The next property market to boom

15th Jul 2015By: Tim Lawless

I’ve been calling the South East Queensland market for a while now. Maybe the fact that I’m local to the area has something to do with it, but when you look at the fact that Sydney house prices are 85% or $413,000 higher than Brisbane’s, the sheer affordability of Australia’s third largest capital city has got to look attractive to prospective buyers in the larger cities to the south.

Different times

The last time we saw a gap this substantial between Sydney and Brisbane was in the early phases of the 2000-03 property ‘boom’. In 2002, after Sydney and Melbourne values had already surged higher over two years, the gap between Sydney and Brisbane median house prices reached a record high of 110%. That meant Sydney prices were more than double those in Brisbane. After 2002 the Sydney housing market started to lose some steam, while Brisbane prices gathered pace.

In fact, from that time, Brisbane’s housing market substantially outperformed Sydney’s all the way through to the onset of the GFC.

Of course, economic conditions were very different back then. The Queensland economy was strengthening, the resources boom was kicking in, labour markets were strong and migration rates were very high. None of these factors exist to the same extent as they did pre-GFC, which is likely to be the primary reason that Brisbane’s housing market hasn’t delivered a stronger performance to date.

While the Brisbane market isn’t racing along like Sydney’s or Melbourne’s (where dwelling values finished the financial year 16.2% and 10.2% higher respectively), values are rising, and are up by 3.4% over the financial year. Gold Coast values have moved 4.9% higher and Sunshine Coast values are 4.5% higher over the year.

More bang for your buck

Considering gross rental yields are now the third highest of any capital city, housing affordability is much less of a challenge and economic conditions aren’t substantially worse than Sydney or Melbourne’s, I think there will be progressively more homebuyer and investor interest in this market.

Another potential factor that could drive demand in South East Queensland is a rebound in the sea change phenomenon. Prior to the GFC, the region saw high rates of interstate migration, which was partly comprised of mature age groups seeking out lifestyle markets where they could ease their way into retirement. The GFC changed those plans for many, but considering Sydney and Melbourne homeowners have seen some significant equity created in their dwellings as well as a partial recovery in share market prices, more prospective retirees could be reconsidering the South East Queensland region as place to reset their feet.

The missing ingredient in a more substantial recovery at the moment is probably a more vibrant jobs market. Unemployment across Queensland is trending higher at 6.1% compared with New South Wales at 5.8% and Victoria at 6.0%. The more significant difference comes back to the level of jobs growth, where NSW has seen almost 81,000 new jobs created over the past year, compared with only about 9,000 across Queensland.

Despite the weaker jobs market, anecdotally, I’m speaking to more and more people of all ages who are starting to shift their property radar to north of the New South Wales border.