Will Brisbane break the two-horse Australian property race?
September 14, 2015 / Written by Rich Harvey
When it comes to Australian property, there have really only been two big names in the last few years: Sydney and Melbourne. The CoreLogic RP Data Hedonic Home Value index shows that in the year to September 1, Sydney property values went up 17.6 per cent, with Melbourne's in second place at 10.6 per cent growth.
The next best performer was Brisbane, with 3.9 per cent annual growth in real estate values. This is nothing to be sneezed at, and can represent some significant capital gains - especially in the luxury Brisbane investment property bracket. However, Sydney and Melbourne are still the powerhouses.
They dominate the gains, the auction listings (more than 2,000 of 2,615 across the capital cities in a week) and the headlines. But this isn't sustainable growth in the long term, and we're eventually going to return to levels closer to 6 or 7 per cent. But will Brisbane pick up where we leave off?
It won't happen overnight - but it might happen
One thing to remember with the current property landscape is that Sydney and Melbourne are hardly finished with their growth. Low interest rates are here to stay for at least the next few months, and they are currently sitting around 50-year lows at many lenders.
It all depends on how Sydney property performs this spring. There has been a bit of a credit crunch for those looking at Sydney investment property, with interest rates going up. We have to wait and see how much clearance rates on auctions are impacted. There will of course be a decline in these as listings spike, but the higher interest rates for investors may yet have an impact on growth.
Even with slower growth, Sydney remains attractive to a lot of buyers in 2015 as long as interest rates remain where they are. But looking at 2016 and beyond, there could be more of a shift.
Brisbane the bright spot in the mid-term
BIS Shrapnel's Residential Property Prospects 2015 to 2018 report outlines how a slowdown is anticipated in almost every property market over the next three years - hardly what house hunters want to hear. However, Brisbane investment property looks to be one bright spot in this landscape.
"[T]he easing of supply pressures means that only the Brisbane market is forecast to have experienced any growth in house prices in real terms by June 2018, with all remaining capital cities forecast to have recorded real price declines totalling up to 10 per cent," the report reads.
Of course, these general figures don't mean that you should get out of your Sydney property - the right buyers' agent will always be able to find you growth spots, even in a softer market.
But as BIS Shrapnel points out, Sydney's growth in value may have reached 45 per cent in the last three years - but it can't keep going at this rate. Keeping an eye on Brisbane property, currently much more affordable than the Harbour City, might be a valuable step forward for budding investors.
Bucking the two horse race
High construction levels and appealing interest rates have kept Sydney and Melbourne on top of the Australian real estate game for some time now; but with Brisbane waiting in the wings, there may now be a third option for people looking to buy Australian investment property.
Of course, just because one report indicates it is a growth city, does not mean you should immediately buy property in Brisbane. Taking your time to invest in something that is going to be either positive cashflow property or something to generate equity in the long term is key.
Take your time, use a buyers' agent, and pick a spot that's going to give you growth.