Brisbane Investment PropertyEven investment property under $600,000, usually in strong demand, has shown weakness over the past 6 months. BHA recently concluded a search for a client looking for a Brisbane investment unit. We targeted the rapidly changing area of Bowen Hills, only 2.5 kilometres from the CBD, with good rental yields, and a mix of both established and new stock regularly coming to market.
One of the newest properties in the area is the Code building. We found a beautiful 9th floor 2-bedroom unit, bought off-the-plan for $534,000 and due to a change in circumstances offered for $480,000. This is certainly a reasonable discount at face value. But when benchmarked against similar existing properties that deliver close to 5% rental yields, not cheap enough. It would need to be priced at $440,000 or a good 25% less than it’s pre-completion purchase price to tempt an investor.
In time vendors will correctly price to the new market conditions. This will be the buyer’s great opportunity.
House price fallsEven though domestic interest rates have declined in the first half of 2012, price falls have continued across capital cities. So far in 2012 the luxury market on the East coast has in fact declined twice as much as those properties in the middle market. However according to RP Data, overall house prices managed to grind out a small gain in the month of July.
Home price discountsExperts have pointed to some encouraging signs; Vendor discounts across capital cities have reduced from 7.9% to 7.1% as vendors finally become realistic about prices in the current market. So to has data for days on the market, which has fallen from 70 days to 63 days, not great but certainly improving. Data for clearance rates remains volatile, but seems to be leveling around 50%. And finally, housing affordability continues to improve. With inflation remaining subdued, the combination of lower interest rates and declining home values has seen affordability improve for the fifth straight quarter. The Index is now 11% higher than a year ago.
The key drivers of Australian property prices, yields, population growth, lower purchase costs and pent up demand, should help the market stabilise and potentially strengthen over the second half of 2012. As the mid-year report card says,
There are signs of improvement“By Shane Clinton”