A new report has found that Brisbane’s affordability and strong rental yields were likely to attract more demand from local and interstate investors this year.
Brisbane’s affordability in comparison to states like Melbourne and Sydney, was one of the many factors that made the city so attractive in the eyes of investors said the report entitled: Property Market Spotlight: Brisbane.
The report commissioned by Momentum Wealth, a property investment consultancy based in Western Australia says interstate migrants will continue to be attracted to Brisbane’s greater affordability and lower entry costs as stamp duty rates and total government charges are significantly lower than all other states, particularly for owner occupiers.
With economists predicting interest rates could rise within the year, Brisbane’s affordability will provide a lower risk investment as investors are less exposed to rising interest rates and are able to make higher interest repayments, it said.
A typical $500,000 purchase of an established residential property in Brisbane comes with a stamp duty that is at least 50 percent lesser than all other states. This reduces the barrier to enter the market as stamp duty is a large upfront cost which hinders many purchases.
Even in term of rental yields in Brisbane remains a winner in comparison to the Sydney and Melbourne markets as it gets the highest returns for both houses and units at 4.1 percent and 5.2 percent respectively.
However, the report cautioned that there might be concerns between the performances of houses and apartments in the Brisbane property market in the future due to disparities in its growth with the former heading for an oversupply while the later remains in check.
Apartment approvals in Brisbane remain considerably higher than their 10-year average, while approvals for new houses in the Queensland capital remain around normal levels, the firm said.
“We’re likely to see a greater divergence between the performance of houses and apartments, given these supply-side fundamentals,” Momentum Wealth director Damian Collins said.
“The research report explains that as the pipeline of new apartment projects comes to market, it’s going to weigh on rental returns and capital growth for these types of assets, particularly in those areas with a high concentration of new stock.”
“However, the research report shows that the number of houses under construction is in line with the 10-year average, meaning this segment will not reach a state of oversupply at current rates, which will help to buoy prices.”
Top areas with high apartment approvals are…
According to the research report, the suburbs with the largest concentration of apartments approved for construction include South Brisbane, Brisbane City, Newstead – Bowen Hills, West End and Chermside.
“Investors should avoid apartments in areas with high levels of new supply waiting in the pipeline because when it comes to market, the new stock will weigh on capital growth of similar stock in the surrounding areas,” Collins said.
“While we don’t expect all of these new apartment projects to go ahead, there will still be a considerable amount of new apartment supply coming to market in Brisbane over the next few years.”
“In the Brisbane market, investors should instead focus on established houses, in inner-metropolitan areas with large land content and low supply.”
Although the Brisbane housing market was starting to show some signs of decline, Momentum predicts many things were coming in the city’s way that could spell long-term growth for investors wanting to have a go at its property market.
Among them were a growing employment market, population growth, a balanced economy and high housing affordability, the difference in the supply-side fundamentals which will lead to a widening in the disparity between the performance of houses and apartment.
“The Greater Brisbane labour market is performing well with rising employment as the city offers a relatively balanced economy with tourism and education a major driver, particularly with the lower Australian dollar, as well as health care and the resources sector.
“We expect population growth to increase and be driven by interstate migration, particularly due to housing affordability constraints in Sydney and, to a lesser extent, Melbourne, forcing people to move north – Brisbane’s beautiful subtropical climate is also a major drawcard for relocation.
“Demand from owner occupiers is expected to remain robust with record-low interest rates and relatively high rents enticing tenants to buy. Although investor demand has fallen in recent times, we expect this to be short-lived as domestic and interstate investors realise the value, yield and capital growth prospects that Brisbane has to offer,” the report said.