The reasons behind Brisbane's lagging property market: Macquarie Wealth

Brisbane, along with Queensland's regional property markets, continue to lag other states this property cycle, according to Macquarie Wealth Management.

"Brisbane is still very much the laggard for this cycle given the sluggish domestic economy, with periodic price falls still common particularly for the Brisbane unit market," Macquarie's latest report noted.

It was in part because Queensland continued to show population growth moderation as the recent mining boom subsided.

The lagging occurs even as prices emerge back into recovery and should exhibit strong price growth into 2015, it noted.

"There are clear macro reasons behind this slow recovery, due to weaker domestic growth and the slow pace of interstate migration out of both Sydney and Melbourne," the report said.

"Affordability levels in Brisbane are relatively good, given the recent price correction, which will offer a relatively larger buffer when mortgage rates eventually impact more significantly on affordability and pricing."

Macquarie's concerns relate to what it sees as "sluggish interstate migration and rising supply".

Noting the surge in construction activity in 2014 in Brisbane, it did concede that Brisbane had not seen meaningful supply additions for some years.

"As the mining investment cycle unwinds, both foreign and interstate migration into Queensland is slowing significantly – a trend that will tangibly reduce housing demand in these regions," it added.

Macquarie described the Australian residential housing market cycle as unfolding "largely as we expected".

"Low rates and good affordability had bolstered a moderate price upswing in 2013, initially out of Sydney (after 10 years of subdued gains) before it broadened out to Perth and Melbourne and finally to Brisbane, the clear laggard in this recovery cycle," the report noted.

"By late-2014 and into 2015, the stimulatory impacts from low rates have been largely realised.

"While further price gains ahead are still expected, the pace of growth is likely to be slower over the remainder of this upswing cycle.

"Medium term, the fundamental drivers of the Australian housing market are less favourable, but still firm overall.

"Housing demand is well supported, given solid migration, although that pattern of growth is still shifting clearly from resource-intensive states of Western Australia and Queensland back to the larger, more diversified states of New South Wales and Victoria.

"Developers are lifting supply in response, driving a surge in approvals and starts initially for units and apartments, but that supply is now broadening into detached housing as well."

Meanwhile Brisbane's off the plan apartment market has smashed its previous quarterly sales record with 1,621 unconditional transactions in the three months to December 2014.

The results as reported in Place Advisory's quarterly unit report equated to more than 135 off the plan sales a week in the inner-Brisbane market.

Place Advisory noted that level of quarterly sales outstripped the records set during the previous cycle, where 1463 unconditional sales were recorded in the June 2002 quarter.

Place Advisory noted that AMP Capital and Billbergia's Skytower was Brisbane's top performing project for the quarter with a registered 415 apartment transactions in total.

Place Projects director Bruce Goddard said the result showed Brisbane was experiencing an unequivocal boom in apartment buying.

"With approximately $2.4 billion worth of new and off the plan residential sales recorded during the year 2014, it shows the Brisbane residential market remains in massive demand consistently city-wide," Goddard said.

Apartments sold during the quarter showed a weighted sale price of $551,558 up from $545,478 in the threes months to September 2014.

Place Advisory director Lachlan Walker said he didn't believe these sales rates were sustainable longer term.