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Is the worst behind us, or is there more pain to come?

Brisbane has seen another month of price falls based on median settled sales data. Is the worst now behind us, or is there more pain to come? The answer depends on a few things. It depends if you are a buyer, a seller, a landlord, or a tenant! Our team has put together a Brisbane Property Market Update September 2022 for you.

Interest rates have risen 250 basis points across the last 6 months which is the fastest tightening cycle since 1994. This has definitely had an impact on buyer demand.

According to Proptrack, there are now 29.4% FEWER potential buyers per realestate.com.au listing for houses in Brisbane. This is compared to the recent peak. For Brisbane Units, there are now 12.6% fewer potential buyers per listing, compared to the peak. This confirms that the drop in demand has been more severe for Houses compared to Units across Brisbane.

The change in the number of potential buyers per listing for Houses now, compared to the pre-pandemic period is +79.8%. For units, the buyer activity in Brisbane for the same period has increased 126%. This is according to Proptrack data.

This confirms that buyer demand has slipped over recent months. But it remains strong looking historically to the period prior to the Covid-19 pandemic.

Whilst demand is lower according to these indicators, we started to see more people turn up to property inspections again throughout September, compared to July and August. Perhaps this is due to buyers having fewer choices in the market.

New listings have been reducing in Brisbane for the last 3 months (see below). At the same time, total listings have been increasing.

Image of graph to show new listings down in last three months   Image of graph to show total listings have been increasing

What does this mean?

  • Sellers are less motivated to list their properties for sale (especially in the last 2-3 months) – probably because they are uncertain about the price that they might achieve
  • There is NOT a trend of high levels of forced selling!
  • Some sellers are less willing to meet the market, OR, buyers are becoming more selective about what they will buy, which is why days on market are trending higher as evidenced by increasing levels of older stock

Domain auction clearance rates have been improving across Brisbane since July. The monthly average clearance rates in July were 39.8%. By August this increased slightly to 40.25% and for the 4 weeks in September, the average auction clearance rate in Brisbane increased to 53%. The graph below also shows that the clearance rates in Brisbane have bottomed out.

Image of graph showing Brisbane Auction Clearance Rates
Source: CoreLogic

Rising interest rates have also been impacting the amount of money prospective buyers can borrow. Even with cash rate increases of 225 basis points, borrowers’ maximum loan size was reduced by around 20%. With a further .25% rate rise in October, this is now further reduced. This means that the pool of buyers who are able to purchase higher-valued properties is reducing.

The median value price falls in Brisbane are being led by the more premium end of the market as can be seen in the graph below.

Image of quarterly change in dwelling values in brisbane
Source: CoreLogic

Dwelling Values

Brisbane Property Market Update—September 2022

Across September, according to the CoreLogic Hedonic Home Value Index, Brisbane Dwelling values declined -1.7%. Like most other major capital city markets, this demonstrates a loss of momentum in the pace of price falls compared to last month. The median value for a Dwelling in Brisbane is now $746,017 which is $16,267 LESS than last month.

Images to illustrate dwelling values in brisbane decline

Brisbane remains a more affordable market than Sydney, Melbourne, Hobart, and Adelaide when we assess the Dwelling to Income Ratio of capital cities throughout Australia. This is despite being one of the highest growing capital city markets over the last 18 months. It is perhaps another reason that the Brisbane market has been less impacted during the current downturn.

Images to illustrate dwelling value to income ratio in Australia

Source: CoreLogic

House Values

Brisbane Property Market Update – September 2022

Housing values are leading the downturn in Brisbane as evidenced by a greater month-on-month decline in this sector, compared to units.

Image to illustrate housing values in brisbane

For the last 3 consecutive months, median Brisbane House Values have declined. The rate of decline has recovered slightly in September, compared to August. Units have seen a decline for the last 2 months, although there have been relatively minor median value changes in this segment of the market.

For the month of September, CoreLogic Hedonic Home Value Index data confirmed that Brisbane Houses declined a further 2%, with quarterly falls now at -5.1%. The median value for a House in Greater Brisbane is now $841,923. This is down by $50,210 from the market peak in June when median House values were $892,133.

Image to show median house value in brisbane
Source: CoreLogic

Unit Values

Unit Values are a lot more resilient in Brisbane in the current downturn. This is perhaps because they are a lot more affordable, compared to Houses. Also the oversupply of units that we saw in the years following peak construction in 2016 has now corrected and there is a lack of quality unit stock being built – hence lower levels of supply.

Throughout September, Brisbane Units saw prices decline by just -0.1%, but quarterly growth remains in positive territory at +0.4%. The median value for a unit in Brisbane is now $501,255, just $3,265 off the recent peak which was $504,520 at the end of July 2022.

Image to show median unit value in brisbane

The Rental Market in Brisbane

The rapid rise in rents in Brisbane over the last 12 months has been building for some time. Since 2017, the residential vacancy rate has been falling in Brisbane. According to SQM research, our city now has month-on-month record low vacancy rates recorded. The current Vacancy Rate across Greater Brisbane is 0.7%.

Image to show residential vacancy rates in brisbane

It has been reported that nearly 30% of rental dwellings have been stripped from the Queensland market in two years. The 2022 PIPA Annual Investor Sentiment Survey found during this time more than 160,000 investment properties were potentially sold to homebuyers throughout the State. This means rental stock in Queensland has potentially fallen by an extraordinary 29% in just two years.

The 2022 PIPA Survey showed that 19% of investors nationwide have signaled they intend to sell even more property within the next 12 months. This confirms the assumptions above. The number one reason cited in this survey was the fact that Queensland’s proposed new land tax law would penalise owners of property in other states/territories. With the Land Tax proposal now scrapped, it is possible that these projected numbers will change. Of course, time will tell.

With rents rapidly increasing in Brisbane, the portion of income required to service new rents has reached its highest level since 2009. Affordability is starting to be challenged for those who are renting properties in Brisbane.

Image to show portion of income required to service new rents in brisbane

For investors who are looking for some solid returns, especially those lured by higher yields, there is likely to be some strong income growth in the months and years ahead. This is due to the factors highlighted above. Unless we see new rental accommodation being added to the market, it will be hard to imagine how rents won’t keep escalating into the foreseeable future.

Perhaps now that the Queensland Land Tax proposal has been scrapped, we will start to see more investors show interest once again. This is especially true for those who are looking for some strong yields, along with the prospect of strong growth in the lead-up to the 2032 Olympic Games and beyond.

What will happen in the months ahead?

Brisbane Property Market Update September 2022

Looking back at previous months, we feel that July demonstrated the lowest level of activity in the Brisbane market. August showed a slight improvement, but there was a definite improvement throughout September. This also seems to be reflected in the data, given the fact that when we assess the data we are looking in the rearview mirror. We have seen a small improvement between August and September (reflecting what was happening on the ground between July and August) and we expect that the results next month will show a further improvement.

We believe the initial shock of rising interest rates has passed, although we recognise that if interest rates continue to rise rapidly in the months ahead this may create additional headwinds. The good news is that the October rate rise was less aggressive, and inflation appears to be slowing, which might see the RBA start to ease back on the rate hiking cycle that commenced in May this year.

Overall, the Brisbane Property Market is not in a terrible state. Supply is tight, unlike other capital city markets around the country. This is a significant point of difference.

Demand is picking up again. Buyers are out and there are plenty of shoes at the doorstep of open homes.

And, despite such strong price growth over the last 18 months, relative to incomes, Brisbane property values are still very affordable.

Some see the current market conditions as a downturn. As Brisbane Buyers Agents we see the current market conditions as an opportunity to buy well, with less competition. The longer-term prospects for Brisbane remain strong. When the focus is on quality, the right time to buy is when buyers can afford to do so. It is impossible to determine the point at which a market turns, so our recommendation is always to ignore the noise and focus on what you are trying to achieve. Time in the market matters more than trying to time the market.


If you would like to reach out to our team to learn more about how we can help you understand the Brisbane Property Market and how a Brisbane Buyers Agent can help you, click here.

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