Brisbane housing market set to boom over the next three years
Eagle-eyed analysts have been watching the property market throughout Australia, and are now turning their attention to Brisbane. Those focusing on the market agree that now may be the time to act in sunny Queensland. Despite the downturn over the past few years, and the market hitting rock bottom across the country, the slow rise in housing is a welcome change to the economy. Brisbane looks to be the city that will be leading this charge. Analysts are predicting a rise in housing prices over the next three years, to the tune of 20% by 2022.
Over the past few years, market prices have declined steadily or stayed the same in Brisbane, so why the sudden boom? There are several factors influencing this boom, including:
- Modest increases left Brisbane behind
- Supply and Demand
- Credit conditions and interest rates
- Houses versus apartments
Let’s look at these factors and see how they are affecting the housing market.
Modest increases left Brisbane behind
For the past decade, Brisbane has had very little change in their housing market. QBE released its Australian Housing Outlook 2019-2022 report which forecasts the sun shining on Brisbane and southeast Queensland over the next three years.
AMP Capital’s Chief Economist Shane Oliver. told the Courier Mail:
“Brisbane housing market was due for a “catch-up after years of not going anywhere. It’s fallen way behind Sydney and Melbourne. The reality is Brisbane has lagged – it is quite cheap compared to Sydney and Melbourne and it’s just a better value market.”
Current housing market prices are much more affordable than in Sydney and Melbourne, so much so, that Brisbane has seen an increase in people relocating from Sydney. The current price to income ratio required to buy in Brisbane is 5.3 times at a median house price of $524,000, according to Michael Matusik’s housing research. When compared to Melbourne at 8.4 times income and Sydney at 10.8 times income, housing in Brisbane is currently a buyer’s dream.
With the information from these various housing reports, we expect Brisbane can look forward to some exciting changes in its housing market in the near future, including a major increase in median home prices. In fact, median home prices are expected to increase from $552,000 to $665,000 in Brisbane over the next couple of years, according to Hunter Galloway.
Supply and Demand
In the past, an oversupply of apartments has negatively impacted pricing in some parts of Brisbane, but with rising population, this is soon to change. The population in Brisbane is increasing by about 23,000 residents per year, according to Hunter Galloway. This far exceeds the 10-year average in Brisbane’s growth. This influx of people means about 8,825 new dwellings need to be developed to keep up with demand, and that is not a quick task.
Brisbane has experienced employment growth in the past few years, causing more families to move from regional Queensland and interstate to take up employment. This employment trend is set to continue, according to the QBE report, as strong job growth is forecast.
Families moving to Brisbane are looking for stand-alone homes, and the supply is low. Residential homes are being constructed accordingly, but currently cannot keep up with the rapid demand, causing prices to jump.
Credit conditions and interest rates
Good news has hit homebuyers recently. Lending conditions for homebuyers have been relaxed, and interest rates are falling, according to BIS Oxford Economics. The Reserve Bank of Australia (RBA) has continued to cut interest rates, keeping it at a record low 0.75% for the past two months.
Another rate cut is predicted sometime in the near future and, as of November, the ASX 30 Day Interbank Cash Rate Futures December 2019 contract indicates a 31% expectation of an interest rate decrease to 0.50% at the next RBA Board meeting.
With these changes, renters are jumping at the chance to buy a house now that affordability has improved. With interest rates being this low, and prices just starting to increase, it would seem like now is the magic time. Angie Zigomanis, author of the BIS Oxford Economics property forecast predicts these policies will
“help stabilise residential markets this year and encourage price growth to start in 2020.”
Those homeowners currently looking to buy have found the perfect buyers market from now through mid-year 2020.
Queensland is currently enjoying an increase in tourism, thanks to the lower Australian dollar. Tourists are flocking in from across the globe to enjoy the sunny beaches and rugged terrain. These international tourists are spending time and money visiting the unique Queensland landscapes and attractions, forcing some places to extend hours or add tours. This means more people are needed to work shifts, tours, and other jobs within the tourism industry.
Brisbane is also seeing an increase in overseas students coming to study at nearby universities. The unique opportunities and the lower dollar offer a value that students can’t resist.
The influx of students and tourism brings an increase in infrastructure. Significant projects, including Queens Wharf, Howard Smith Wharves, and the Cross River Rail Projects, are in the works and other projects are being looked into. This improved infrastructure cycles back to bring in families, which in turn, need housing.
Houses versus apartments
In the past, Brisbane has been an apartment city, with new complexes rising up constantly. With the influx of families, people are now looking for homes. These young families are looking for permanent places to call home, with a yard and the intent of raising a family. Like the housing market that is showing a steady increase over the next few years, apartments are also showing a steady increase, albeit a smaller one. This is good news for both ends of the Brisbane housing market.
This is good news for the construction industry, as they prepare to build over 8,825 houses to meet the demand needed for these families. The only complication this might create is the fact that all the construction workers that will be needed to complete these projects may also need a place to live. That 8,825 number may continue to grow.
How does Brisbane compare?
While it looks like Brisbane’s property market is predicted to thrive over the next few years, after finishing 2019 at a steady rate, some other cities aren’t going to be quite as lucky. Sydney and Melbourne are both expected to have a rise in housing costs, but only at about 6%, compared to Brisbane’s 20%+.
Not only are Sydney and Melbourne going to experience slow growth over the next 5 years, the median price is also expected to stay at par with their respective peaks. Both cities reached these peaks in 2017, and are now back on the rise to reach these peaks again within the next 6-12 months before levelling out.
Adelaide and Canberra are expected to fair a bit better than Sydney and Melbourne. Adelaide is projected to have about 11% growth in housing prices, while Canberra is looking at a rise of 10 percent.
What do the experts say?
The Finder RBA Cash Rate Survey found two cities sharing the top spot for property investment. Brisbane and Melbourne both received 27% of the vote, clearly beating out Sydney in the poll. Sydney and Canberra both received 14% of the vote.
This doesn’t come as a surprise to industry experts and economists, who have noticed home prices in Brisbane rising slightly in the past two months. Insights Manager for the Finder survey, Graham Cooke, noted that many experts steered clear of Sydney this time around. Cooke stated,
“Sydney has traditionally been Australia’s darling in the property market, but it is no longer the belle of the ball. Prices have just started to recover after falling nearly 15 per cent from the heady days of 2017, but sales volumes are still low and many investors and potential sellers are in a holding pattern. While prices fell across the board, the ratio of house prices relative to income is still higher in Sydney than in other cities, which may slow the bounceback somewhat compared to Melbourne and Brisbane.”
Experts were also asked if they felt like the housing market had improved, and about half said yes. Most also agreed that housing prices would continue to rise, after remaining at their current level for a short while. Most of these experts also agree that they would put their money in Brisbane or Melbourne.
The good news for all of Australia’s capital cities and the rest of the country is that the housing market is currently working its way back from hitting rock bottom just a short time ago. Brisbane, because of its previous lack of growth, is predicted to lead the way into the housing boom. The population is exploding, and the demand for new houses is on the rise. For investors and homeowners who are looking to buy a property before the housing market increases, the time is now, and the place is Brisbane.