total listings are 22.8 per cent lower.

Choice for buyers in Brisbane remains significantly below the long-term average, with listings still trending approximately 40 per cent lower, according to CoreLogic.

The PropTrack Listings Report underscores that suburb-level trends can differ from the overall city-wide trend for listing volumes.

Suburbs with significantly increased year-on-year listings include Park Ridge (+142 per cent), Ripley (+140 per cent), and Ormiston (+79 per cent), while suburbs with the greatest decreases include Cornubia (-58 per cent), Warner (-57 per cent), and Woolloongabba (-52 per cent).

Source: CoreLogic

In September, dwelling values in Brisbane saw another uptick of 1.3 per cent, according to CoreLogic, pushing the median value to $761,739.

Over the quarter, Brisbane’s dwelling values have surged by 3.9 per cent. However, it’s worth noting that the previous month’s quarterly growth rate was at 4.2 per cent, suggesting we may have witnessed the peak growth rate for Brisbane’s market.

Brisbane houses outperforming units

The latest data from CoreLogic continues to highlight robust growth in median house prices in Brisbane, with a notable 1.4 per cent increase over the past month.

This translates to a median house value of $848,680, reflecting a substantial rise of $16,433 compared to the previous month. On a weekly basis, this translates to approximately $4,108 in price growth.

Over the quarter, Brisbane’s housing market has seen a respectable 4 per cent growth rate, although it’s worth noting a slight decrease from the previous month when quarterly growth for houses was at 4.3 per cent. This suggests that we may be witnessing a levelling off in the peak rate of growth for houses in Brisbane.

Source: CoreLogic

According to the latest data from CoreLogic, Brisbane’s unit market continued its steady growth in September, mirroring the 1.1 per cent increase seen in the previous month.

The quarterly growth rate for units currently stands at 3.7 per cent, a slight dip from the 3.8 per cent reported last month. Consequently, the median value for units in Greater Brisbane now sits at $539,169, reflecting a monthly uptick of $13,010, or $3,252 in weekly price appreciation.

Rental market dominated by low vacancy rates

Virtually all areas of the city are experiencing a tight rental market at present.

The rental market continues to maintain remarkably low vacancy rates, with the latest data from SQM Research indicating a drop from 1 per cent in July to 0.9 per cent in August.

Although rents are still on the rise in the Queensland capital, the pace of rental price growth has significantly slowed over the past six months.

House rents have increased by 6.4 per cent over the last 12 months, which is less than the 11.2 per cent annual growth observed six months ago to the end of March 2023.

National property prices had a 0.8 per cent rise in September as the recovery trend moved through an eighth consecutive month of capital growth.

This deceleration in rent price growth is likely attributable to affordability constraints, even in the face of reduced vacancy rates. Additionally, a shift in household formation may be underway, as group rentals resurface as a strategy to distribute rental costs among larger households.

Meanwhile, unit rents in Brisbane have risen by 14 per cent over the past year, according to CoreLogic. This marks a slight slowdown from the 16.1 per cent rate recorded six months ago. Units, being the more budget-friendly segment of the market, seem to have outperformed houses in terms of rental price growth.

As of 1 September, Queensland Rent Law Reforms have introduced minimum housing standards for all new tenancies, necessitating landlords ensure their rental properties comply with these standards.

The PIPA Annual Investor Sentiment Survey revealed that 23 per cent of investors who sold a property in the past 12 months did so in Brisbane.

While rising interest rates played a role in these sales, a larger majority cited changing tenancy legislation and increasing government regulations as factors that made property investment less appealing.

This has led to a reduction in the volume of investment properties in the Brisbane market, which could intensify competition among tenants for the dwindling supply of available rentals.

Article Q&A

Are Brisbane property prices rising or falling?

In October, Brisbane appears likely to hit that record high, with property values now standing just 0.6 per cent below their previous peak, as per CoreLogic data. Remarkably, since January, prices have surged by an impressive 9.1 per cent, even in the face of a higher inflation and interest rate environment.

How much income is needed to service a mortgage in Australia?

PropTrack data indicates that an average of 31 per cent of income is needed to service a mortgage in Queensland, compared to 39 per cent in NSW and 35 per cent in Victoria, South Australia, and Tasmania.

What direction are rents heading in Brisbane?

Although rents are still on the rise in the Queensland capital, the pace of rental price growth has significantly slowed over the past six months. House rents have increased by 6.4 per cent over the last 12 months, which is less than the 11.2 per cent annual growth observed six months ago to the end of March 2023.

Originally Published: Melinda Jennison, Streamline Property Buyers | Australian Property Investor | 4 October 2023

https://www.apimagazine.com.au/news/article/brisbane-property-price-boom-likely-to-push-into-2024