After property prices in Brisbane boomed by more than 40 per cent during the pandemic, values are now falling at a record-setting pace.
According to CoreLogic’s Daily Home Value Index (HVI), Brisbane’s home prices have declined 10.9 per cent since the peak in June, marking the largest percentage fall on record.
CoreLogic Head of Research Eliza Owen said that despite the falls across Brisbane, it has “not made much of a dent” on the gains that occurred during the upswing.
“The fall in the Brisbane daily HVI follows an upswing of 43.5 per cent between August 2020 and 19 June 2022, which was the fastest trajectory of rising values on record,” Ms Owen said.
“This leaves home values across Brisbane 27.9 per cent higher than at the previous trough in August 2020.
“Brisbane now stands out as one of two capital city markets with record declines, the other being Hobart.
“Sydney continues to have the largest peak-to-trough falls of the capital city markets (currently at -13.8 per cent), while peak-to-tough falls remain mild in some cities.”
The 10.9 per cent decline in Brisbane home values has taken just over seven months, making this both the largest and quickest decline in history according to Ms Owen, with previous declines ranging between 2.9 per cent and 10.8 per cent.
Ms Owen said the second largest downturn in Brisbane home values took place between April 2010 and January 2012 and took 21 months to reach a similar decline of decline to what the city is currently experiencing.
“The second largest period coincided with a national housing market downturn that was fairly broad based, and partly coincided with the RBA lifting the cash rate 175 basis points between October 2009 and November 2010,” she said.
“Cash rate rises occurred as Australia’s economy proved relatively resilient through the Global Financial Crisis (GFC), and the RBA moved to gradually repeal monetary stimulus it had put in place through 2008-09.
“Through this period, Brisbane saw the largest declines of the capital city markets.”
According to Ms Owen, during the 2018 and 2019 decline, Brisbane values slipped just 2.9 per cent, however, the unit market fell by 6.8 per cent.
Rising interest rates to blame
The falls across Brisbane are mainly due to rising borrowing costs that have hit buyers hard after the extraordinary price rises Ms Owen said.
The median dwelling value in Brisbane has increased from $506,553 at the onset of COVID-19 in March 2020, to $707,658 at the end of 2022.
“Despite the large decline from peak, Brisbane maintains the third highest gain in value of the capital cities since the start of the pandemic,” she said.
“Only Adelaide and Darwin, which are 42.8 per cent and 29.6 per cent higher respectively than at the onset of the pandemic, have performed stronger.
“For this reason, there is marginal risk of negative equity for Brisbane homeowners, with the exception of very recent buyers, who purchased around the peak in June 2022 with less than a 20 per cent deposit.”
Ms Owen said there are a number of factors that should help place a floor under the Brisbane market.
“The first factor is relative affordability,” she said.
“Although housing values remain higher than pre-COVID levels, Brisbane retains a lower price point than Sydney, with a $435,170 difference in median house values and $280,749 difference in median unit values.
“The gap between Brisbane and Melbourne housing values is also significant, with a $119,697 gap between median house values and $97,692 difference in median unit values.
“This could encourage ongoing housing demand from those willing to migrate to the state, or own an interstate investment.”
According to Ms Owen, Brisbane also continues to experience above-average levels of interstate migration with the latest data showing arrivals in Queensland were tracking 63 per cent above the decade average to the June 2022 quarter.
While rents increased a further 13.4 per cent in 2022, suggesting an underlying shortage of available housing across the city.
“Similarly, a low volume of listings persists, where the volume of advertised stock is trending almost 40 per cent below the previous five-year average,” Ms Owen said.
“While Brisbane property values are likely to fall further in 2023, it is possible the rate of decline will continue to slow over the coming months.”