Unit Market Comeback: ‘There Are Some Bargains To Be Had’
Brisbane’s beaten down unit market is making a comeback, with new figures showing the value of apartments outperforming houses.
Despite the surge in supply, the latest home value index released by property researcher CoreLogic reveals unit values in the Queensland capital rose 0.6 per cent in April, while the value of houses fell 0.2 per cent.
CoreLogic research director Tim Lawless said it was yet to be seen whether this was an emerging trend, but Brisbane’s unit market seemed to be moving through the bottom of its cycle and showing signs of subtle growth.
“The construction cycle peaked back in 2016 so we’re progressively seeing unit supply being absorbed and values are still about 11.6 per cent lower than they were 10 years ago, so there are some bargains to be had in the unit market,” Mr Lawless said.
Rental yields are also holding strong in Brisbane’s unit market, sitting at 5.4 per cent.
“That’s quite a good yield,” Mr Lawless said.
“I would show some caution for the off-the-plan market though, and some inner suburbs showing supply concerns.”
AMP Capital chief economist Shane Oliver said the rise in unit values could reflect the increase in first home buyers or the perception that a new unit closer to transport might offer better value than a stand-alone house.
“I would still be cautious in areas with lots of cranes though!” he said.
Regional areas such as the Gold Coast and Sunshine Coast continue to outperform Brisbane, with home values rising 1.9 per cent on the Gold Coast and 5.1 per cent on the Sunshine Coast over the past 12 months.
“We’re seeing the benefits on both coasts of this real rebound in interstate migration as a lot more capital flows north of the NSW border,” Mr Lawless said.
“People are buying holiday homes and putting retirement plans in action.
“Anecdotally, more people are moving to what you might describe as ‘lifestyle markets’ and either commuting, or in some cases, working from home.”
Nationally, capital city dwelling prices fell 0.3 per cent in April — the sixth consecutive drop.
Weakness continues to be led by Sydney and Melbourne, with most other cities seeing gains.
Mr Oliver said last year’s APRA driven tightening in lending standards for interest only borrowers was clearly continuing to have an impact.
“The latest round of tightening bank lending standards around borrower’s income and expenses will add to this,” he said.
“We expect prices in Sydney and Melbourne to fall another 5 per cent this year, another 5 per cent next year and to still be falling in 2020.”
Mr Oliver said he expected moderate growth in Brisbane dwelling values.
It comes as the Reserve Bank of Australia decided to leave the official cash rate on hold at a record low 1.5 per cent at its monthly board meeting on Tuesday.
AMP Capital expects interest rates to stay on hold until 2020.