Since 2012 through to now, Sydney and Melbourne have had the lions share of capital growth nationally and also the media spotlight. With little old Brisbane flying under the radar, the River city has always been a ‘safe bet’ for long term gains but aspirations of double digit value growth over the past five years have not come to fruition.
Recently in a Herron Todd White Residential Monthly Market review the Brisbane market was perfectly explained, so here it is,
“We may not have fired as high or fast as many wished, but really, Brisbane is about staying the course and enjoying our forgiving troughs and tempered peaks.
When it comes to investment property, there’s a thing or two that speculative out-of-towners could learn from the locals.
In recent years, non-local investors have bolstered demand for new units.
As has been well publicised, the result is an oversupply of this stock, and forward approvals indicate this won’t be alleviated any time soon. While there were some locals getting in on the new-unit act, most smart Brisbane-based investors were steering away from high-rise one-bedders, and dipping their toe into townhouses and detached homes. Non-locals should notice and follow their lead.
Near-city houses and townhouses situated close to transport and infrastructure are the ones to go for if you want to, as a ‘rule of thumb’, mitigate risk.
Brisbane is also attractive to investors keen on chasing higher rental yields. The popularity of duplex and dual occupancy style properties is on the up. It’s
not surprising Brisbane property yields are attracting interstate buyers of course. Those strong price gains in Sydney and Melbourne have continued to
erode return on their capital outlay. The interesting thing is, in this sector, we’re actually seeing a lot of this activity in the fringe rather than close in. Think
Caboolture and Morayfield in the north, Logan to the south and Ipswich to the west.
When looking for movement at the investment station, price point is imperative. Most Brisbane investors are looking to outlay on entry level stock.
For detached housing, that price generally varies with proximity to the CBD, with a broad observation being $500,000 to $700,000 for mid-ring suburbs
and $400,000 for outer lying suburbs. For fringe suburbs, those dual-occupancy, strong yield investments are priced up to $550,000. For townhouse buyers, the sweet spots are typically sub-$350,000 for outer lying suburbs and sub- $450,000 for middle ring addresses. When investors are deciding the balance of their portfolio in relation to capital gain vs yield in Brisbane, the old rules ring true.
Detached homes are more prone to value rises while attached housing is yield driven.
You see, detached homes come with a land component – and we continue to have decent size blocks within a reasonable distance of the CBD in our capital, so that’s always a good thing. The other capital gain advantage is the potential to do a bit of renovation. A cosmetic tart-up in particular can have a very immediate increase in value without too much effort and cost, so this strategy continues to be of the appeal in our city. There has been a slowdown in investor activity of late due to a confluence of factors. Uncertainty around price movements in units has been exacerbated by the oversupply. Negative media exposure and restrictions imposed by lenders responding to regulators are other factors that are seeing investors take a breather. If these influences continue and investors decide to keep vacating the market, price softening in the unit sector will likely be the most dramatic result. That said, there’s still a good variety of options at the moment, particularly for established dwellings which can offer long-term capital growth. As we said, in Brisbane it’s best stay the course, think long term and remember – location, location, location.”
– Herron Todd White August 2017 Month in review