By Steve Waters
The Brisbane property market has been hiding in plain sight for the past few years as Sydney made all the headlines instead.
But the Queensland capital has experienced some good price growth in certain areas, but there are some locations that you need to stay away from as well.
The Brisbane property sector covers a large area, which can mean different market conditions depending on the location of your property.
There’s the well-publicised over-supply of units in the inner-city, but houses within that five-kilometre ring really have a life of their own and are performing strongly.
Where we see the most action, and quite phenomenal growth to boot, are the affordable corridors in outlying council areas – particularly Logan and Ipswich.
We’ve been buying into these locations for a few years now and our on-the-ground research, which is based on actual recent sales, shows double digit price growth in some of these locations. There are also strong signs of increased consumer confidence, which helps to keep prices buoyant as well.
These locations have the happy combination of a number of market drivers, including affordability, infrastructure and great rental returns. In fact, I believe that the yields on offer in parts of Logan and Ipswich can’t be found anywhere else in Australia at the moment.
When buying into Brisbane, however, investors must be selective about location, street and the dwelling type itself. They also must understand how flooding may impact their prospective property because buying a previously flooded one can severely impact its price potential and insurance premiums – possibly for a long time.
Thankfully there’s plenty of research online about flood overlay maps, so make sure you use these tools during your due diligence.
Brisbane auction results were quite flat over the past weekend with a clearance rate of 56 per cent recorded on Saturday. That said it was a long weekend and Brisbane doesn’t have as strong an auction culture as Melbourne or Sydney.
An interesting element of the market of late is the large increase in mortgagee in possession sales compared to 12 months ago. What’s unusual about this is that with the cheap price of money via historically low interest rates, it’s difficult to understand how people can’t afford to keep their properties. Perhaps it’s a leftover from 12 to 18 months ago, with banks only now acting on delinquent borrowers, or maybe it’s due to the softer employment conditions in Queensland generally.
Regardless of what you buy, though, investors need to always consider how a property will perform in a bad market. If the answer is terribly, well, it’s probably not the right property for you.
I believe in the next 12 months we’ll start to see more and more investors attracted to Brisbane because of its affordability as well as its strong rental yields. If interest rates increase – and I’m not predicting that they will – then demand for these affordable corridors will increase even more strongly as investors chase better cash flow and higher yields.
This likelihood is supported by the latest Property Investment Professionals of Australia research. The 2016 Property Investor Sentiment Survey found that 50 per cent of property investors believe Brisbane currently offers the best investment prospects.
It was the second year in a row that Brisbane came out on top in the survey. What made their prediction even more interesting was that 47 per cent of those surveyed have more than two investment properties already, so they certainly aren’t beginners tipping Brisbane as the next area to see growth.
Looking to 2017, I think the Brisbane market will experience continued strong and healthy growth in many areas, however there will be a softening of prices and rents in those inner-city areas that are oversupplied with new units.
I also don’t think it will be too surprising if at the end of 2017 – all things being equal that is – that quality investment properties within Brisbane’s affordable corridors have recorded some seven per cent price growth. Not a bad result for a region that’s been off the radar – but I don’t believe that state of affairs will last for very much longer.
By Steve Waters