I thought it would be valuable for my clients and readers to understand the thoughts of a few buyers agents who are recommending their clients to invest in the Brisbane property market at the moment. In Sydney, we are all aware that the median price is moving closer by the day to $1mil and the huge growth that Sydney has had over the past five years in particular. Some investors are beginning to turn their back on Sydney as they believe over the next 5-10 years they may have a higher likelihood of capital growth elsewhere.
If you are looking to build a property portfolio of more than one investment property and in the next 5-7 years, it is very important that the first property gains value in the first five years of ownership. With out this growth you are unlikely to have the equity to purchase again and it’s why some investors are betting on Brisbane to give that growth before they look to come back to the Sydney market to purchase their next place. If it takes 5-7 years to get the growth needed to purchase again, you may have missed out on 3-4 years in the other market and what could be a strong growth part of it’s cycle. Timing is everything on your first few properties. After you own great assets, it’s time to sit back and let the property cycles do their thing over the next 30 years.
Below are the thoughts of three buyers agents actively working in the Brisbane Market and one in Melbourne to spice things up. Please remember three things
1) These are not my thoughts and are their words entirely
2) I prefer to use Buyers Agents and stay far away from new developments or property sharks. These are just four buyers agents and I consider many others.
3) Buyers agents are conflicted to a certain point as they only get paid only if people buy, so you always need to be careful and find someone you can trust.
James Freudigmann – PMC - www.pmcproperty.com.au
Brisbane as a city is not as landlocked as Sydney, therefore supply constraints are not quite the same in all areas. Whilst the Brisbane market has some good projected upside, it is not all of Brisbane that will experience sound capital growth. The inner city pockets of Brisbane are on the verge of a strong capital growth cycle over the next few years (primarily houses). The growth cycle began in mid-2014 and is continuing at a strong rate already in these early stages of 2015. At this point in time, Brisbane is one of the most affordable capital cities in the country. Traditionally and historically Brisbane has the 3rd highest median house price only behind Sydney & Melbourne, however as we stand in early 2015, it is the 3rd lowest only above Hobart and Adelaide. The entry price point is appealing for owners and investors alike, and from an investment standpoint, it is even stronger with Brisbane having the 3rd highest rental yields of all capital cities (only behind Darwin & Hobart).
The inner city housing market has very low levels of supply and there is a high demand from owners occupiers and investors alike. This is beginning to force prices up and is the start of what is expected to be a strong 24+ months of capital growth in Brisbane. These growth rates are expected to be more moderate compared to previous growth cycles in 2003, 2007 and Sydney’s recent growth phase. Note, it is important that investors are very wary of the unit market in Brisbane as these inner city areas are expected to have an oversupply in the near future.
With 5 year fixed interest rates below 5% and variable rates even lower, strong gross yields on houses between 4.5% and 5%, the market is poised for a strong growth cycle. The ideal price point that PMC considers to be appropriate for Brisbane is $650,000 - $750,000. This budget allows you to purchase an investment grade free standing house within 8km of Brisbane CBD. These properties are in limited supply, are slightly below the median prices for the inner-city areas and are in demand from both owner occupiers and investors alike.
Joshua Masters – BuySide – www.buyside.com.au
With a high Australian dollar effecting tourism in Queensland, the oversupply of property stock in the Gold Coast region and the severe impact that the floods had in 2011, Brisbane has had it’s fair share of setbacks. In my view though, Brisbane is the classic case of an undervalued stock that has been too low for too long. Take a closer look at Brisbane - it’s the third largest city in Australia. Last year it made the Top 25 Most Liveable Cities list with notable mentions for it’s affordability, urban spaces and efficient transportation systems. And there’s more to come – a second runway for international’s and a $5bn bus and train system to be constructed. Ten years ago you struggled to find a restaurant that wasn’t a pub, but these days some of the more cutting edge restaurateurs are opening up in Brisbane’s inner city. From a statistical viewpoint, Brisbane has been well under their long-term average growth rate for nearly 5 years. But word of warning, just like market’s that overheat and come back to the average, so too do those that are under the line. The sweet spot for quality properties within the inner ring start from $450K for a 2 bedder up to $600K for near new 3 bedroom townhouses (eat your heart out Sydney). If you’re looking for a major metro market that’s been undervalued, don’t say I didn’t warn you.
Gavin Mcpherson – Oasis Property Buyers - www.oasisproperty.com.au
As CEO of Oasis Property, and a professional investor of over 2000 properties, I have learnt to rely on baseline fundamentals, patience and of course...market cycles.
like any mere mortal however, I just can't say 'when' the market is about to catch the eye of the investment masses. But having seen Sydney and Melbourne present themselves as fairly, if not overvalued, Brisbane and South East Queensland sit squarely in the eye of the investor. A few quick points.
- Sydney and Melbourne are approaching their historical limits of housing affordability (55% of household income). Brisbane is lingering in the mid to high 30's, with plenty of room for organic growth.
- Brisbane is Australia's fastest growing city. (Overtaking Perth in 2014)
- at 2.2m people and growing it dwarfs Perth (previously our fastest growing city) at only 1.8m people, yet Perth has prices approaching $600,000.
- at an average price of $462,000, Brisbane is absolutely the best blue chip destination for long term property investors.
- only 80kms separates Brisbane from the home coast. Irrespective of what you think of the Gold Coast, historically it always performs as a 'lag effect' to the southern markets, as Sydney and Melbourne reach their upper price thresholds.
- this, combined with the decadal seachangers moving to the Gold Coast puts a great trading opportunity for the less patient investor seeking short term profits.
Love or hate either of these destinations, the last I checked...property investment was about making money. I see double digit growth for both of these cities in the next 12 months, with potential for a repeat in 2016.
So that’s it from a Brisbane point of view, some great views there and there are many other great buyers agents out there.
Being independent from the decision, I help my clients explore a number of options to find the best way to suit their situation. I thought it would be wise to give you an alternative view and that is from a leading Melbourne advocate I have used many times and trust.
Cate Bakos – www.catebakos.com.au
Why Melbourne over Brisbane?
Melbourne's median household income is greater than that of Brisbane. Melbourne is home to more premium-salary jobs than Brisbane, and Melbourne's headquarters and offices of global businesses eclipse Brisbane's. The pattern here is that there is more highly paid work available in both Melbourne and Sydney than there is in Brisbane, and it's fair to say that unless businesses have headquarters which are domiciled in Brisbane, the high net wealth salaried workers often ultimately move south to one of the big cities.
The relationship between higher paid workers and higher property price growth is based on supply and demand. If more families who are earning higher household incomes than the median household family incomes of the area are choosing to move into a particular area, this demand will force up property prices. Popularity of an area is not necessarily a sign of whether price growth will occur, but HIGHER competing household incomes ARE. I believe that the house price growth in popular inner-ring suburbs in Melbourne WILL be stronger for the long term than Brisbane's house price growth.
And what you would buy for around $750k
This is not a simple answer - it actually hinges on the client's ability to service the loan and the associated cash flow. If they can sustain a cash flow shortfall of up to $1500 per month, then an ideal selection would be a period cottage or terrace in a premium inner-ring suburb within 1km of local cafes and train station. A well renovated, easy-to-rent property is ideal (maintenance call outs are not suited to the busy professional), and likewise, a profession single or couple would be the target tenants.