If you’ve been keeping up with news regarding the Australian property market, you already know that it’s in a bit of a slowdown after years of strong growth. It has never been harder to find the right property to invest in, as nobody knows for sure the short-term direction of the market.
Naturally, investors are too afraid to commit. Despite the many tools in your arsenal, you might be feeling like this as well.
Up until recently, Sydney was all the rage. Investors fought over every property they could find as they could no wrong. Everything they got their hands on turned into gold.
However, today we’re seeing higher vacancy rates and more unsold listings than ever. This has kept up into 2019, so many investors might’ve made a mistake buying properties in Sydney.
“The annual rate of decline in values has increased and is now deeper than during the GFC “
But there are markets within the market. Some of them are still going up and showing promise despite the overall market conditions. And everybody wants to know where the new investment hotbed.
In this article, you’ll see that all data points to Brisbane. But which part or parts of Brisbane?
We’ll show you the most important data that you need to look at when choosing the best suburb to invest in. But before we do that, let’s see some of the top reasons why Brisbane is so attractive to investors.
Why Buy In Brisbane?
There are signs that point to Brisbane as the best city in Australia for property investment in 2019. After staying in the shadows of Sydney and Melbourne all these years, Brisbane might just be the next big thing.
Here are some of the main reasons why. And to maximise your profits, it’d be a good idea to get in before everybody else.
- Population Boom Projections show that there will be around 2.9 million people in Brisbane by 2031. This is a lot more than today’s 2.18 million and all those people will need a new home to live in.Government estimates show that Brisbane will build up, not out. This means there will be a huge number of opportunities for new investors to come in. On average, there will be a need for 8,000-10,000 new dwellings each year. This increase in demand will counter the current oversupply and push prices up
- Affordability According to the last available research, the median house price in Brisbane is $668.000. At the same time, the median unit price is $485,000. This is much less than average unit prices in Melbourne and Sydney, which sit at $635,000 and $815,000 respectively.This will likely remain the case for some time, after which we can expect the prices to rise. The main reason for this is the next factor:
- Market Growth As the national market declines, Brisbane’s certainly hasn’t. Recent data show a jump in housing prices, which isn’t surprising considering the influx of new investors and the increasing demand.Aside from affordability, the ability of Brisbane prices to hold up in the face of declining national market proves that the city is perfect for investors. There’s still a huge gap between Brisbane and Sydney, but that is likely to shrink in the future.Brisbane is in an incredible near and mid-term growth position, which is why it’d be a good idea for proactive investors to jump on board before everyone else.
- Infrastructure Investment Brisbane will have a number of exciting developments over the next few years, all lined up until 2022. These include the Queen’s Wharf Precinct, Brisbane Live Entertainment Arena, and International Cruise Terminal.
Obviously, these infrastructural improvements will make the city more appealing. As people move from in-state and from out of state, it’s very likely that the oversupply will turn into undersupply in the next few years. Among many indicators, this will influence vacancy rates, the importance of which we’ll talk about a bit later.
- Growing Job Market
Brisbane’s regional GDP is on the rise, which experts predict to reach $250 billion by 2031. As the capital city, almost half of Queensland’s economic output comes from Brisbane. There will be hundreds of thousands of new jobs in the near future, and Queensland’s economy will likely outperform the national average.
These new job opportunities will draw many people towards Queensland and in particular Brisbane in the next few years. This is another reason why there will be a higher demand for dwellings.
These are the main reasons why investors are treading lightly in Sydney and Melbourne and taking a closer look at Brisbane. But where in Brisbane?
Once again, there are markets within a market. Not all Brisbane suburbs are equally lucrative, and there’s a lot of data that you need to look into to find the best suburbs. Let’s take a look at what you need to pay attention to.
How to Find the Ideal Suburb?
There’s an enormous amount of data that you can use to make investment decisions. Luckily, you don’t have to spend a ton of time looking for it. The main reason for this is that there’s one metric that takes into account all the key data – the DSR (Demand/Supply Ratio) score.
It’s a score of 0-100 based on numerous available metrics, each with a different weighting used to deliver a lead indicator that you can use to start your investigations.
Here are eight of the important metrics that the DSR accounts for:
- Days on market – Shows the average number of days properties stay on the market before someone buys it. The lower the number, the better, as it shows that there are a lot of active buyers.
- % vendor discount – This is the discount percentage off the original listing price. Again, this number should be as small as possible, as there are no reasons to give big discounts when demand outstrips supply.
- Gross rental yield – Average annual rental returns expressed as a percentage of the property’s value. A higher number means higher cash flow. In addition, it’s the most important indicator of capital growth.
- Auction clearance rate – This is the percentage of properties that sell at auctions. When the demand is high, buyers bid and push the prices up, which is more likely to happen when the clearance rate is high.
- Market cycle timing – Shows the right time to enter the market. The higher the number, the sooner investors should pursue properties in the area of focus.
- Vacancy rate – The percentage of rental properties that are currently empty. This number should be as low as possible, as vacancies are very costly for investors.
- % renters – Shows the percentage of renters in all dwellings – the opposite would be % owners. In general, the lower this number, the better, as there’s a lower chance of vacancies. In addition, owners take better care of the property than renters, which can increase the housing standard.
- Online Search Interest (OSI) – OSI shows the ratio of the number of searches to available properties. A high number may indicate more buyers than sellers.
So now that you know what to look for when searching for the best suburb to invest in, let’s take a look at some high-performing Brisbane suburbs.
Some of the Top Brisbane Suburbs to Invest In
Based on its high DSR score, Capalaba is one suburb that is definitely worth a look at.
With a DSR of 69, Capalaba performs better than all other suburbs. It has the lowest vacancy rate, with Alexandra Hills and Mount Cotton coming in second and third. Suburbs in this DSR category are very healthy, as the demand is high but not alarmingly so. In general, sellers are able to secure the price they ask for, and the annual growth is higher than average.
Bray Park, Strathpine, and Cleveland fall under the ‘above average’ category. Even though they’re not as strong as the top 3, they’re still more than attractive to potential investors. In markets where the demand is just slightly higher than supply, a value-adding strategy can be your best bet.
Sellers can negotiate a great price, which they can bump up by doing some renovations on a property and making it more attractive to buyers. The growth is still above average, but only slightly.
As you can see, you don’t have to spend endless hours researching the right suburb to invest in. DSR is highly reliable and takes into account all the important factors that influence property prices and price action.
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The Takeaway
From all the above, Brisbane will be a go-to city for smart investors in the foreseeable future. When you take into account the population growth, infrastructure investments, and numerous future job opportunities, this comes as no surprise.
It would be best to consider investing in Brisbane as soon as possible. Brisbane is still affordable, but it’s just a matter of time before intense investment activity drives the prices up. Now that you know which suburbs to target, you might want to take a closer look at them. Bear in mind that DSR isn’t a definitive guide to whether you should invest. Rather, it just shows the suburbs that deserve your attention.
If you need help with further research, it might be best to consult a professional advisor. You can do that by scheduling a free consultation with a financial planner specialised in the Brisbane property market.