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Why are Brisbane property prices going up by so much during a pandemic?

By George Hadgelias

A perfect storm of low stock, even lower interest rates, wage growth and a global pandemic have catapulted Brisbane’s typically slow-moving property market into the stratosphere, sparking a once-in-a-decade boom that experts say could fuel a further 10 per cent rise in house prices in the coming year.

While detached property prices rose in every capital city except Darwin and Perth over the January quarter, according to figures released by Domain, the almost magical mix swelling Brisbane’s usually stable market has been brewing for two years, says Brisbane-based market analyst and owner of Propertyology, Simon Pressley, with the red-hot industry showing no signs of slowing.

“All of Australia without exception – in every single location – is strong and it’s the first time the country has seen this for about 18 years,” Mr Pressley said.

“So, it’s a case of rising tides lifting all ships – but not everyone is rowing in the same boat.

“We had a series of events for a couple of years before COVID that meant progressively there was less and less resale stock (here in Brisbane), and it was getting tighter and tighter. Then in the six months leading up to COVID, we had auction clearance rates through the roof, prices rising primarily because we had not enough supply for sale and not enough rental supply and then we had four interest rates cuts.

“And that was all before COVID.”

But while the stars were aligning for a Brisbane property boom well before the pandemic struck, Mr Pressley said the virus further fuelled the fire as Melbourne and Sydney bore the brunt of the nation’s coronavirus chaos.

“We saw in Melbourne they lost 10,000 people (to interstate migration) in six months, and that was before the lockdown,” Mr Pressley said.

“So, there’s no question in my mind that Brisbane will outperform Sydney and Melbourne for quite some years.

“What we are going to see throughout 2021 is an increase in properties listed for sale, but at the same time, buyers will regain more confidence. We’re calling it the biggest single property boom in 15 years Brisbane … and we could see double-digit price growth [over the next 12 months].

CEO of Brisbane’s Place Estate Agents, Damian Hackett, said the launch of major infrastructure projects within the state capital had further seasoned the property boom dish – making the city a particularly enticing destination for interstate migrants fleeing lockdowns and bad weather.

“2020 was always going to be strong for Brisbane, but the increase in demand outside of Brisbane [off the back of the pandemic] has just accelerated it,” Mr Hackett said.

“I’ve looked back over my 30 years (in this industry), and I’ve spoken to a lot of people who have been in it for the same amount of time and for us the acceleration of the market and how fast it came out of nowhere makes it the most prolific market we’ve seen.

“The last boom in 2007 built up over time, and then the GFC happened but as far as the pace [goes] – particularly in January this year – the rule book has been rewritten.

“In January we saw the strongest numbers (for sales) we’ve seen (in a long time) … people really shot out of the gate, and just for contracts written, it was up 85 per cent on January last year.”

While Mr Hackett said the writing for a Brisbane-wide boom was on the wall, like many, he had worried COVID would stop the market in its tracks with early predictions the economy would take a devastating nosedive.

Instead, Australian Bureau of Statistics figures released in November last year revealed Queensland enjoyed one of the nation’s highest quarterly wage growths (of 0.6 per cent) amid reports of sky-high buyer activity.

The city has since undergone two consecutive quarters of house price growth, with suburb price records smashed every other week in a remarkable show of strength Mr Hackett said felt a world away from March last year, when they were desperately restructuring the business and preparing for the worst.

“Looking back at this time last year we were talking about how it was going to be Brisbane’s year because we hadn’t seen much growth with Brisbane being fairly steady – not like Sydney and Melbourne. Interest rates were low, and the government hadn’t put negative gearing in like everyone thought, and people were feeling really confident,” Mr Hackett said.

“Then came Sunday, March 22, and it was like, holy hell. Everyone went through predictions like ‘what if we don’t sell a house for six months’; it was really worst-case scenario plans that we had in place.

“Then at our auctions last month we had a 100 per cent hit rate — and that’s unheard of in Brisbane.

“It was always going to be Brisbane’s time (because of that perfect storm) but what’s surprised me the most out of the past few months is if you’re talking about where we sat 10 months ago and what the predictions said, is just how fast it changed and how dramatically it changed …it’s the confidence people have had to jump into the market.”

CEO of Ray White Queensland Jason Andrew put that confidence in Brisbane’s market down to more than just affordability and a top lifestyle, but a rising need for somewhere safe to live in a time of heightened volatility.

“In a time of need, the safety of a home has emerged as something unbelievably important in our lives … so, while there’s no question that affordability of money plays a part in this [boom] there’s great energy right across Queensland, and a lot of people have looked at Queensland as a place of comfort and safety,” Mr Andrew said.

“When you look here, there is no market that isn’t experiencing some form of growth and we’re experiencing a shortage of inventory within the property market. Within the rental sector, you’re looking at a vacancy rate of less than 1 per cent.”

“And then there’s the interstate migration. I think all of that has driven that to where we are now.”

Mr Andrew said while Brisbane and Queensland, in general, had long been a popular destination for southern buyers, the city had never undergone lengthy market booms like its southern state capital counterparts.

He said what had stopped it before was a handful of missing ingredients such as infrastructure projects and wage growth, with the final addition of COVID-19 resulting in a boom that could change the city’s landscape.

“We’re seeing a real demographic shift here. Previously, in Queensland, it was more conservative, buyers would go up to retire, but it’s not that demographic anymore. Now you are seeing more and more 30-year-olds bidding at auction.

“[The pandemic] has highlighted what a wonderful piece of the world we have … and it’s exciting for Brisbane because our market was undervalued.

“I think it (COVID-19) has expeditiously moved us towards the path we were going towards.

“Now, numbers at open home are unheard of, and prices will continue to increase.”

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