23 January 2019 Capital spotlight: Brisbane

Property experts often recommend investing in big cities because their markets are larger, which decreases volatility, and their populations grow reliably, sustaining demand.

But this wisdom has been challenged by Australia’s two biggest urban markets, Sydney and Melbourne, both of which are registering steep price falls after a once-in-a-lifetime property boom. Both cities are also contending with infrastructure challenges.

In these uncertain times, Brisbane, the country’s third largest city, is becoming an attractive alternative for investors. It combines the best attributes of a big-city economy (size, stability) with the infrastructure spending and strong rental yields usually associated with a blossoming regional town.

“The Brisbane metropolitan area generally has been plodding along for the past several years while Sydney and Melbourne have burned,” says Terry Ryder, founder and managing director of Hotspotting.com.au, which issues detailed market reports about south-east Queensland.

“But the population data, particularly interstate migration, is now favouring south-east Queensland,” Ryder says. The City of Brisbane local government area, which covers the inner city, added 22,000 residents in the year to June 2017 alone.

Net positive migration – that is, more people arriving in an area than leaving – helped Brisbane achieve a 2.2 per cent increase in its median house price in 2018 (and a 25.4 per cent increase over the past five years), according to Domain. Rental yields for houses sit at a healthy 4.63 per cent, substantially higher than yields in Sydney or Melbourne, indicating strong demand for rental housing.

According to Ryder, this influx of residents can be attributed to three factors. “There’s a major upturn in infrastructure spending around Brisbane; the underlying economy is getting stronger; and there’s also the affordability comparison,” he says.

Simon Pressley, Propertyology’s head of property market research and three-time Real Estate Institute of Australia Buyer’s Agent of the Year, highlights two vital factors that will propel the area’s economy in 2019 and beyond: the resurgence of the Queensland mining industry (driven by global demand for resources); and development of the $3.6 billion Queens Wharf entertainment precinct in central Brisbane.

“Queens Wharf will be a game-changer,” Pressley says. “The tightening vacancy rates we saw throughout 2018 are likely to continue in coming years.”

Meanwhile, property prices remain affordable compared with Sydney and Melbourne: Brisbane’s median house price is $567,000 and its median unit price is $377,000. Affordable housing and job creation are major drivers of migration and seem certain to support population growth in Brisbane in the years ahead.

In 2019, savvy investors may wish to consider Brisbane’s unit market, which experts say offers significant value. “The housing market and the unit market are quite different,” Domain economist Trent Wiltshire says. “A lot of new apartments have been built in inner Brisbane in the past two years, and this has really weighed on unit prices.” In fact, the median unit price in Brisbane fell 6.8 per cent in 2018, according to Domain data.

But this price decline also helped push rental yields for Brisbane units to an impressive 5.14 per cent in 2018. Those who buy now can take advantage of the lower prices while reaping an impressive yield. In the medium to long term, Wiltshire says unit prices are likely to strengthen. “The pipeline of new construction has peaked and it’s falling away,” he says, predicting a 3 per cent rise in the median value of units during 2019.

Take a look at DHA properties available now in Brisbane.

The advice contained in this article is for general information only and should not be taken as financial advice. Investment is subject to DHA’s lease terms and conditions of sale. Investors retain some responsibilities and risks including property market fluctuations. Prospective investors should seek independent advice.