Why should I invest in the Brisbane Property market?
Why invest in the Brisbane Market?
Selecting a city or market to invest in can be quite overwhelming for some. There are many factors to consider such as where to invest, what to invest in and whether you’ll make the right decision.
Today I want to discuss why we think Brisbane is going to be one of the top performing capital cities now and into the future. I’m going to list these factors and explain why we believe they will positively impact the Brisbane market. I hope this will give you some clarity and understanding of why we feel Brisbane is a strong market to invest in.
At Taylored Property Wealth we strongly believe Brisbane is currently a strong market to invest in and has huge potential for performance now and into the future. We help clients invest into the Brisbane market and put our money where our mouth is and invest in Brisbane personally ourselves. We have experienced strong performance in the Brisbane market in recent times and believe there will be strong performance in the years to come.
Brisbane over the first half of the 18-year real estate cycle hasn’t performed as well as Sydney or Melbourne. Based on Phil Anderson’s predictions, we have just experienced the mid-cycle slow down and will approach the top of the cycle approximately 2026/2027. Brisbane, based on historical data, performs better in the second half of the 18-year real estate cycle. This is due to Brisbane being far more affordable than other major capitals cities at this point in the cycle, as Sydney and Melbourne historically perform better in the first half of the cycle.
As per Core Logic’s data, noted below are the average median dwelling values for Sydney, Melbourne, and Brisbane as of October 2021. This median figure shows the distinct difference between the three capital cities in discussion.
People start to identify that there are more affordable areas to live, and this is where we see the migration to these more affordable lifestyles – Brisbane being one of these locations. Affordability then ties in closely with internal migration, internal migration and an increasing population generates more demand, more demand creates higher sales activity/volumes, which ultimately increases price growth.
Typically, within this second half of the 18-year property cycle both Sydney and Melbourne become extremely expensive in relation to some of the other capital cities such as Brisbane, Adelaide, and Perth. This means that people within the more expensive capital cities start to identify the opportunity to move to these capital cities with a more affordable lifestyle.
Brisbane is currently experiencing large interstate migration numbers. According to the Australian Bureau of Statics as at 31 of March 2021, Queensland had experienced an annual population change of 43,900 people. Victoria had seen a population decrease of 42,900 and NSW saw an increase of 11,700. Further, Brisbane has lower population density compared to other major capital cities. Queensland has also been far less effected by the current Covid-19 pandemic.
We believe people these factors will entice people from both Sydney and Melbourne to migrate north.
Sydney and Melbourne saw massive infrastructure spending between the years of 2013 and 2017. During this time, we saw the Sydney and Melbourne markets achieving strong capital growth, whilst Brisbane and Adelaide were sitting flat, and the Perth and Darwin markets were going backwards.
Infrastructure spending is an important consideration as this creates more jobs and it increases the desirability of an area. People want to live close to these areas and take advantage of the new infrastructure and facilities. It can also increase population growth and interstate migration as more people move to these areas due to the new jobs being created.
Brisbane is now starting to see more infrastructure spending. The biggest infrastructure spending projects that are currently underway or about to commence are as follows:
- Queens Wharf – $3 billion
- Brisbane Airport’s new runway – $2.1 billion
- Brisbane Live – $2.1 billion
- Eagle Street Pier – $2.1 billion
- Cross River rail – $5.4 billion
- Fortitude Valley commercial – $2.5 billion
- Coomera Connector – $2 billion
- Albion Exchange $750 million
- Toowong Town Centre – $450 million
- Brisbane to Gold Coast fast rail – $22 million
- Crestmead Logistics Estate – $1.5 billion
- Brisbane Metro – $1.2 billion
Vacancy rates is a metric used to determine how many properties in a suburb or area are currently vacant without a tenant vs the total number of properties for rent in a suburb or area.
When vacancy rates are low and trending lower, this puts pressure on demand for rentals and what follows is an increase to rental yields which makes it less affordable for renters. Once rentals become less affordable, more people decide to purchase property which creates larger sales activity/volume, and this creates a higher demand and increases property prices.
At Taylored Property Wealth, the vacancy rates in all suburbs across Brisbane that we invest in are currently below 1%. This means for every 100 properties in a suburb there is less than one property vacant. The current average for Brisbane in September 2021 as per SQM research is 1.4%, compared to Sydney sitting at 2.7% and Melbourne sitting at 3.5%.
When looking at Vacancy rates always remember low vacancy rates lead to increased rental yields due to high demand, this causes rentals to become less affordable, renters then become purchasers and generate increased sales activity/volume and this is a forward indicator for capital growth.
According to the ABS, as at May 2021 the average weekly salary of Queensland was $1,646.70, Victoria was $1,750.70 and New South Wales was $1,764.30. In the past, NSW and Victoria have had a higher average income however, these margins have narrowed, and the average is now approximately $100 difference.
This is important to note because Brisbane’s median price is lower than Sydney and Melbourne, yet the average income is still at $1,646.70. This mean there is far more room left in terms of serviceability and shows that Brisbane has far more opportunity and growth left before reaching it’s borrowing capacity ceiling. We know this because Sydney and Melbourne are great examples where the income levels have allowed prices to reach far higher then where Brisbane is sitting currently, yet the difference in the average weekly income is only approx. $100 difference.
This means that due to the affordability of Brisbane that we have touched on above, individuals aren’t using their maximum borrowing capacity to purchase properties in Brisbane, meaning that the recent APRA changes to the serviceability rate will not affect prices in Brisbane as dramatically if at all as other potential areas with higher median values and the borrowing capacity of these individuals can afford to pay more then where prices currently sit.
It is extremely exciting that Brisbane will be hosting the 2032 Olympics. This is a huge opportunity for the city of Brisbane and means there will be strong infrastructure spending moving forward. We know that more infrastructure means more jobs and as discussed before, we know this can positively impact population growth, further creating more jobs and increasing average income.
This is also a huge opportunity for Brisbane to showcase their wonderful city to the world. This can catapult the exposure and awareness of the city and will attract more people from overseas which will subsequently increase economic strength. This could also see more foreign investors deciding to invest in Brisbane over other capital cities, identifying the large opportunity with affordable property prices. Keeping in mind that this would require foreign investment policy to loosen for this to occur.
Strong Rental Yields
Rental yields are another important factor to consider. Brisbane, as of September 2021 as per SQM research, has a rental yield across all houses of 3.8%, in comparison to Sydney sitting at 2.2% across all houses and Melbourne sitting at 2.5% across all houses. It’s important to note this isn’t inclusive of the unit/apartment sector as we invest in established areas buying houses on large pieces of land, as we know that land appreciates, opposed to the building which is the depreciating portion of the asset.
When investing, you can focus on buying blue chip areas where rental yields can be traditionally lower however the capital gains are larger, or you can focus on regional areas or outer ring suburbs where yields are traditionally higher and capital gains may not be as high as the premium locations.
At Taylored Property Wealth we typically like to focus on a good balance of both capital gains and strong rental yields, as this allows you to build your wealth through capital gains and income due to strong yields. Creating wealth this way allows you to have more freedom and choices now and can also assist you with purchasing further properties.
At Taylored Property Wealth the average rental yields of the suburbs we focus on currently range from 4.5% up to 6%, attracting strong rental yields in conjunction with strong capital growth. It’s a massive opportunity currently to secure a strong rental yield! This is where engaging a knowledgeable buyers agent is beneficial and key to increasing your chances of success. At Taylored Property Wealth, we perform extensive due diligence on every property to ensure we only put forth quality property investments specific to your property criteria and goals.