Did you know that Brisbane’s Property growth forecast is currently 6+ times stronger than Sydney?
BIS Shrapnel, who are usually quite conservative, forecast Brisbane’s property capital growth to be 13% over the coming 3 years, with Melbourne and Tasmania second best, but a long way behind at just 4%. This is followed by Canberra with 3%, Sydney, and Darwin at 2% and Adelaide at just 1%.
This makes Brisbane’s forecast of 13%, nearly three and a half times better than Melbourne’s second best and six and a half times better than Sydney’s 2%, however, if you add the higher rental returns of Brisbane, the forecast is essentially about five times better than Melbourne and eight times better than Sydney! It’s very rare to see just one capital with such a superior forecast than all other capitals. Usually, the top two or three capitals have a similar forecast, so in this case, the research provides a clear direction of where we should be investing now.
The median value of Sydney property is now double that of Brisbane’s – the last time this occurred was in 2003. In the subsequent 8 years, Brisbane grew by 80%, almost three times more than Sydney’s 30%.
As the graphs below indicate, Sydney is clearly near the top of its cycle and Brisbane is near the bottom. In addition, Brisbane rents are 20-30% higher than Sydney. Supply in Brisbane is currently almost identical to that of 2003, after which Brisbane had a long run of very good growth – this shows the supply level was nowhere near enough to slow growth, (especially when affordability is 70% better than in Sydney).
Further, supply in Brisbane is forecast to reduce by around 60%, largely as a result of banks tightening lending to developers, similar to what occurred during the GFC.
Clearly, these facts debunk any media speculation that the Brisbane supply market is of any great concern, as long as you are not buying long term of the plan! There are a few areas of Brisbane to be cautious about, however, well selected areas still show great promise.
Strong yields provide positive gearing
Brisbane rents are so strong that most property is neutral to positively geared, so any growth is essentially profit, even when all deposit and costs are borrowed against any available equity. We always recommend you borrow more as a cash reserve for a safe and effective use of spare equity.
The profit can later be used to significantly pay down your home loan, pay school fees or provide your children with a better education, take a family holiday and ultimately secure your retirement. When you look at the facts, it’s clear that any delay will almost certainly lead to significant opportunity cost.
Richard Sheppard is the Managing Director of inSynergy Property Wealth Advisory. inSynergy provides professional property investment advice, property market research, specialised mortgage broking services and is an accredited investment property buyers’ agent. Visit www.insynergy.net.au or phone 1300 425 595.