Investors flee Sydney as Brisbane looms as next hotspot

It may mean the best time to invest in Sydney has passed, while cities like Brisbane and Perth are now potentially offering better value.

The reason for this is that their vacancy rates are travelling in the right direction, according to SQM Research managing director Louis Christopher.

“The relative direction the rates are moving is as important, if not more so than the rates themselves,” Mr Christopher said. “Sydney for example has moved from a low of 1.6 per cent five years ago to now recording 2.8 per cent. That may still sound good, but the fact the vacancy rate has moved higher has put downward pressure on rents.”

While Brisbane’s vacancy rate is still higher than Sydney’s at 3 per cent, the market is improving, down from 3.6 per cent year-on-year.

“Brisbane has had a slowdown for a number of years where prices have not done anything,” Mr Christopher said. “Affordability is quite good, vacancy rates in our view have peaked and there are more renters coming from Sydney, which is showing up in the interstate migration data.”

Mr Christopher said Brisbane’s former issue of slow job creation had improved, prompting more people to relocate there. He also nominated Perth as a potential target market for investment; its vacancy rate of 4.1 per cent having plunged from 5.4 per cent at the same time last year.

PRDnationwide’s Affordable Property Guides for the first half of 2018 agreed, naming Brisbane the country’s most affordable and liveable city, due to slow growth in purchase prices and rents.

PRDnationwide national research manager Dr Diaswati Mardiasmo said “we are finally seeing a shift in property trends”, adding that most capital cities could now be expected to return to a sustainable level of growth.

Overall, the national vacancy rate for capital cities is 2.3 per cent, down from 2.5 per cent in June 2017. Markets with vacancy rates between 2 and 3 per cent are generally regarded as steady.

Australia’s tightest market is Hobart, with just 0.7 per cent vacancy, followed by Canberra (0.9), Adelaide (1.5) and Melbourne (1.6).

“Property is a long term play … investors need a 10-year outlook, not two years,” Mr Christopher said. “You need to pay a price that reflects the current state of the market.”

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