After suffering a heavy blow during the downturn, the Sunshine State’s property sector is yet to pick up in 2010
Brisbane is yet to experience the positive upturn property investors have been hoping for, but low prices mean that now may be a good time to buy.
Houses in the city rose by 4.94% over the year, falling by 2.24% over the quarter and 1.66% in the month of March, according to Residex. The median house price now stands at $461,000.
Units haven’t fared much better, with restrained capital growth recorded by Residex. Median values rose by 1.39% over the quarter, picking up slightly with 2.93% over the month of March, to reach a median price of $367,500.
“It maybe getting close to being time to go “bargain hunting” in Brisbane but would probably wait a little longer as this market presents as having further falls particularly if interest rates continue to rise,” says John Edwards, CEO of Residex.
Australian Property Monitors’ House Price Report confirms that Brisbane house prices have remained flat in the March quarter. It says that after three consecutive quarters of price growth, the median house price fell by 0.1% in the three months to March, making Brisbane the only capital city to record quarterly growth of less than 1%.
The RP Data numbers showed similar weak trend. Brisbane only managed to add a paltry 6.2% increase in median house price over the past 12 months and a measly 0.2% in the month March.
“Brisbane is still pretty slow, the worst performers of all other capital cities,” says Tim Lawless, research director with RP Data. “It’s quite surprising to see Brisbane at the bottom of the leagues table. Normally it’s sitting somewhere closer to the top. What Brisbane is experiencing now is really a continuing hang over from such a strong growth from previous boom and also it tends to lag behind in the cycle.”
The state’s property sector has suffered notably during the downturn, with dwelling investment contracting far more sharply than the economy as a whole, according to an Access Economics report.
“Queensland is again at the bottom of the class for the pace of growth in its housing starts and engineering work. The end result is that Queensland has the equal highest unemployment rate of any state with the worst performance in terms of job ads and skilled vacancies as the downturns in retail and commercial construction bite into the demand for labour,” the report said.
According to Louis Christopher, managing director with SQM Research, the slow growth in the housing market is weighing down on developer’s sentiment. “I’ve met with a few developers and a lot of them are quite bearish. They don’t see any improvement and major recovery,” he says. I believe the type of growth we’ll see in Queensland particularly in SEQ is just modest to moderate growth with the second half of this year relatively flat.”
Bright outlook
Although housing activity has weakened and will fall further, population growth has not and the economy is now showing signs that it’s starting to pick up according to Paul Braddick, head of property and financial system research at ANZ. “One of the big drivers that we see behind the economy over the next two years is this enormous commodities boom which is going on particularly in the bulk commodities such as iron ore. The levels of mining investments that are likely to flow from this boom into Queensland is massive. So the broad outlook for Queensland is actually pretty good and eventually we think that will feed down to house prices.”
Rents expected to rise
Although rents remained fairly stable in 2009, they’re expected to bounce back across the country this year, according to Australian Property Monitors economist Matthew Bell.
“National rents rose by more in the March [2010] quarter than in any quarter in 2009,” he says. “The factors that kept a lid on rents in most cities in 2009 are no longer apparent. Job security and income growth have returned as unemployment peaked at 5.8%.”
He suggests that the recent interest rate rises may be factored into higher weekly rents in the coming year.
Average rents climbed by $15 a week for both houses and units over the year to March 2010, but stood still in the month, with houses earning $375 and units $350.
Houses are currently receiving an average 4.24% yield, and units 4.97%, though Bell expects these to fall in the year ahead. “With the outlook for price growth remaining strong, yields are expected to soften through 2010.”