Brisbane the place to invest

The property market is cooling and sellers no longer have the whip hand. It’s now becoming easier for buyers to find a bargain but value is an important consideration.

In our previous report, we pointed out that property values were falling, auction clearance rates were declining, rental growth was the lowest on record and general real estate sentiment was weakening.

While that’s not the best news for sellers, it adds up to a better market for investors and the latest Performance Property Advisory (PPA) Investor Market Update offers a guide to the best buying.

The update details rental growth, price growth, affordability, housing vacancy rates, population growth, employment, supply of housing, income growth, size of population, infrastructure spending and availability of stock.

And the winner is…

On those measures, the Queensland capital leads the way.

Top Brisbane suburbs in 2015

 

BRISBANE THE PLACE TO INVEST 1
Source: PRD Nationwide

 

Here’s why. Brisbane’s residential population has grown to 2.1 million people from about 1.7 million over the past decade or so and is projected to increase by another 820,000 over the next two decades.

Spending on infrastructure is up, unemployment is 5.4%, which is below the national average of 6%, and the city has an undersupply of housing, the update says.

Affordable city

“Brisbane also remains one of Australia’s most affordable cities to invest in, with an ‘affordability index’ of 27%,” PPA director of acquisitions David McMillan says. “Affordability is based on the average property price (assuming a 20% deposit) and the median income of that city. This is a PPA calculation based on existing industry data.

“House prices rose by as little as 15 per cent from 2008 to 2015, while income over the same period grew by about 31%. Couple this with falling interest rates and Brisbane’s residential stock remains extremely inexpensive.”

In fact, average unit prices fell 5.3 per cent in 2015 to $360,000 – their biggest drop since 2000, according to December quarterly statistics from Domain Group.

The PPA Investor Market Update shows that Brisbane’s choice investment prospects are in the middle ring suburbs of Stafford, Kedron, Nundah, Mitchelton, Camp Hill and Morningside and to a limited extent in the city fringe.

The update is done four times a year and examines property investment market conditions in Sydney, Melbourne, Brisbane and Adelaide. It pulls together research from the Australian Bureau of Statistics, the Real Estate Institute, SQM Research, RP Data, PriceFinder, and Residex as well as statistics from multiple government agency websites.

Price growth in 2015

BRISBANE THE PLACE TO INVEST 2
Source: JLL

 

Melbourne

Victoria’s capital is the second-poorest performer, with average yields of just 2.8 per cent, marginally better than Sydney at 2.6 per cent, the update shows.

However, Melbourne’s sub-markets are well worth considering. These include the coastal and tree-change locations within an hour’s drive of the city, such as Mornington, Mount Eliza, Frankston and Queenscliff.

Sydney

The update shows that this market is now nearing its peak in terms of investment prospects.

However, Sydney experienced the sharpest quarterly decline in house and unit prices on record in the final three months of 2015, the Domain Group statistics show.

Sydney has the lowest capital city yield, making it less attractive to experienced investors, but there is some value within 1.5 hours of the CBD – prime rental locations for those opting for a tree or sea change.

Opportunity

To take advantage of the looming opportunities, now may be a good time to find a commercial finance partner who sees property the way you do.

 

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