Perth and Brisbane may be on opposite sides of Australia but the roughly two million inhabitants in each city enjoy a lifestyle centred on sizeable properties or modern apartments, plenty of sunshine and good public facilities, schools and universities.
They’re two cities of similar size, climate and lifestyle yet with very different property investment outlooks for 2022.
Perth and Brisbane may be on opposite sides of Australia but the roughly two million inhabitants in each city enjoy a lifestyle centred on sizeable properties or modern apartments, plenty of sunshine and good public facilities, schools and universities.
The deeper you dig, the more the economic parallels emerge too. They are the sibling cities that moved as far from each other geographically as the continent would allow. They’re actually more like twins, being the same age, doing the same jobs and incurring the same property debts.
It’s almost spooky how alike they are.
Each city has a median age of 34-35 years, and each has 63 per cent of their over 15s in the workforce. Uncannily, the top three occupations of employed persons are identical, with professionals at 22 per cent of the workforce, managers at 11 per cent, and labourers nine per cent.
When it comes to housing costs for their roughly 800,000 dwellings each, the two cities are also on a par.
Perth households spend 28.4 per cent of their household incomes on the mortgage or 21.9 per cent of their incomes on the rent. That figure hardly changes for Brisbane, at 27.8 per cent and 22.7 per cent respectively.
Both cities held off COVID in 2021 and had economies that tracked along reasonably well.
So why are property investors and intrastate migrants pouring into Brisbane and largely overlooking Perth?
Tale of two cities
Even though property price growth is slowing in other parts of Australia, Brisbane’s housing markets are likely to continue to perform strongly in 2022.
Both markets are coming off years of lean performance, but it is Brisbane that is outshining its sibling now.
Buyers agent Grant Foley, of Grant Foley Property, said Greater Brisbane has enormous momentum and is experiencing a much-awaited cyclical price boom.
“With significant runway still existing for growth, I expect prices to rise by a further 10 to 15 per cent in 2022, fuelled by not only strong local sentiment, but also continued interstate migration and investor activity.”
Perth’s housing market looks to have temporarily stabilised after a strong run of growth, with housing values edging 0.2 per cent higher last month and 0.4 per cent higher over the rolling quarter.
Across the capitals, the monthly change last month ranged from a 0.1 per cent fall in Melbourne housing, through to a top-of-the-table 2.9 per cent surge in Brisbane dwelling values.
CoreLogic’s Research Director Tim Lawless said Brisbane and Adelaide, along with regional Queensland, are the only broad regions where there is no evidence of prices slowing just yet, with the monthly rate of growth reaching a new cyclical high in December.
“While the pace of capital gains has been easing in Sydney, Melbourne and Perth, conditions across the Brisbane and Adelaide housing markets have gathered momentum,” Mr Lawless said.
“Slower conditions across the Perth housing market may be more attributable to the disruption to interstate migration caused by extended closed state borders, which has had a negative impact on housing demand.
“In Brisbane, housing affordability is less challenging, advertised stock levels remain remarkably low and demographic trends continue to support housing demand,” he said.
Julie Kelley, Sales and Marketing Manager of SMATS Group, said the southeast Queensland housing market was booming, with huge buyer competition, prices rising quickly and days on market at historical lows.
“Those wanting to repatriate are seeing sense in buying before they return to Australian shores for a number of reasons — they don’t want to be priced out of the market, children have school commitments set for a particular date, they understand it will take time to settle and that if their shipping is delayed, reliance on securing short term rental accommodation is difficult,” Ms Kelley said.
Fun and games
So, despite their overt similarities, the widely held view is that Perth will grow at around three to five per cent in 2022, most pundits are predicting rises of 10 to 15 per cent for Brisbane.
The influx of migrants from Sydney and Melbourne into Brisbane is partly due to its relative closeness compared to Perth but is also a reflection of economic confidence.
Perth has benefited greatly from jobs generated by a record iron ore price but it’s that same sector that is also of the greatest concern to potential residents and property investors.
Property analyst and commentator Gavin Hegney told Australian Property Investor Magazine he perceived two main differences between the Perth and Brisbane markets.
“Queensland is seen to have a more diversified economy and, secondly, they will have a global advertisement running for the next six years or so in the Olympic Games,” he said.
“Perth has high rental yields, has not seen excessive growth pushing the market beyond fair value and is likely to have an uplift in values with opening borders given the strong employment market.
“While there has been some good growth at the top end, the level of investor activity is extremely low, and has been in recent years.
“A shortening supply of land and rising building costs are putting cost pressures on the market and at this stage apartment values haven’t risen as fast as costs and hence feasibilities aren’t tending to promote development.
“These factors make it extremely unlikely that the market will be oversupplied.”
One-trick pony
Perth’s perception as a one-trick pony economically is based on its increasingly unhealthy mining export reliance on China.
Australia’s fraught relations with its largest trading partner are only serving to highlight this more each year. Iron ore prices have also fallen back to more traditional levels.
In the early 2000s, China represented less than 20 per cent of Western Australia’s international exports. Today that figure is in excess of 70 per cent, with few outward signs of the State Government redressing the imbalance.
Chamber of Commerce and Industry WA CEO Chris Rodwell told API Magazine that their own nation-wide polling showed WA had become a significantly more attractive business investment destination but would benefit greatly from a more diversified economy.
“Nearly three in five businesses in Australia (57.3 per cent) reported being more interested in investing in WA in 2021, particularly businesses in New South Wales, and that interest arose across the financial and insurance services, professional and technical services and renewable energy,” Mr Rodwell said.
“It doesn’t arise solely from the mining sector, which is encouraging because it’s just the sort of activity we need in order to diversify our economy.
“What those businesses indicate they like about WA is the lifestyle (40 per cent), the strength of the local consumer economy (34 per cent), and strong well-managed state finances (24 per cent).
He said a key to attracting further investment and migration was to ensure WA strengthened its tax and regulatory environment.
“Diversifying our economy remains WA’s top priority, and payroll tax reform would particularly enable medium-sized businesses in sectors like manufacturing, construction and agribusiness to grow.”
The recently released ANZ Corelogic Housing Affordability Report showed the wide scale decline in housing affordability with the ratio of housing values to household income reaching a new record. This was coupled with the number of years it takes to save for a deposit and the ratio of income to rent.
Buyers in regional Australia have been particularly strained due to the effects of COVID-19, with remote work trends and appealing coast and tree changes have become the new normal, and raised regional investing and purchasing to new levels.
Migration from cities to regions increased almost 6% by March 2021, and was up 14.3% from the decade average compared to a 3.5% decline leaving regional Australia to capital cities.
Eliza Owen, Head of Research at Corelogic said where a loss of momentum across capitals was usually matched by easing growth of regional Australia there has been a clear divergence in recent months. This was probably due to major cities coming out of lockdowns & the easement of social distancing and travel restrictions.
“Interestingly, the latest CoreLogic home value index results show that dwelling value and rent growth across the regions shows no sign of slowing just yet. Over November, dwelling values in regional Australia increased a further 2.2%, up from 1.9% in the previous month, and twice the monthly growth rate of capital city markets in November.”
MCG Quantity Surveyors recently conducted their latest Property vs Postal survey highlighting the increase in remote and borderless investing due to the global pandemic. The study indicated investors had ‘doubled the distance’ between where they live and where they invest.
Mike Mortlock, managing director of MCG Quantity Surveyors, compared the buying habits of their investor clientele for 2020 and then again in the year to November 2021 showing the average distance from investor home to investment property had risen from 294km pre-COVID to 559km over the pandemic period.
“Rather than going to ground during lockdowns, it seems investors looked for real estate opportunities further from their home suburbs than ever before.
“What’s perhaps most telling is the rapid increase in those looking for assets positioned exceptional distances from their home.
“Buyers investing in locations more than 200 kilometres from home rose from 29.5 per cent in January 2020 to 44.65 per cent in November 2021.
“Even more dramatically, the percentage investing more than 1000 kilometres from home more than doubled during the period.”
Property vs. Postal
% of investors
Jan 2020
Nov 2021
Invest in same suburb*
6.9%
6.75%
further than 200km
29.5%
44.65%
further than 1,000km
7.7%
17.15%
closer than 50km
60.1%
41.12%
closer than 10km
36.1%
19.1%
closer than 5km
23.2%
11.56%
closer than 2km
10.8%
4.99%
Average Distance
293.47km
559.09km
Sample size
994
822
*Principle place of residence. Source: MCG Quantity Surveyors.
Only 6.75% of Australian-based investors bought within their primary residence suburb, with most popular investment destination being Queensland with over 37% of investors buying in the sunshine state.
Mr Mortlock said a range of factors had made distance buying an attractive option.
“Firstly, lockdowns and economic uncertainty during the pandemic has had Australians thinking long and hard about their financial situation, so investing has been front of mind.
“Technology makes it possible to buy property from the comfort of a locked-down home. Modern day investors see the whole of Australia as a potential market – not just their state or city.
“Also, the surging popularity of regional relocation in this remote working world has boosted those property markets. Capital growth rates in many regional centres rivalled big cities in 2021, and investors want to get a piece of this action.”
Purchasing properties ‘sight unseen’ has become more prevalent with the ease of engaging local buyer’s agents in the suburbs you want to invest in, regardless of where you live. An upswing in buyer’s agent engagement amongst investors has shown the they rely on advice on where and what to buy, the facts and figures and less about the emotional connotations of location.
Julie Kelley, Buyers Agent at Aussieproperty.com has noticed the increased demand for buyers agents from not just international/expat buyers but the local market, with residents from WA, VIC and NSW all showing interest in QLD properties.
‘I’ve had cash buyers ready to purchase apartments without even seeing a picture, let alone getting a local walkthrough of the property.”
Whilst based on the west coast, with a vast network of professionals around Australia Ms Kelley has been able to get local agents to provide walkthroughs and conduct due diligence on behalf of her clients.
“We are able to get offers done faster than ever before because the interest and subsequent trust of Buyer’s Agents has certainly been evidenced,’
“I’ll work with one client, and within a week or two of settlement I’m getting a call from one of their referrals for assistance, as well as assisting with property management and future investment planning”.
What many are now speculating on is whether this trend will be sustained once borders reopen and life returns to pre-pandemic ‘normal’, its only a matter of time to see what happens.
