The Aussie capital with the best-performing housing market over the next few years may not be the usual suspects of Sydney or Melbourne, but rather Brisbane, thanks to more affordable housing and strong jobs growth and interstate migration.
CoreLogic research director, Tim Lawless, forecast that the housing market in Australia’s third largest capital city is set to improve over the next five years, though the rate of this growth is unlikely to match what was previously experienced in Sydney and Melbourne in recent years.
Lower house prices, but similar incomes
According to Mr Lawless, Brisbane’s dwelling values grew at an annual rate of 1.2% over the past decade, which is much lower than the growth in Sydney (6.3%) or Melbourne (5.9%) over the same period. As a result, at the end of November 2017, Sydney house values were found to be 102% higher than Brisbane’s, and Melbourne’s were 57% higher than Brisbane’s.
However, Sydney’s median income over this period was found to be just 12.9% higher than that of Brisbane, and Melbourne’s was actually 0.7% lower than that of Brisbane. This results in a dwelling price to income ratio of 9.1 in Sydney, compared with 7.5 in Melbourne and 5.9 in Brisbane.
What’s more, the proportion of gross annual household income required to service an 80% LVR mortgage was found to be 48.4% in Sydney, compared with 39.9% in Melbourne and 31.7% in Brisbane.
“Clearly households aren’t as affected by affordability in Brisbane as significantly as they are in the larger capitals.” – Tim Lawless
New people, new jobs
Other factors set to affect the Brisbane housing market in the near future includes population and job growth.
According to Mr Lawless, net interstate migration into Queensland is now the highest of any state, outpacing Victoria for the first time since June 2013, implying more demand for housing which should help to support an improvement in capital gains for investors and home owners.And while Queensland’s net overseas migration was found to be well below that of New South Wales and Victoria, it’s still at its highest rate in more than three years.
Queensland’s jobs growth was also found to be increasing at a faster rate than any other state or territory, reaching 4.8% annual growth as of November 2017. In numerical terms, 113,000 jobs were found to have been created across Queensland over the past year, more than in New South Wales (111,000) or Victoria (94,000).
“Jobs are an essential component of a healthy housing market and a strong labour force has been a key missing ingredient from the Brisbane housing market up until recently. The improved jobs sector, together with high rates of migration and an affordable mix of housing is a solid recipe for stronger housing market conditions.” – Tim Lawless
What could hold Brisbane back?
However, there are also conditions in the market that could potentially limit the growth of Brisbane’s housing, including:
- Tighter credit conditions compared to the 2012-2016 period when Sydney and Melbourne experienced their peak rates of growth.
- The “unprecedented” supply of new units could also affect the performance of Brisbane’s unit market.
- The cost of mortgage debt will eventually move higher, with Mr Lawless forecasting that rates will rise from their current history lows around 2019.