The value growth performance of the Brisbane housing market has lagged substantially behind that of Sydney and Melbourne over recent years. Given that values are now falling in Sydney and Melbourne and migration to Queensland is accelerating could a reversal of fortunes be in store?
Although house and unit values are now falling in Sydney and Melbourne it should be noted that the rate of value growth in Brisbane has also slowed. Over the 12 months to April 2018, house values have increased by 1.2% while unit values are -0.6% lower. Compared to their pre-GFC peak in March 2008, Brisbane house values are only 14% higher (in just over a decade) and unit values are currently -11.6% lower. While house value growth has been anything but substantial over the past decade it is pretty clear the surge in unit supply together with a relatively soft trend in economic conditions has kept unit values depressed over the period.
The gap between house and unit values in Brisbane relative to Sydney hasn’t been as wide as it is currently since the early 2000’s, while the gap for Brisbane values relative to Melbourne hasn’t been as wide since the mid-1980s. With such a substantial gap in the cost of housing it is no surprise that interstate migration to Queensland is starting to accelerate. Over the 12 months to September 2017, there was 19,324 net interstate migrants to Queensland. Not only was that the greatest number of interstate migrants of all states and territories it was also the greatest number of net interstate migrants to Queensland since June 2008.
The main drag on the Brisbane housing market over recent years has been the persistently weak economic conditions. While job creation has accelerated over recent years Brisbane continues to lack the economic drivers of cities the size of Sydney and Melbourne despite the substantially more affordable housing on offer. This is the key challenge for governments to overcome.
Supply outstrips demand
Another factor that has weighed on value growth over recent years has been the dramatic ramp up in housing supply, particularly inner city high rise units. We’ve already shown that unit values are currently -11.6% lower than their 2008 peak. Over the final quarter of 2017, around one quarter of all units resold across Brisbane transacted for a price lower than that which they were purchased for. Furthermore, while the number of new unit approvals has moderated and construction activity peaked in late 2016, apartment construction activity remains well above average and a large number of new units remain under construction.
Although Brisbane has a number of challenges which it has faced over recent years, the city is continuing to evolve. The large volume of infrastructure, retail and social projects either under construction or touted should increase the liveability of the city over the coming years. As dwelling values continue to fall in Sydney and Melbourne while cities like Brisbane remain much more affordable, Brisbane has a unique opportunity to attract additional housing demand from these cities. New large scale infrastructure projects are a key part of what can drive this growing demand but it will also need business development which drives job creation across the Greater Brisbane region.
To find out more about Brisbane 2.0 come along to REIQ’s Property Insider Lunch presented by Aon, this Friday at Moda Events Portside. Purchase your tickets here – Member discount available!