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Property Prediction: Brisbane Beats Sydney

Man being hit in the face with a red boxing glove New figures are tipping property prices in Brisbane to grow by as much as 17 per cent over the next three years, almost twice as much as Sydney.

That’s according to the latest research from QBE, which found that improvements in Brisbane’s inner region and middle suburbs will push the average median house price to $560,000 by June 2017.

The Sydney market will still see considerable growth (9 per cent) though, with the average median property price to hit $885,000. This is followed by Melbourne at $690,000 (5 per cent growth).

Although Perth and Canberra are showing signs of price decline, there are investment opportunities sprouting up in a number of regional hubs thanks to infrastructure projects and an influx of inner city home buyers seeking more affordable property.

Outer suburb opportunities in Brisbane


Quite dissimilar to Sydney and Melbourne, much of Brisbane’s median house price growth in the last 12 months has been driven by its inner region (16.8 per cent), with its middle suburbs recording median price growth of 8.2 per cent and its outer suburbs declining by 1.4 per cent.

The drop in first home buyer demand and the high state unemployment rate (6.6 per cent compared to the national rate of 6.1 per cent) is driving much of the weakness in the outer suburbs, the report found.

However, with house prices in inner and middle Brisbane tipped to become less affordable over 2014/15, outer Brisbane should see some positive growth in the next year.

Despite the city’s uneven performance over 2013/14, REIA has predicted the Brisbane median house price to hit $560,000 by June 2017, a 17 per cent rise on the June 2014 median.

Regional Queensland

Following a major dip in housing supply in 2007/08, the Gold Coast managed to hit back in 2013/14, reporting house price growth of 11 per cent.

QBE’s report found that it will take some time for new housing stock to have a significant impact on the market, with the Gold Coast set to benefit from a bolstered construction sector, in particular, the expansion of the Pacific Fair shopping centre and Commonwealth Games-associated projects. By 2016/17, a total median house price growth of 15% is forecast.

The Sunshine Coast will see similar growth (14 per cent) over the next three years and, like the Gold Coast, its market is being driven by construction, specifically, the completion of the Sunshine Coast University Hospital.

Hampered by cuts to administrative and defence jobs as well as reduced investment in the thermal coal sector over the past year, the median house price in Townsville fell by 1 per cent over 2013/14. Still holding up fairly well, the figures from REIA suggest median house price growth of 10 per cent over the next three years.

Cairns saw strong growth over the 2013/14 period (10 per cent) despite new dwelling commencements falling by 73% in 2013/14 compared to the 2007/08 peak. Thanks to rising tourism and more residential construction, Cairns’ median house price is forecast to reach 14 per cent by June 2017.

Going sideways in Sydney


Median house price growth rose from 7 per cent in 2012/13 to 17 per cent in 2013/14, with the strongest growth coming from the inner-city (17.3 per cent) and western suburbs (15.6 per cent).

Overall, Sydney housing growth is expected to continue through to June 2017, albeit at a slower rate. This is largely due to a lack of affordable housing and growing demand from investors who can afford to pay a premium for prime real estate.

As the demand for more affordable housing ramps up, QBE’s report found that Sydney’s outer suburbs should begin to see some uptick, at least until June 2016.

With an interest rate rise (expected to peak at 6.8 per cent) predicted in 2016/17, Sydney’s median house prices is set to peak at $885,000 (total growth of 9 per cent) by June 2017.

Regional New South Wales

House prices in Newcastle and Wollongong have long been impacted by the timing of the residential cycle in Sydney, with Newcastle’s median price, in particular, rising almost on par (8 per cent) with Sydney over the 12 months to June 2014.

The median house price in Newcastle is around half (52 per cent) that of the median Sydney price. QBE stated that is expected to drive an increased number of Sydney-siders to head north to reap the affordable housing options, fuelling further price growth in the Newcastle and Hunter region.

Overall, Newcastle’s total median price growth of 17 per cent is forecast over the next three years, almost twice the expected median house price growth of Sydney. Similarly, Wollongong’s total growth to 2017 is forecast to hit 16 per cent.

Much of the Gong’s 10 per cent growth in the past 12 months alone was largely a result of the climb back from a flat market in the two years prior. According to QBE, massive job losses in the manufacturing sector, including BlueScope’s decision to close one of its two furnaces in 2011/12, was a major contributing factor for the slowdown in growth.

Since then though, the region has bolstered employment growth with median growth of 7 per cent per annum forecast for 2014/15 and 2015/16, taking the total rise to 16 per cent by June 2017.

Melbourne easing to due to oversupply


Like Sydney, price growth was strongest in Melbourne’s middle suburbs at 15.8 per cent. A high volume of sales in high-value inner and middle suburbs pushed the median Melbourne house price to 19.6 per cent, a significant uptick from the 4.8 per cent growth rate in 2012/13.

According to QBE, a high level of new dwelling supply to hit the market (mostly apartment complexes) is likely to tip the market into oversupply from 2015/16, causing vacancy rates to rise.

Because of this, price growth is expected to slow substantially and could even see affordability hit 2008 and 2010 levels. As a result, the median house price is expected to fall by 1 per cent in 2016/17 and take Melbourne’s median house price to $690,000 by June 2017 (total growth of 5 per cent over the three years).

Regional Victoria

Infrastructure will play a role in median house price growth in regional Victoria, with Geelong, Ballarat and Bendigo set to reap the benefits of the completion of the Regional Rail Link in the next year.

Property in the outer suburbs is still significantly more affordable than the inner city  and this is expected to drive migration to these regional hubs and eventually push up property prices.

Ballarat is expected to see the greatest total growth over the three years to 2017 at 11 per cent, followed by Bendigo (10 per cent) and Geelong (8 per cent).

First home buyers leaving Perth


Fuelled by strong economic conditions and significant levels of overseas and interstate migration to the city, Perth recorded median house price growth of 8 per cent in 2012/13.

However, with net overseas migration inflows declining from 53,100 in 2012/13 to around 37,400 in 2013/14, and net interstate migration falling from 8,300 to 1,000 over the same period, an median house price increase of only 2 per cent was recorded over the past 12 months.

Most of the median house price growth was concentrated on inner Perth (6.8 per cent) but it was outer Perth (2.2 per cent) that saw the greatest activity.

According to QBE, a contributing factor for this is the significant number of first home buyers leaving the rental market.

Despite the first home buyer demand coupled with continued strong investor appetite, the resource sector investment is expected to decline substantially over the next two to three years.

Current low interest rates should help to maintain current house price growth levels over the next two years, after which a rate hike could see growth decline by June 2017.

Overall, the median house price in Perth is forecast to hit $525,000, a total median house price rise of just 2 per cent compared to the June 2014 quarter.

Canberra in the red in 3 years

Despite record levels of construction in recent years, oversupply of housing did little to slow median house price growth in the nation’s capital. In fact, Canberra’s median house price rose above $530,000 in the first two quarters of 2014, the first time the median price has done so since the city hit its peak of $541,000 in December 2010.

Overall, median house price growth reached 5.9 per cent, albeit with most of it concentrated in west and north Canberra (10 per cent). This was followed by outer south (5.2 per cent) and inner south Canberra (4.2 per cent).

Interestingly, the report found that it’s not first home buyer or investor demand driving this price growth but rather non-first home buyer appetite.

According to REIA, the high level of activity in the upper property market by non-first home buyers (most of which are likely to be upgraders) is quite possibly due to current low interest rates.

Despite the positive signs, median house price growth in inner central Canberra declined by 4 per cent in 2013/14, although much of this is due to the low volume of sales recorded in Canberra compared to other state capitals.

Oversupply in housing coupled with expected cuts to public sector jobs by the relatively new Government will have a detrimental impact on Canberra’s median house price over the next three years, with the forecast house price to reach $540,000 by June 2017 (a 1 per cent median house price growth for the city).

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According to QBE LMI chief executive Jenny Boddington, increasing market activity is being driven most by non-first home buyers (upgraders) and in residential investment, with first home buyer demand affected by available state incentives. Should you wait to buy?

You can view the full QBE ‘Australian Housing Outlook 2014-2017’ report (BIS Shrapnel/Real Estate Institute of Australia (REIA)) here.

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The emerging property markets identified by QBE and REIA won’t stay a secret for very long. In fact, it’s more than likely that savvy investors are already jumping on board right now.

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