QUEENSLAND’S capital city continues to be Australia’s leading residential property investment location and while the other capital cities generally show lacklustre performance, all have pockets worthy of investment, according to our latest Performance Property Advisory Property (PPA) Investor Market Update*.
Conducted four times per year, the update examines property investment market conditions in Sydney, Melbourne, Brisbane and Adelaide, providing investors with a detailed and an accurate insight into these cities and their many sub-markets.
Pulling together research from the ABS, Real Estate Institute, SQM Research, RP Data, PriceFinder, Residex as well as statistics from multiple government agency websites, the update examines the following key indicators: rental growth, price growth, affordability, housing vacancy rates, population growth, employment, supply of housing, income growth, size of population, infrastructure spending and availability of stock.
Homes in Brisbane are showing strong investor value and will continue to do so thanks to the city’s ongoing population growth, low levels of unemployment (currently around 5.4 per cent) and its continued undersupply of housing.
Brisbane’s residential population has grown by 27 per cent over the past decade or so – from approximately 1.7 million to 2.1 million people – with an additional population increase of 820,000 projected over the next two decades.
Combine this with the fact that the infrastructure spend is up $1.07B on 2015 and you have a very positive story for Brisbane!
Brisbane also remains one of Australia’s most affordable cities to invest in, with an ‘affordability index’ of 27 per cent. Affordability is based on the average property price (assuming a 20 per cent deposit) and the median income of that city. This is a PPA calculation based on existing industry data.
House prices rose by as little as 15 per cent from 2008-2015 while income over the same period grew by approximately 31 per cent. Couple this with falling interest rates and Brisbane’s residential stock remains extremely inexpensive.
However, I anticipate these low prices will rise in the short-to-medium term.
Median yields for the city stand at approximately 4 per cent. The yield figure is a PPA only figure. It is based on purchases the company has made for clients in each of the capital city markets. This comes from a sample size of 300 properties across all four capital cities. PPA constantly monitors the average yields of it purchases in each capital city to understand when the value proposition of the cycle has ended and the capital growth phase has begun.
According to the PPA Investor Market Update, Brisbane’s choice investment prospects are in the city’s middle ring in the suburbs of Stafford, Kedron, Nundah, Mitchelton, Camp Hill and Morningside and to a limited extent in the city fringe and blue chip school belt.
However investing in apartments in the CBD and on the city fringe is not a good idea as this market is transitioning from neutral to over-supply. Also increasingly off-limits are parts of Brisbane’s outer metro area which is slightly over-valued and over-supplied.
Also ranking relatively well in PPA’s Investor Market Update is Adelaide.
While the city’s property investment indicators are mixed, the city is very affordable for first homebuyers with rental growth now outpacing price growth.
Median yields currently stand at 3.8 per cent – slightly higher than Brisbane and well above those available in Melbourne and Sydney.
The best buys are in the city’s blue-chip school belt and its middle ring. However avoid the CBD and outer metro, particularly off the plan which is showing no value and possible price falls in the short-term.
The PPA Investor Market Update shows that in terms of investment value, Melbourne is Australia’s second poorest performer with average yields of just 2.8 per cent, marginally better than Sydney at 2.6 per cent.
However Melbourne’s sub markets are well worth consideration. These include the city’s so-called “lifestyle market” – coastal and tree-change locations within an hour’s drive of the city. These include areas such as Mornington, Mount Eliza, Frankston, Queenscliff and so on.
The update shows that this market is now nearing its peak in terms of investment prospects.
While demand for property is out-pacing supply, the market is starting to experience serious affordability issues which could see the average number of persons per household rising as people are forced to share rental accommodation.
Sydney is currently experiencing the lowest capital city yield, making it less attractive to experienced investors.
Despite this, there is some value for investors in the city’s ‘lifestyle” areas within 1.5 hours of the CBD – prime rental locations for those opting for a tree or sea change.
While PPA is not active in the Perth market, this market is likely to remain stagnant or fall off slightly in the short-term thanks to falling rents and significant construction activity.
For more information about the performance of subsidiary markets within each capital city please make an appointment with one of our Qualified Property Investment Advisors by filling out an enquiry form on our website.