Brisbane’s housing market is performing well compared with Melbourne and Sydney, thanks in part to steady jobs growth and interstate migration in the state.
However, Brisbane’s unit market is underperforming, with unit values down by 3.2% over the last twelve months, compared with house values which are up by 4.3%.
We’ve included the Brisbane market update below, along with a transcript.
Welcome to CoreLogic’s Brisbane property market update for September 2017
In Brisbane the pace of capital gains remained reasonably sedate in August, with dwelling values rising by 0.2% over the month, to be 3% higher over the year.
With jobs growth now picking up across southeast Queensland and migration rates gathering pace, particularly from interstate, the outlook for Brisbane’s housing market remains very positive.
Key areas within the inner-city apartment market are worthy of some caution, considering the large amount of new apartment supply coming online.
The under-performance for the unit sector is very evident from the Core Logic indices, with house values up 4.3% over the past twelve months, while unit values are actually down by 3.2%.
Overall slower growth conditions
Overall, slower growth conditions in Sydney and to a lesser extent in Melbourne are likely to be a welcomed evolution in the housing market performance by policy makers such as the RBA.
So far the cooling trend has been very gradual, implying that macro-prudential policies are having a flow-through effect on housing conditions.
The growth cycle in both cities has run for five and a half years now, providing a substantial wealth boost for homeowners but also creating much frustration for those who don’t yet own a home.
Sydney and Melbourne dwelling values have increased by 75% and 56% respectively since the growth cycle commenced in early 2012.
However, growth rates have been far more moderate across the other capital cities.
The policy settings around investment credit growth and new interest-only settlement targets have seen credit policies tighten, and pushed mortgage rates higher for both investors and interest-only loans.
These disincentives are likely to continue to weigh down investment demand, which will have a much more pronounced effect in those markets where investors are most concentrated.
New South Wales has the heaviest bias towards investment with fifty eight and a half percent of the value of all Housing Finance commitments being for investment purposes.
Clearly tighter credit policies and higher mortgage rates for investors are dampening the Sydney marketplace more than others.
Another contributing factor to slower home value appreciation is the high price of housing relative to incomes, particularly in Sydney.
Affordability barriers are preventing some prospective buyers from participating in the market.
The recent availability of stamp duty concessions in New South Wales and Victoria is likely to provide some support for first-time buyers, but it’s not likely that a rise in first home buyer activity will completely offset the demand gap left by fewer investors.
Overall, the outlook for Australia’s housing market depends on a broad range of factors including local, economic and demographic conditions, as well as supply factors and credit policies.
However, if the current trends continue, Sydney dwelling values could start to drift lower over the coming months.
Historically, a negative shift in home values has followed every growth phase so it’s reasonable to expect a period of moderate value falls following such a sustained period of strong capital gains.
With the spring selling season kicking off in September, it will be interesting to monitor the impact of higher inventory levels on the Sydney and Melbourne market, especially given evidence of slowing growth conditions accompanied by stock levels that are already higher than they were a year ago.