Three big things happening in Brisbane | Property market in 2021?

After a wild 2020 where the year seemed to have thrown everything at us – from fires to floods, and fevers – 2021 is here.

And while the Government, and Reserve Bank were quick to act with rapid reductions in interest rates and massive stimulus policies in 2020, how is Coronavirus (COVID-19) and border closures going to affect the market this year?

And where do we forecast the Brisbane property market to go in 2021?

• 1. Property Market Crash
• 2. Brisbane’s time to shine – the property market in 2021
• 3. Five Suburbs to watch in Brisbane
• 4. Four Areas set for growth due to School catchments
• 5. Stricter lending criteria ahead?
• 6. Brisbane’s riskier suburbs in 2021
• Bonus: Changes to flight path (that the real estate agent forgot to mention)

1. Property Market Crash

Early in 2020 property commentators, including AMP’s Chief Economist Shane Oliver were saying house prices across Australia could plummet by 20%, other banks like CBA agreed that 5-7% declines in Brisbane could be possible in the short term.

Now in 2021 commentators are saying it could go the other way, with ANZ expecting Brisbane prices to jump by 9.5% and AMP tipping 10% gains. 

Boom or bust, the reality is Australia’s property market moves in cycles, from peak to trough and Australia’s largest market Sydney has seen over 80% growth over the past few years (and much more over the past 20 years).

While we have seen values in Sydney come off by 5.6% from their peak in July 2017 this is nothing new.

In the GFC we saw Sydney dwelling values fall 7% over 12 months, and after the Sydney Olympics between 2003 to 2006 we saw a reduction in values of 7.1% over the same time period. In fact, the falls we have seen over the last 12 months have been mild compared to previous downturns.

It has been a similar story in Brisbane, where there have been four recent periods of decline, the largest of which between 2010 and 2012 saw values fall by -10.6% from their peak.

The share market was insanely volatile last year, and depending on global events 2021 could continue to be fairly erratic.

If you are like me you’ve seen your super balances nosedive with the ASX from 7,160 20th February to as low as 4546 23 March 2020 – a 36% drop in value in just over a month – so is property likely to follow?

The worst year for house values in Australia was 1931 where some values dropped by 18%.

Looking back in history, it is clear that residential property has performed relatively well at times of negative economic shocks.

Given the fact lenders are offering to defer mortgage payments (for 6 months) to reduce forced selling, and if price falls do become significant UBS are saying they “would expect further government support” towards assisting the property market-  and we did not see this come to pass.

While AMP Capital chief economist Shane Oliver predicted high unemployment and drops of up to 20% this didn’t happen in 2020 and unlikely to happen in 2021 now saying:

Brisbane property prices rose 3.6 per cent last year, with small increases in rents for apartments and houses. Brisbane is playing “catch-up” after years of underperformance compared to Sydney and Melbourne, according to AMP’s Oliver. Prices are expected to top their September 2017 record by March, reflecting lower debt and less exposure to immigration, his analysis shows.

Remember that property is a long term investment, and it is not going to be the right investment for you if you are looking at selling in the short term.

Not all property markets are the same

I think it’s important to remember that Australia doesn’t have one single property market. Each state, each city, each area has its own stage within the property cycle.

Potential for a rising property market in Brisbane is also supported by a recent analysis by BIS Oxford Economics.

They are saying Brisbane property prices could surge as much as 20% over the next 3 years as economic growth and affordability become factors that slow down Sydney and Melbourne.

Brisbane’s population is growing faster than the 10-year average, at about 23,000 new residents per year.

Brisbane’s population growth: Source Michael Matusik and ABS Census

And according to Property Researcher Michael Matusik, there is a need to build about 8,825 new dwellings to meet this demand.

2. Brisbane’s time to shine

Brisbane’s property market has been slow and steady, with dwelling prices rising 1.1% for the 3 months to December, or 0.4% per month according to Tim Lawless of CoreLogic.

The property market in Brisbane is set for a strong start in 2021 thanks to a few major projects like Queens Wharf (aka the new casino), Howard Smith Wharves and very strong housing affordability compared to Sydney and Melbourne.

Brisbane’s Howard Smith Wharf, located near the Story Bridge in New Farm is one of the big projects planned for Brisbane in 2021.

Brisbane’s property market is much more affordable than Sydney and Melbourne, according to research by Michael Matusik the current price to income ratio required to buy in Brisbane is 5.3 times at a median house price of $524,000.

Compare this to Sydney at 10.80 times income, and Melbourne at 8.40 times income with a median house price of $829,000. 

Brisbane property market is much more affordable than Sydney and Melbourne.

Even at Hunter Galloway, we are noticing an uptick in interstate enquiries from people who are migrating from Sydney to Brisbane so we think this is a space to watch.

3. Our suburbs in Brisbane to watch in 2021

Many property commentators are reporting Greenslopes, around 5km south-east of Brisbane to be a suburb to watch in 2021.

Being close to the city, a median house price of $720,000 and great access to public transport it could be a suburb to watch as the year plays out.

Based on our tips on how to best research property in Brisbane (using these free tools), it would also be worth watching the following suburbs in 2021.

Read More: 3 Signs Brisbane’s housing market is ‘on the up’ 🔥🔥🔥

4. Four Areas set for growth due to School catchments

While it might not be high on your radar if you are buying an investment, properties in good school catchments across Brisbane have historically given much better capital growth than those in other areas.

With some real estate agents reporting demand for properties in School Catchment areas increasing by over 30% in the past 12 months, is buying in a school catchment area a good option?

In our experience, some buyers are more willing to invest in their family than pay for private school fees, and according to some Real Estate agents we have spoken to, buyers are willing to pay up to $100,000 or around 10% more for a property in the Brisbane State High School catchment area.

So which are the suburbs to watch? 

The top-ranked public high schools in Brisbane in 2018 (and most likely set to continue to 2021) according to Better Education are:

• ✅ Brisbane State High School
  • Suburbs: South Brisbane, Highgate Hill, West End, Dutton Park and some parts of Woolloongabba.
• ✅ Mansfield State High School
  • Suburbs: Mansfield, Wishart, MacKenzie and some parts of Burbank.
• ✅ Indooroopilly State High School
  • Suburbs: Indooroopilly, Toowong, Taringa, St Lucia, Auchenflower and some parts of Chelmer.
• ✅ Cavendish Road State High School
  • Suburbs: Holland Par and some parts of Coorparoo.
• ✅ Mount Gravatt State High School
  • Suburbs: Mount Gravatt and Mount Gravatt East.

How do you know if your property in Brisbane is within these schools catchment areas?

You can use the Queensland Government School Catchment Map here.

5. Stricter lending criteria

While the Royal Commission has put more focus on the banks and their lending practices it certainly hasn’t stopped them from lending.

After the Royal Commission finished in 2019, we have found the lenders have slightly relaxed home loan lending rules pathing the way to make it a little easier to access mortgages into 2021.

What are the secrets to getting your loan approved in 2021? 

#1. Consider a different bank 

Different lenders have different policies, and some simple things can make a massive impact including the amount they lend you.

Consider a single person on $50,000 per year looking to buy their first home.

There is a $67,000 different in how much the banks will lend… For this person earning $50,000 that is almost 1.4 years worth of salary difference! 

So it does pay to look around and see what your options are.

#2. Reduce your interest costs with principal and interest repayments

2021 has seen a massive differential between interest-only and principal and interest repayments – in some cases upwards of 1%.

So how can you get lower interest costs? Check out P&I repayments.

According to Macquarie Bank, “using a 0.5 percentage point [interest rate] differential, Macquarie found that a bank customer in the top tax bracket with a $500,000 loan would be $6,000 better off after five years, and $12,000 better off after 10 years switching to P&I.”

#3. Review your interest rate 

With the RBA dropping its cash rate twice in 2020 interest costs have come down considerably, making property in Brisbane much more affordable.

As you can see from this data, each interest rate cut can give annual savings of between $1,317 on a loan of $250,000 all the way up to $5,267 in annual savings on a loan of $1,000,000 or more.

It is worth speaking with your mortgage broker in Brisbane if you have an existing loan to see if you can reduce your annual interest costs today.

Read More: Home Loan Guide to Brisbane

6. Brisbane’s riskier suburbs in 2021

While we have found the banks lending criteria is a bit more relaxed in 2021, if you are looking at buying a unit in Brisbane you might be asked for a 30% deposit by some banks.

(Don’t worry this is not ALL banks)

We have found some banks have created a bit of a blacklist on certain suburbs in Brisbane, where they have applied stricter criteria to loans, could reduce rental income and may ask for more deposit.

Brisbane’s so called ‘riskier suburbs’ include units in:

• Milton (4064)
• Brisbane CBD (4000)
• Fortitude Valley, Herston, Bowen Hills, Newstead (4006)
• Kangaroo Point, East Brisbane (4069)
• Woolloongabba, Brisbane, Dutton Park (4102)

As I mentioned some banks are completely fine with lending in these suburbs, it’s just a matter of working with a Mortgage Broker that understands the different credit policies and can help achieve your goals.

While some banks might try to charge you lenders mortgage insurance if you don’t have a 30% deposit, we have access to banks who do not – and can look at interest-only terms.

If you need help with navigating the changing landscape, get in touch with our team or give us a call on 1300 088 065 to discuss your situation.

These suburbs are only ‘riskier’ if you need a loan with a 10% or less deposit. More importantly not all banks find these suburbs risky, so you still have options if you are looking at buying with a 10-20% deposit.

Bonus: Which Brisbane Suburbs Lost & Made Money in 2021

It’s not all blue skies for property, and house prices in Brisbane can go down.

Corelogic has released their latest Pain and Gain report where they analyse who made money and lost money on property resales in Brisbane.

Units were the biggest loss-makers in Brisbane, with 43% of units selling at a loss compared to 6.4% of houses that sold at a loss.

Data from the report showed its not timing, but time in the market that will make a profit in real estate.

The typical sales period for loss-making at 6.2 years compared to profitable sales in Brisbane that had a median hold period of 10.6 years.

The most profitable suburbs in Brisbane are in the Moreton Bay Region.

This includes suburbs like Strathpine, Albany Creek & Beachmere where the data showed over 90% of resales sold for more than the previous sale price, taking a median profit of $130,000!

Bonus: Changes to the flight path

When you’re buying in Brisbane most people know to check if the property has flooded, and get an RP Data valuation to make sure you’re paying the right price but do you know you should also check the flight paths…?

The Brisbane Airport Corporation (BAC) has updated its guide to Current and Future Flight Paths – and how the noise might affect your property.

The most important part of the report is on page 33 and 34: detailing the noise contour map, and includes which suburbs are going to be most affected by the increase in aircraft traffic.

It’s hard to say how this will affect property values in this area over the next 20 years, but is worth keeping in mind if you are buying a house – you might want to negotiate some double glazed windows into the contract!

In the next 20 years, some of Brisbane’s most prestigious inner city suburbs will be much more affected by aircraft noise: including Ascot, Hamilton, Bulimba, Hawthorne, East Brisbane, Cannon Hill, New Farm and Seven Hills.

Download: Current and Future flight Path and Noise Information Booklet

Brisbane Flight Path Tool: See if your property is affected

Ok this is an added bonus that I just found, the Brisbane Airpot Corporation has just created a new flight path tool to see if your property is affected.

Try it now: Brisbane’s new runway flight path tool

That’s it for now

Overall the Australian property market is looking steady for 2021 and we’re looking forward to seeing you this year!

The Hunter Galloway Mortgage Broker Brisbane team looks forward to seeing you in 2021!

Read More:

• LVR Calculator, and What is Loan to Value Ratio?
• State Custodians Home Loan Review
• Explanation Letter: Written Sample & Template for Home Loan Application
• How to Overcome a Poor Property Valuation
• Bank of QLD Home Loan Review
• First Home Owners Grant QLD 2021 [Are you Eligible?]

Ready to take the next step toward buying? We’re happy to help. Schedule a call today with a Home Loan Expert from Hunter Galloway, the home of home buyers.