House hunters are steering away from Sydney and Melbourne and turning their attention to Brisbane, according to property data group CoreLogic.
Investors are being turned off by affordability constraints in Sydney and Melbourne, and the sentiment that both markets are currently at their peak, CoreLogic head of research Tim Lawless says.
More investors and prospective buyers are now looking at Brisbane, as recent migration growth and improving job prospects make it more attractive, he said.
Queensland’s unemployment rate has tumbled in recent months, falling from 6.5 per cent in June to an 18 month low of 5.7 per cent in August, according to the latest data from the Australian Bureau of Statistics.
“I think one of the missing pieces of the Brisbane puzzle up to date has been the fact that there hasn’t been much jobs growth,” Mr Lawless said.
“This is one of the reasons why we haven’t seen Brisbane values growing to the same extent as Sydney and Melbourne, despite affordability and the decent rate of population growth.
“It hasn’t been a very strong economy but that seems to be changing now.”
In the past 12 months, Brisbane’s home prices have jumped 2.9 per cent. That compares to a 10.5 per cent increase in Sydney and a 12.1 per cent rise in Melbourne.
But Mr Lawless said an oversupply of apartments could have investors treading cautiously.
In September, the Reserve Bank of Australia said Brisbane was still at risk of a potential for an oversupply of apartments which would drag property prices lower.
RBA assistant governor Luci Ellis then said second-hand apartments will likely fall in price as tenants move into newly built homes because they are nicer and rent is still low.
Mr Lawless said, while Brisbane is at a higher risk than Sydney and Melbourne because of a substantial uplift in existing unit stock, the threat is starting to subside.
“Brisbane has already moved through the peak of the construction pipeline – back in December last year – so it is already starting to come down a little bit,” he said.
Recent data from CoreLogic shows investors are also looking outside of the major capitals to regional areas where growth rates have been remarkably strong, particularly in areas adjacent to the Sydney metro area.
NSW’s Newcastle and Lake Macquarie were the strongest regional performers with home prices up 15.3 per cent over the past 12 months, according to CoreLogic.
In Victoria, the strongest regional market was Geelong and in Queensland, the Sunshine coast was the most popular.
Mr Lawless said more and more people are using their equity in their property to buy lifestyle properties such as holiday homes or future retirement premises.
“The metro areas and the major capitals have just become too expensive,” he said.