Brisbane Set to Become Australia's Property Market Rising Star
Lately, the Australian property market seems to have given many investors pause. This is understandable, because the Australian market is usually viewed through the lens of Sydney and Melbourne, and over the past few months the figures for these two cities have looked somewhat pessimistic.
However, one city has bucked the trend with an impressive performance. The latest Daily Home Value Index from CoreLogic, a well-known Australian property research firm, shows that Brisbane is the only capital city to have recorded growth over the past week, month and even year (+1.2%), while Sydney and Melbourne fell 5.6% and 1.1% respectively, and the other five capital cities recorded a combined average decline of 2.9%.
A number of property research firms — including CoreLogic, BIS Oxford Economics, and NAB, one of the Big Four banks — have all published articles expressing a positive outlook on the Brisbane property market.
BIS forecasts that Brisbane property prices will grow 2–3% annually in 2019–2020, and 5–6% annually in 2020–2021 — the period when many of Brisbane's major infrastructure projects will be progressively completed. Over the next three years, Brisbane's property growth will lead all capital cities, with gains of up to 13%.
So, let's analyse why Brisbane will be Australia's best-performing property market in the years ahead:
1. Brisbane is an undervalued city, currently sitting at a price low pointHistorically, Brisbane recorded 22% price growth in 2007, with a price gap of only 10% compared to Sydney at the time. Over the following 10 years, Brisbane property prices grew steadily and healthily at 4–5.7% per year. Although the growth has not been as rapid as Sydney's or Melbourne's over the past decade, the market is healthier, with greater room for future growth and development potential. The table below sets out Brisbane's price growth from 2007 to 2017.
According to PRDnationwide's Affordable and Liveable Property Guide, Brisbane is Australia's most affordable and most liveable city. In Sydney, the price-to-annual-income ratio is 9.1, meaning a family would need to save an entire 9.1 years' income, without spending anything, to buy a home; in Melbourne this ratio is 7.5, while in Brisbane it is only 5.9.
Similarly, in Sydney a family must put 48.4% of its annual income towards repayments on a mortgage with an 80% loan-to-value ratio; in Melbourne it is 39.9%; while in Brisbane a family only needs to devote 31.7% of its annual income to mortgage repayments.
So, Brisbane has enormous room for future price growth.
2. Queensland has overtaken Victoria as the state attracting the most interstate migrants
According to ABS data, in the fourth quarter of 2017 around 7,730 people moved to Queensland from other Australian cities, a large proportion of them from New South Wales. Ordinary people are increasingly unable to afford Sydney's persistently high property prices, and once they find work in Queensland, they move their whole families to a state with warmer, more pleasant weather and more affordable homes.
In 2017 alone, 22,500 people relocated to Queensland — the highest interstate migration growth in the past decade, already surpassing Victoria. Let's look at the number of interstate migrants moving to Queensland from 2014 to 2017:
2014: 5,598 people; 2015: 8,236 people; 2016: 14,652 people. And last year, 2017, it was 22,500 people.
With interstate migration, overseas migration and natural births growing at 50,000 people per year, by 2036 Brisbane will have a population of 3.4 million.
3. Queensland's unprecedented infrastructure programme — the largest in Australian history
The Palaszczuk Government's 2018 Queensland infrastructure plan states that A$45.8 billion will be invested in infrastructure over the next four years — the largest infrastructure funding commitment since 2011. In the 2018–2019 year alone, A$11.6 billion will be invested in infrastructure, creating 38,000 jobs.
For Brisbane, major infrastructure projects include the A$4 billion Queen's Wharf Brisbane development, the A$5.4 billion Cross River Rail project, the A$2 billion Brisbane Live entertainment centre and the A$940 million Brisbane Metro. These projects will provide substantial employment both during construction and after completion.
4. Brisbane's vacancy rate has fallen for the fifth consecutive yearThe vacancy rate is one of the best indicators for tracking supply and demand in the property market. SQM Research recently released its vacancy rate index for the major capital cities in May 2018, showing that Brisbane's vacancy rate continued to fall to 2.9%, down from 3.5% in the same period last year. Sydney's vacancy rate, by contrast, rose from 1.7% last year to 2.5% this year.
If this trend continues, it is quite possible that in the near future Sydney's vacancy rate will be higher than Brisbane's.
