Brisbane house values to increase by 3 percent, units to fall by 0.6 percent: NAB
The pace of home value growth across Brisbane has been improving, with dwelling values rising by 4.1 percent over the past twelve months.
The latest NAB housing insights report noted due to the higher pace of growth recorded in Sydney and Melbourne since 2009, Brisbane home values have become comparatively very affordable with the typical Brisbane house now showing a median value that is approximately $441,000 lower than Sydney’s and $144,000 lower than Melbourne’s.
The slower conditions compared with the larger states of New South Wales and Victoria can likely be attributed to softer economic conditions as the mining sector winds down. More recently though we have seen consistent improvements in the services sector of the Queensland economy, with rising tourism numbers and retail spending providing support for coastal and lifestyle based housing markets as well as the Brisbane housing market.
The regional areas of the state have shown a weakening in the rate of home value growth, dragged lower by value falls in the region’s most heavily dependent on mining related activities. Values in Mackay were 8.6 percent lower over last year, while Fitzroy values had fallen 3.7 percent and values across the Central West region were down 6.2 percent. Conversely, key lifestyle oriented markets such as the Gold Coast and Sunshine Coast are seeing home values trending higher.
The Brisbane housing market has been somewhat undersupplied in previous years’, yet housing price performance has lagged notably behind that of Sydney and Melbourne. Consequently, the comparative affordability makes the Brisbane market an enticing alternative for foreign investors, while pent up demand will keep local buyers in the market. An improving outlook for the Queensland economy will be another factor supporting prices as low interest rates and AUD depreciation help to jump start non-mining segments of the economy, feeding into better labour market outcomes.
However, population growth is expected to continue slowing in Queensland, while the unemployment rate is likely to remain above 6% over the near-to-medium-term, which will limit gains in property prices. Also, similar to Sydney and Melbourne, residential construction is picking up rapidly in Brisbane, which should address some of the pent-up demand and cool the market.
Similar to what was seen across all three of the major eastern markets, the NAB Property Survey showed a sharp deterioration in market sentiment in Queensland for Q4 2015, although forward expectations suggests the weakness may be only temporary. Nevertheless, respondents downgraded their house price expectations significantly, as well as their rental expectations – in contrast to NSW and Vic where rental expectations rose.
NAB expects house price growth in Brisbane to outperform other capital cities, but to slow to 3 percent in 2016 (from 4.3 percent in 2015).
On a more positive note, foreign buyers are responding as expected to the relative affordability (and availability) of Brisbane property, with demand apparently picking up in the quarter according to the Survey. Overall, NAB expects house price growth in Brisbane to outperform other capital cities, but to slow to 3 percent in 2016 (from 4.3 percent in 2015).
However, there are a number of risks stemming from the uncertainty around foreign demand and the impending spike in housing supply. These risks are particularly prevalent in the unit/apartment market, where prices are already expected to fall 0.6 percent in 2016 (from 1.8 percent in 2015).