Brisbane is now in the midst of a deep house price correction.
Brisbane home values have declined by 5.7%, with the 28-day run rate tracking at -1.2%:
Brisbane’s auction clearance rate is also the weakest among the three largest capital cities, tracking below 40% for 19 consecutive weeks:
Meanwhile, old listings keep piling up. As illustrated by Cotality, while new listings in Brisbane have fallen by 3.9% over the past year, total listings have surged by 60.4%:
Source: Cotality
The listing pile-up comes amid a 26.3% decline in property sales across Brisbane, according to Cotality.
The federal budget’s changes to negative gearing and capital gains tax will likely have a disproportionate impact on Brisbane values, given the city’s gross rental yield is only 3.5%, the second lowest in the nation:
Source: Cotality
With negative gearing abolished, investors will demand significantly higher yields to make Brisbane property investment viable.
All of which is bad news for property prices, which are facing a sharp correction following the explosive growth experienced over the prior five years:
The outlook for Gold Coast property is even worse, with the Australian’s Mackenzie Scott recently reporting that the Gold Coast home values are falling “at a rate of knots”, with median house asking prices falling 8.6% since March and unit prices plunging 16.4% since February, according to SQM Research.
“It’s falling at a rate of knots”, SQM Research managing director Louis Christopher said. “The higher they climb, the harder they fall. That is the concern that we’ve had for the Gold Coast; it became massively overvalued”.
“It is uniform; there’s not a single area that’s outperforming, and that includes the lower end of the market”.
As illustrated by Louis Christopher below, there has also been a large increase in apartment approvals in the Gold Coast since the pandemic:
The Gold Coast has always been a speculative boom-and-bust market.
Given the magnitude of the boom and the level of overvaluation, the bust will be severe.
Brisbane, while less speculative, is also facing a significant haircut.
