Brisbane Property Market:
Is demand finally catching up to supply?

Brisbane’s market didn’t take off like Sydney and Melbourne’s did during the recent boom. Oversupply (particularly in the unit market) made price growth in the region sluggish over the last four years, causing investors to think twice.

New data tells us that that’s all about to change.

The property market in Brisbane is turning around

BIS Oxford Economics has forecasted 20% growth in house values and 14% growth in unit values in Brisbane from 2019 to 2022, while Domain predicts property prices in the city will increase by 8% in 2020 alone.

It’s true that Brisbane’s property market didn’t see price growth like Sydney and Melbourne during the boom, but it also didn’t dip as much during the downturn. In June 2019, property values in the city hit bottom and have been on an upward trajectory ever since.

During the three months to February 29 2020, Brisbane’s average property price increased by 1.7% to reach a record high of $503,265, according to CoreLogic data.

What’s more there are several signs that tell us this growth is here to stay. Queensland has the highest rate of net interstate migration in Australia, which increases its population by 11,000 each year, Australian Bureau of Statistics (ABS) data shows. Most of this increase is focused on the wider Brisbane area and it continues the city’s population is expected to hit 3 million by 2027, increasing by just under 75,000 a year.

It is estimated that the city will need a minimum of 23,000 additional dwellings per year in order to cope with this demand. And what comes with an uptick in demand? An uptick in prices – and potential profit.

 

Brisbane units are oversupplied but not for long

Data from Charter Keck Cramer shows there were roughly 11,000 apartments built in Brisbane in 2016 and 2017. The supply of units in metropolitan Brisbane suddenly exceeded demand, putting downward pressure on average prices in the area.

Then in 2018 and 2019, building slowed considerably with just 5,600 and 5,000 units built, respectively. In 2020, that number’s expected to drop to 3,700 and then continue decreasing to just 900 in 2022.

As of December 2019, there were roughly 1,500 units unsold by developers in Metro Brisbane, according to research from M3 Property. With population rapidly increasing and a strong local economy, it’s expected that this residual stock will decrease over 2020 and demand will start to catch up to supply. If this continues, the supply of units in Brisbane will soon be equal or less than demand. 

 

Houses in Brisbane are in short supply 

Houses in Brisbane have not experienced the same oversupply that units have and haven’t seen the same dip in average prices. Apart from a small decrease in 2011/12 and another during the downturn in 2019, detached houses in Brisbane have increased in value by an average of 1% to 11% every year since 2010.

The fact is, while there are plenty of units in Brisbane, we’ll always be in short supply of land and for that reason houses in Brisbane are expected to continue to outperform units for the foreseeable future.

The availability of cheap credit is another factor expected to fuel the demand for property in Brisbane. The Reserve Bank of Australia has just dropped the Official Cash Rate (OCR) to 0.5% in an unprecedented move that should result in the lowest retail interest rates in Australia’s history. What’s more, major banks, including the National Australia Bank, ANZ and Westpac are predicting another OCR cut in 2020, which would bring the rate down to just 0.25% and make credit even cheaper for consumers.

Whatever statistic you look at, it’s clear that Brisbane is in the midst of a house price recovery that could make it one of the best performers out of all of Australia’s capital cities to 2022 and beyond. Now could be the perfect time to invest.