September 2020 Update: See the latest prognosis for Brisbane in the new post here.
The City of Brisbane local government area (LGA) covers a very large portion of the Brisbane metropolitan area and has the largest population of all the LGAs in Australia. Its population is equivalent to the combined population of the Australian Capital Territory, Tasmania, and the Northern Territory.
The other large cities in Australia divide up their central districts between several LGAs. So, in order to get more accurate property analysis for Brisbane, we have segmented the City of Brisbane LGA into five sectors: Inner, Southern, Northern, Eastern, and Western Brisbane. This report covers the Inner Brisbane area.
Overall, house prices fell in the last quarter in the City of Brisbane by 1.27 percent. Looking at the Inner Brisbane sector, the sales market for houses was very close to the average price performance for the City as a whole because it experienced a price fall of 1.3 percent. House prices fell in all sectors of the City with Southern Brisbane experiencing the largest average price drop of 2.96 percent. Western Brisbane had the smallest price fall, which was 0.03 percent. Northern Brisbane experienced a price drop of 1.45 percent and Eastern Brisbane saw the average price at sale for houses fall by 0.6 percent.
Inner Brisbane has the highest average house prices within the City. That figure is A$1.14 million, compared to A$636,00 in Southern Brisbane. The other areas of the City have median house prices that are A$704,000 in Northern Brisbane, A$796,000 in Western Brisbane, and A$807,000 in Eastern Brisbane. House sales volumes fell dramatically at the beginning of 2019 and have stayed low since then. Similar volume drops were experienced in all sectors of the City of Brisbane.
The market for units in Inner Brisbane is larger than the sales market for houses. The turnover in this market is not as high as it once was, similar to the sales of houses. Unit prices are still rising in Inner Brisbane, making this market much more attractive than the market for houses. Prices rose by 4.58 percent in the last quarter, which is strong quarterly growth. The average price for units in the area was A$679,966 in the last quarter. As with houses, the prices of units in Inner Brisbane are higher than those encountered in the surrounding districts of the City of Brisbane. The median unit price in Northern Brisbane was A$390,000 in the last quarter and prices fell by 0.49 percent there. In Eastern Brisbane, the median price of A$542,000 represented an increase of 12.09 percent.
Demand for both houses and units for sale in Inner Brisbane is very high compared to national demand. The rental sector experienced similarly high demand both for houses and for units.
Rent levels are rising both for houses and for units, although the rise in rent for houses was very slight, at just 0.16 percent. Rent levels for units rose, but not as fast as the sales price of units.
The results of these difference in rent level increases means that yield on rentals for houses rose strongly by 2.75 percent while yield levels for units fell by 0.98 percent. However, yield for unit rentals is still higher than yield for house rentals. The high cost of acquisition makes rental yields low in comparison to other cities in the state. For example, rental yields in Rockhampton, where sales prices for both houses and units are much lower, is 4.33 percent for units and 5.45 percent for houses.
The demand profile of property sales in Inner Brisbane over the past year show that units dominate the sales market in the area. One and two bedroomed units dominate the market with 229 and 493 sales respectively. This is typical for inner city areas where space is limited and developers recover the high cost of land by constructing multiple occupancy buildings rather than houses.
Houses start to figure in the sales records at the three bedroom size, but even at this size, unit sales still exceed those of houses – 137 houses sold and 154 three bedroom units sold during the year. House sales exceed unit sales only in the four and five bedroom categories. However, sales of five bedroom properties are significantly lower than the number of one bedroom properties sold in Inner Brisbane during the past year with 40 and 232 sales respectively.
The historic price chart and forecast for house sales in Inner Brisbane shows a steady increase in average prices over the years. Prices have only dipped twice in history. The first time was in Q4 2012, when the average house price at sale fell to A$890,000 from the previous quarter’s average price of A$900,000. Prices never fell again until Q4 2019, when the average price was A$1.1 million, compared to an average of A$1.2 million in Q3 2019.
The average house sale price remained at A$1.1 million in Q1 2020. HtAG sees a precedent in the price performance following the previous price dip, when there was just a single quarter fall. Analysis expects house prices to remain at A$1.1 million for the foreseeable future. Although a prediction of no price gains over the next two years might seem to indicate that houses in Inner Brisbane are a bad proposition, that price expectation is, at least, an offer of safety – prices are predicted to fall in many LGAs in Australia over the next two years.
Sales volumes in the Inner Brisbane housing market reflect a national trend. Turnover was on an upward trend until 2014 when it peaked at the level of 210 sales per quarter. Sales volumes remained at about the same level, with seasonal drops, until mid 2018. From that time, sales levels have fallen dramatically.
The periodic peaks in volume started to lessen in 2017, with the highest-volume quarter reaching 190 sales. The highest volume in 2018 was in Q2 with 180 sales. Volumes declined from that point down to 110 in Q4 and then fell in Q1 2019 to just 39 house sales. The highest sales volume achieved in 2019 was 55 house sales in Q4. That is just a quarter of the sales achieved in the peak quarters of 2014, 2015, 2016, and 2017. Although dramatic, this fall is not unusual and fits in with a national trend in house sales. HtAG expects that sales volumes for houses in Inner Brisbane will rise gently over the next two years, reaching a level of 66 sales in Q4 2021.
The graph for house rentals in Inner Brisbane shows some very unusual behaviour over previous years. The rent levels of five bedroomed houses rose dramatically from a low of A$650 pcm in Q2 2011 up to a peak of A$980 pcm in Q1 and Q2 2013. It has to be remembered that five bedroomed houses represent a smaller sector of the housing market in Inner Brisbane than smaller properties. However, that steep increase in their rent levels had a significant influence on the overall rental levels for all house sizes during the period. Overall rental volumes during those two quarters were 210 and 220 new contracts respectively. Once that unusual surge retreated, median rental levels returned to a steady and predictable rising trend.
Five bedroomed houses had another unusual rent level rise in 2016, peaking at A$820 pcm in Q3 2016. That price rise had an almost negligible effect on average rent level increases for the entire house rental sector and so probably involved a very small percentage of the 390 rental contracts that were signed in that quarter.
The five bedroomed house rental sector is in the middle of another peak in prices at the moment, with rent levels increasing from A$730 in Q2 2018 up to A$820 in Q4 2019. Although this rent level increase is appealing to investors, the fact that average rent levels tend to fall back quickly, shows that anyone that needs to buy a property in order to get into the rental market can’t rely on that peak rent level when projecting future income. However, HtAG predictions expect that rents will remain near their peak for the foreseeable future, being at $810 pcm in Q4 2021.
The most stable rental market in Inner Brisbane is for two-bedroomed houses. Rent levels have remained at A$450 since the beginning of 2014. HtAG expects this trend to continue.
House rental volumes in Inner Brisbane are now at their all-time highs, so some of the house hunters who are no longer buying have switched over to renting houses instead. The rental sector peaked in volume in Q3 2015 to Q1 2016 with 410 new contracts signed in each quarter. That level declined to 360 contracts in each of Q2 and Q3 2017. Since that time, turnover has increased in the house rental sector as volumes declined in the house sales market. In Q4 2019, 410 house rental contracts were signed, returning to peak levels. However, HtAG forecasts are more positive about increased volumes in the sales market for houses, expecting the turnover in the rental sector to fall simultaneously down to a volume of 360 contracts in Q4 2021.
HtAG’s bedroom-level forecasts are currently using a beta model source, so expect these forecasts to be revised once the model is fine-tuned by our data science team.
The market cycle graph below shows that the average sales price for houses in Inner Brisbane has never fallen. The different levels in the graph represent different rates of increase in price. This is very good news for investors, or would be, but for the HtAG forecast that prices will fall. The red section of the line on the graph represents the HtAG estimates of price movements in the next two years.
The heat map shows price movements in each district of Inner Brisbane all colours represent positive price movements. Even the areas shaded red are not necessarily experiencing price falls because that section of the scale represents price changes of between 1 and -2 percent. Of the zones coloured red, Wolloongabba Houses saw a price rise of 0.56 percent and the price fall of 0.02 percent in Paddington Houses was negligible. Only Herston Houses experienced a meaningful price drop, which was 1.9 percent.
The heat map was compiled from sales figures during Q1 2020 before the quarter was complete. Therefore, these sales prices are calculated over very few actual sales. For example, that price drop in Herston houses was recorded from just one house sale.
The suburb with the highest price increase during the quarter was Kangaroo Point, which saw a rise of 13.03 percent. However, this figure was derived from just one sale. The only area with a significant number of sales – 10 – was Bardon Houses, which saw an average price increase of 1.91 percent.
The scatter plot below shows where every house sale in Inner Brisbane occurred during the past year. Activity is particularly focused around the outer suburbs of the area. However, this is probably because there are almost no houses in the densely packed, commercially-focused city streets at the centre of Brisbane. On this scale there are no negative price movements – red dots represent price increases of between 3 and 5 percent.
Unit rentals dominate Inner Brisbane’s property market. In the last quarter of 2019, 2,700 rental contracts for units were signed in the area. Compare this to the 410 rental contracts for houses in the same quarter and sales of just 55 houses.
Rental levels in Inner Brisbane are completely disconnected from rental volumes. The rent levels for two and three bedroomed units peaked in Q4 2013 at A$480 and A$640 per month respectively. The average rent for two bedroom units bottomed out in Q4 2016 at A$450 and remained at that level until Q3 2019 when it rose to $460 and has since held that level. HtAG expects this rent level to rise to A$480 by the end of 2021. The average rent for three bedroom units hit a low point of A$590 per month in Q1 2018. Rent levels stayed at that price until Q3 2019 when the average rose to A$600 per month and continuing up to A$610 in the following quarter. HtAG sees this trend continuing, brining the overage rent for three bedroom units up to A$620 at the end of 2020, remaining at that level throughout 2021.
Rental volumes rose dramatically from 2013 through to a peak in 2015, when signed contracts per quarter increased from 1,200 to 2,400. This doubling of demand didn’t force up prices because average rents were falling during that time. From Q4 2015 volumes fell down to 1,900 contracts in each of Q2 and Q3 2017. Since then, volumes have been on the rise again, reaching 2,700 in Q4 2019. HtAG expects that rental contract volumes will remain at a high level, drifting slightly lower to 2,600 per quarter through 2021.
The median sale price for units in Inner Brisbane has never fallen. However, the sales price for two bedroomed and one bedroomed units have been on a slow downward trend since Q4 2016. Prices of three bedroom units have been rising sharply since Q2 2015. The average sale price of one bedroom units fell from A$360,000 in Q4 2015 down to A$330,000 in Q2 2017. The average sales price remained at that level up until the end of 2019. Sales figures for one bedroom units at the beginning of 2020 show a slight price recovery to A$340,000. Two bedroom units have fallen from A$540,000 to A$510,000 since Q3 2016 to the most recent quarter. Three bedroom units have risen in price from an average of A$920,000 in Q1 2015 to A$1.2 million in Q1 2020.
HtAG expects these price trends to continue with, by the end of 2021, three bedroom units rising to a value of A$1.3 million, two bedroom units falling to A$520,000, and one bedroom units remaining at a price of A$340,000.
Quarterly sales volumes for units hit a high point of 450 in Q3 2015. Since then, volumes were on a downward trend through to Q2 2019, when there were only 84 units sold. Volumes have started to climb since then, with a rise to 170 sales in Q4 2019. HtAG expects the volume of unit sales to maintain at 140, rising to 150 in Q4 2020 through to Q4 2021.
The market cycle graph below confirms the constant rise in the average unit sales prices in Inner Brisbane and the expectation that prices will continue to rise, although at a slower pace in 2021.
The scatter plot below shows all of the locations of unit sales during 2019. Note that the scale indicates that there were no unit price falls in Inner Brisbane during the year.
Like the inner areas of all large cities, Inner Brisbane is densely packed and a location for high-rise apartment buildings and business premises. There are very few houses in the city centre, but the outer reaches of Inner Brisbane do stretch to the beginnings of the suburbs, where houses are located.
Nevertheless, this is a place for unit rentals, with city workers who want to live close to work while they build their careers and before they have families – note that the market has more volume in the one and two bedroomed categories.
The fast turnover in inner city areas is reflected in the high volumes of quarterly rentals in the figures shown here on HtAG. This is a good place to invest in one and two bedroomed units either to live in or to rent out.