The outlook for the housing market in Brisbane is very positive with the Federal election being the final confidence hurdle for many buyers thinking of investing, downsizing or upgrading. The other incentive for buyers is the low interest rate, with some commentators predicting a further rate cut, possibly in November. The first homebuyer market is still at historically low levels due to the removal of the grant for established housing; however the improvement in the broader economic conditions may see this sector of the market also start to improve, especially if there is a further cut to interest rates.
The chart below shows the change in the number of house sales and median prices in the Brisbane LGA between 2007 and mid-2013. It indicates that house sales in the second quarter of 2013 were the highest in three years, with the election outcome still undecided at the time. NPR Co.’s discussions with real estate agents and developers reveal a noticeable increase in the number of buyers attending open homes and the level of inquiry, although this can vary between areas. NPR Co. expects the data for the third and fourth quarters of 2013 to support the anecdotal information and show a continued increase in sales volumes, and in some markets median prices may also start increasing although this is unlikely to occur in any material way until 2014 given that Christmas is typically a quieter time for the property market.
In 2007 prior to the GFC, there were between 6,090 and 5,070 house sales per quarter in the Brisbane LGA but this dropped to below 3,000 at the end of 2010 and early 2011. Data for the second quarter of 2013 shows the number of sales was 3,494 which is a slight improvement from the low with plenty of growth still expected to occur in the market. The period of the First Homeowners Grant Boost is indicated on the chart by the shaded area and shows a 41% increase in sales volumes from 3,198 in the last quarter of 2008 to 4,502 in the third quarter of 2009.
As the Brisbane market starts to recover, growth will be patchy, occurring in some areas before others and some of the most in-demand areas may already have experienced improvements. To assess the difference in recovery between areas in the Brisbane market, NPR Co. has divided the Brisbane LGA into the following 3 groups which are shown on the map below:
- Inner – 5 kilometre radius
- Middle – 5-10 kilometre radius
- Outer – 10 kilometres or more but within the Brisbane LGA
The chart below presents the quarterly number of house sales in each of the three areas in Brisbane – the inner, middle and outer ring suburbs. It reveals that the volume of house sales is higher in the outer ring, which is likely to reflect the higher share of houses in that area while apartments and townhouses will have a higher share of sales in the middle and inner ring areas.
The chart shows that the volume of house sales in the middle and outer ring suburbs was more affected by the GFC than house sales in the inner ring with a 43% decrease between 2007 and 2008 compared to a 36% decrease in the inner ring. There were also larger increases and decreases in house sales in the outer ring at the beginning and end of the First Homeowner Grant Boost. This indicates that sales volumes in the outer ring suburbs are more affected by changes in economic conditions and government grants. This is largely because they attract a greater number of first home buyers with the typical demographic having lower incomes.
Having noted that, these are areas that have typically had the largest supply of both new and older stock. With the advent of the GFC, the outer ring was also one of the locations where employees were more fearful of losing their full time employment. This has only changed more recently where consumer confidence is again starting to improve. With regard to this, there is a genuine expectation that the outer ring suburbs will again experience considerable interest from owner occupier buyers as the strengthening Queensland economy combined with the low interest rate environment prove a seductive lure to home ownership.
The next chart looks at how the median quarterly sale price for houses in the inner, middle and outer ring suburbs has changed. It indicates that prices are higher, the closer you are to the city which is as expected but it also shows that the prices are more volatile in the inner city areas and that there is a lag between a change in volumes and the change in prices. For example the inner city ring experienced a 13% drop in median sale price between the second quarter 2008 and the first quarter 2009 following a 36% decrease in volumes from 2007 to 2008 while the 43% decline in volumes in the outer ring only led to a 5% drop in median sale prices between first quarter 2008 and last quarter 2008. This shows that the lag time between a fall in volumes and a fall in prices is also slightly different between the inner and outer ring suburbs with it being slightly longer in the inner ring suburbs.
In terms of the recovery phase we are now entering, NPR Co. expects it will be more gradual and sustained than the short but sharp volume and price increase that resulted from the FHOG Boost. The charts below show the quarterly changes in sales volumes and median sale prices for houses in the inner, middle and outer ring suburbs. For all areas, prices generally returned to their pre-GFC level by 2010 and while volumes have not recovered to pre-GFC levels, there is an indication that over 2012 and 2013 there has been an improvement in sales volumes. Between the second quarter of 2012 and the second quarter of 2013 house sale volumes in the inner, middle and outer ring have increased 19%, 21% and 17% respectively. If these volume increases continue as expected, NPR Co. predicts prices will also start to rise in 2014.
The slower recovery in the outer ring suburbs is linked to the change in the first homeowners Grant. Many of the outer suburbs of the Brisbane LGA contain mostly established housing while the majority of new greenfield housing to which the grant applies lie outside the Brisbane LGA in the Ipswich, Logan and Moreton Bay LGAs. Therefore, this negatively impacts the first home buyer sector which may have otherwise bought more affordable, established housing in the outer suburbs of Brisbane.
NPR Co. expects that volumes will start to recover in the middle and inner ring suburbs and gradually move outward. The Brisbane floods have also created a degree of pent up demand in the Brisbane market, prolonging the period of uncertainty and low consumer confidence following the GFC. Combined with a large amount of new infrastructure and gentrification projects planned for Brisbane, NPR Co. believes the Brisbane market is likely to experience growth in volumes and prices in 2014.
Combined with this has been a recovery in the population growth of Queensland. The difference between capital city median house prices gives Brisbane a distinct advantage over Melbourne and Sydney of $55,000 and $195,000 respectively. Brisbane also enjoys a discount to the Perth housing price of $70,000 making it a more affordable destination with a rebounding State economy.
Probably much to the surprise of many readers, the Brisbane housing market reached its bottom in the second quarter of 2011 with the exception of the outer 10km plus region finding its low point in the first quarter of 2011. Now that’s not to say that the recovery has been easy or smooth, quite contrary. A further low point was also reached in the second quarter of 2012 that almost eclipsed that of the 2011 data. This was the cause of much consternation as 2011 proved very much to be a false dawn.
Whilst the RBA and various economic houses have commented on the potential for a boom/bubble to be created around the housing market, the reality is that SEQ, and more particularly Brisbane have been trading steadily and consistently with very little price or volume growth. To lump Brisbane in with Sydney and even certain parts of Melbourne is to clearly overstate any return to the “good times” of a pre-GFC era. It is this steadiness and value proposition combined with the low interest rates that is now starting to show the beginning of a more sustained and reliable recovery. To suggest that Brisbane is in boom times is to believe the self-interested hype of various parties. Clearly the market is improving, the fundamentals are again starting to surface and consumer confidence is improving. However it remains a fragile marketplace that would be severely tested if another economic shock was to occur. Thankfully the country’s leadership issues are resolved and stability on this front has been settled by the Australian public.
The balance of 2013 should continue to see the residential market of Brisbane rebound. There is a genuine expectation that the sales volumes in 2014 will increase by between 25%-35% as pent up demand is met and population growth continues. This will see the transition more clearly identifiable between the resource sector and the housing/construction sector.
2014 is looming as a good year for South East Queensland’s residential property market.
If you would like NPR Co. to undertake more detailed analysis for you, please contact us to make sure you stay informed and in the know.
The National Property Research Company
Level 1, 307 Queen Street
BRISBANE QLD 4000
Ph 07 3229 0111