Brisbane Property Prices Continue to Fall – is it Bad News or Not?
Brisbane property market update October 2022
Brisbane property values fell again this month, evidenced by falls across both Houses and Units according to CoreLogic data. But other data by PropTrack suggests less severe falls. The question to ask is, are prices across the city really tumbling, or is the composition of what properties are selling changing?
Rents are still on the way up in Brisbane. Property Investors are starting to see the opportunity to buy well. Competition is lower, yields are strengthening and there are favourable long-term growth prospects. Home buyers are also getting on with it, with more activity from buyers in this area as well. In this report, we take a look at what’s been happening throughout the month of October both on the ground and also in the reported data.
Market Supply
Brisbane property market update October 2022
With the release of the Federal Budget this month, the National Housing Accord was outlined. This is aimed at addressing the supply and affordability issues in relation to housing. One million new homes have been proposed. These are to be constructed over five years from 2024. This housing Accord also encourages institutional investment in housing (including superannuation funds), although much of the detail in relation to this proposal remains unknown. The budget also reaffirmed existing housing policies, but this is not likely to be any substantial impact in boosting housing supply as a result of these announcements in the near future.
The reality is that this proposed new supply is no different to the Housing that has been delivered over the last 5 years. So there appears to be little change from what has been delivered in the past anyway.
During September new listings were down -13.3% according to Proptrack data compared to the previous month. This is a decline of -6.0% compared to 12 months ago.
The same data has reported that Total Listings are now up 12.3% in Brisbane compared with 12 months ago. We have now seen five consecutive months where total listings have been increasing which means that the choice for buyers is starting to improve overall, despite total listings still being down compared to the long-term trend.
Not all areas of Brisbane are showing the same change with the image below highlighting the suburbs with the largest year on year changes in new listings.
Source: Proptrack Listings Report September 2022
Market Demand
The median days on market in Brisbane has almost doubled in the last 12 months according to CoreLogic data. In September 2021 properties were listed online for just 15 days. Now properties are taking 28 days to sell. At the same time Sales Volumes are down just -2.4% across Brisbane over the same period of time.
The uncertainty around rising interest rates and inflation continues to be the main cause of the lack of buyer confidence right now. Buyers appear to be active, but many are still nervous and uncertain. It appears that many are trying to time the bottom of the market. Watching and waiting. This is a strategy fraught with error because there is no real way to determine when this might actually be.
History has shown us that markets can turn very quickly and as soon as buyer confidence improves competition levels spike. This is when buyers find themselves back in a competitive environment.
Dwelling Values in Brisbane
Brisbane property market update October 2022
According to the Hedonic Home Value Index by CoreLogic, Brisbane Median Dwelling Values declined by -2.0% throughout October. This equates to a quarterly fall of -5.4%, even though the annual gain is still +8.4%. The median value for a Dwelling in all of Greater Brisbane is now $728,615.
Source: CoreLogic
Sales at the top end of the market appear to be declining at a faster rate than sales at the bottom end of the market in Brisbane according to the quarterly change in the stratified hedonic dwellings index from CoreLogic (3 months to September).
This data does not separate houses and units. We know the unit market in Brisbane has been less impacted by median price changes recently and units are going to fall within the lower price brackets within the combined Dwellings data. This is why understanding the data is always so critical before making too many assumptions.
Also, depending on what data you rely on there can be discrepancies in what is reported. For example, the PropTrack Home Price Index showed Brisbane Dwellings declined more slightly throughout October. This data reported a more modest change of only -0.9%.
Source: Proptrack
Brisbane House Prices
Brisbane property market update October 2022
Median House values in Brisbane declined -2.2% in October according to CoreLogic. The Median Value for a House in Greater Brisbane is now $817,684. Houses are still 8% higher today compared with 12 months ago.
Source: CoreLogic
Brisbane Unit Prices
Unit values in Brisbane, according to CoreLogic, declined -0.9% throughout October. The changes in unit values have been less dramatic than changes in house values. The annual change in Brisbane Unit Values is now 10.7%. This confirms that units are currently outperforming the housing market throughout Brisbane. The median value for a unit across Greater Brisbane is now $494,785.
Source: CoreLogic
Brisbane Rental Market
Brisbane property market update October 2022
Vacancy rates in Brisbane remained unchanged at 0.7% according to SQM Research. One of the reasons that vacancy rates are so low is that the supply of rental properties has been declining over recent years. The latest lending figures show that the share of overall lending to property investors has been below the long-term average since mid-2017. This has contributed to the supply challenges in the rental market in Brisbane.
New rental listings according to Proptrack Data show that in September 2022 listing volumes are 21% below the decade average. In Brisbane, the year-on-year change in new rental listings is down -12.6%. Additionally, total rental listings in Brisbane are down -22.7%. This data also shows that the year-on-year change for the number of potential renters per listing has jumped 25.9% in Brisbane.
Fewer property investors have been entering the market at a time when more and more people have been relocating to South-East Queensland causing demand to peak. This imbalance is causing rents to escalate which means tenants will find it quite difficult to find accommodation for the foreseeable future.
Source: realestate.com.au
Rent price growth has been the strongest in Brisbane over the last 12 months compared to every other capital city and regional market throughout Australia.
For conditions to change Brisbane needs more property investors to enter the market to increase the supply of rental properties. Alternatively, Brisbane needs to see more tenants buy their own homes to alleviate the demand pressures. These changes will not be quick and therefore we expect rents to continue to increase in the foreseeable future.
Summary – Brisbane property market update October 2022
We are seeing a slowdown in the pace of transactions on the ground in some instances, but not all. For quality properties, buyers still need to act fast. New builds that are brought to the market in inner city locations are selling very quickly. Many townhouses and units in inner city locations are also selling fast. Buyers usually have a little more time for middle-ring or outer-ring properties in Brisbane at the moment. The same applies to some properties that need improvement works. There is no general trend. Every property will have its own level of demand and this ultimately drives the decisions that agents make around closing offers.
The increased costs associated with borrowing to buy remain a strong headwind for property buyers. But with interest rates looking more likely to reach their peak in the near future the ceiling for buyers to understand their most likely borrowing costs might be near. At the same time, the economy is performing very well. Unemployment is close to a 50-year low and this will eventually cause wages to grow, in turn helping to improve people’s borrowing capacity once again.
The fundamentals remain strong. We expect that the bottom of the market is near. And given the buyer volume who are sitting on the sidelines waiting to pounce, we expect the recovery to come through sooner rather than later.