Why isn’t Brisbane doing better?

Recent prices growth in Brisbane… well, it hasn’t been dazzling.

It hasn’t been bad either, and so far it’s holding up better than Sydney and Melbourne in the current consolidation.

But there’s a bit of a puzzle.

Why isn’t Brisbane actually doing better?
You see, Brisbane has been on the favourable end of inter-state migration in recent years. People are leaving Sydney and Melbourne for sunnier climates. And so Brisbane’s population is growing strongly.

Now normally, when this happens, you see prices start to accelerate. Population growth in and of itself typically drives prices, but there’s also a compositional effect. If you sell up in Sydney or Melbourne, then you usually have quite a bit of cash to play with when you cross the border.

But, for some reason, we’re not seeing that show up in the data… yet.

When you compare population growth and house price growth, they tend to go hand in hand. But not right now:

Over the past year or so we’ve seen population growth pick up, but for some reason, house price growth hasn’t followed.

… curioser and curioser.

I’d be guessing that this has a lot to do with the credit environment.

These aren’t normal times. APRA is pushing the banks hard, and with all the scrutiny that came with the Royal Commission, the banks are running scared.

Getting finance is trickier than it used to be, that’s for sure.

And we have been hearing word that the banks are keen to improve the ‘quality’ of their loan book. It may also be possible that, in the eyes of the banks algorithms, Brisbane is a riskier prospect that her bigger sisters.

If that’s true, the credit squeeze could be biting harder in Queensland than in the southern capitals.

And that would be putting a weight on property prices.

I’ve got no hard evidence of that. It doesn’t exist. But it wouldn’t surprise me.

And it helps explain why price growth in Brisbane hasn’t been as dazzling as you might expect.

And if it’s true then it could mean that prices will rebound very quickly in Brisbane when APRA finally declares “Mission Accomplished”.

It could very well be Brisbane leading the charge when we finally come over the hill. All the fundamentals are there.

So if you’ve been focused on Sydney and Melbourne, but are looking to diversify into a major capital, Brisbane could be a very good choice.

Spiro Kladis
Managing Director, Cashflow Capital

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Leave A Reply (2 comments so far)

  1. Mark allan
    3 weeks ago

    I bought in Brisbane 2 years ago through your company which forecast sale price of 1.6 m build was 1.3 m and with a break even of around 1,4 m I was unable to attract a buyer over 1.32m when you sell homes with pumped up prices it is very hard to recoup the outlay let alone make a profit.

  2. Gelila
    3 weeks ago

    Hi spiro thank you for the information but how about you only have a small amount of cash would you consider you could still start a property business.

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