Brisbane has been ranked as the 16th most liveable city, according to a global report.
A combination of lower property prices, mild climate and stunning coastline are wooing foreign investors.
By Romesh Navaratnarajah
William Lim (not his real name), a professional in his 40s, is among a growing number of Singaporeans investing in Australian property. He began investing Down Under in 2015, with the hope of reaping a high rental yield and large capital gain.
“I purchased a one-bedroom unit in Parramatta, Sydney’s second CBD, for around AU$520,000. A similar unit in the area is now selling for about AU$660,000,” he told PropertyGuru.
According to Michelle Ciesielski, Director of Residential Research at Knight Frank Australia, low interest rates in recent years have fuelled foreign investment and a property boom. She noted that the Reserve Bank of Australia (RBA) held the cash rate at a historic low of 1.50 percent in October 2016, after cutting the rate by 25 basis points two months earlier.
The rise in demand has pushed up housing prices. This means that for first-time investors, prices in larger markets such as Sydney and Melbourne may be too steep, but smaller property markets such as Brisbane and the Gold Coast offer a lower entry point.
Not only are apartments in Brisbane and the Gold Coast cheaper, they also offer higher yields, revealed Savills Research, using data from Residex.
The report stated that apartment prices in both cities average around AU$380,000, which is 45 percent and 25 percent lower than Sydney and Melbourne, respectively. Meanwhile, apartment yields in the Gold Coast are at 5.6 percent, slightly higher than in Brisbane (5.2 percent).
A liveable city
Ciesielski pointed out that there are many other positive attributes. For instance, Brisbane is ranked 16th on the list of the World’s Most Liveable Cities by The Economist Intelligence Unit, and experiences a mild winter. The Gold Coast, on the other hand, is home to the Great Barrier Reef, one of the natural wonders of the world.
She added that Queensland’s economy is also holding up well. The Gross State Product (GSP) was recorded at AU$300,270 million in the year to June 2015, up 0.5 percent from the previous year.
This bodes well for the state’s property market, which continues to grow. Said Ciesielski: “In the past three years, the Greater Brisbane apartment market averaged steady annual capital growth of 3.2 percent to a median value of AU$365,500 in June 2016. On the other hand, the Gold Coast apartment market experienced stronger annual capital growth of 4.4 percent over the past three years to a median value of AU$377,500 in June 2016.”
Time to get in
Lim reckons there are good investment options available in the two markets. “Brisbane is at a favourable side of the property clock today, which indicates good timing for investors to enter. However, investors should study the demand and supply factors in different locations before making a decision. Try to buy something that the locals would buy to live in. If budget allows, go for a two-bedroom apartment, which has a broader resale market.”
He noted that the Gold Coast is more appealing to tourists, so investors should buy into schemes which are managed by short-term stay or hotel operators, or locations that are popular with holidaymakers, preferably with sea views.
Christopher Jones, Director at Savills Residential Gold Coast, said: “What we are finding is a surge of interest from Asian buyers for luxury second-hand residential property in the Gold Coast.”
He shared that much of the interest is coming from China, Hong Kong, Singapore and Malaysia, in particular for areas such as the Isle of Capri, Paradise Waters and Sanctuary Cove.
“Of particular interest to international buyers is Sanctuary Cove, Hope Island and Royal Pines, as they are exempt from the need to apply for Foreign Investment Review Board (FIRB) approval. All three areas are designated as integrated tourism developments,” he said.
In October, Savills sold a luxury waterfront property at 46 to 48 Norseman Court in Paradise Waters. “Throughout the campaign, we had interest from China, New York, London and New Zealand, but the property was finally purchased by a Chinese buyer for AU$10.2 million,” said Jones.
At the same time, Ciesielski noted that the 2018 Gold Coast Commonwealth Games has encouraged economic growth and increased employment opportunities, with significant government spending on new infrastructure projects, such as a light rail system, a new hospital, and sporting facilities.
New measures target foreign buyers
In response to the high volume of foreign money flowing into its real estate market, Queensland recently became the third state in Australia to introduce additional stamp duties on overseas property buyers.
With effect from 1 October 2016, foreigners must pay a three percent surcharge on stamp duty.
While these additional taxes may deter some foreign buyers, it’s not likely to significantly impact the level of foreign investment activity over the medium-term, said Ciesielski.
“Foreign investors continue to look for a longer term return, in addition to the Australian lifestyle, access to good educational institutions, and a transparent ownership structure,” she said.
Jones added: “It hasn’t dampened the second-hand residential market in the Gold Coast. In fact, enquiry levels for luxury properties have risen.
“The long-term prospect for residential property in Australia remains sound, and Brisbane and the Gold Coast offer attractive returns in comparison to other asset classes.”
Still, he thinks investors are likely to become more cautious when faced with higher transaction costs, particularly those who are heavily reliant on debt.
Getting tough on loans
In recent months, major Australian banks have become stricter on lending practices in an effort to curb speculation and regulate property sales.
“From May 2015, the Australian Prudential Regulatory Authority (APRA) endorsed stricter lending practices due to on-going concerns of an over-heated residential market, particularly driven by the Sydney and Melbourne markets,” said Ciesielski.
“Lending institutions commenced reducing their maximum loan-to-value ratio, introduced new variable rates and required customers to provide evidence of existing loan repayments before being accepted. This was in addition to applying serviceability repayment loading buffers to existing mortgage repayments as part of borrowers’ serviceability assessment in a higher interest rate environment.”
Despite tougher rules, Lim believes foreign investment will continue to drive Australia’s property market, and has this advice for new investors.
“The key thing investors should avoid is to buy into areas which have an oversupply of properties. Secondly, investors need to be mindful of the new financing restrictions in Australia and prepare sufficient cash to complete the transaction. Thirdly, investors need to factor in the possibility of an interest rate hike, which will drive up the cost of borrowing when they calculate their monthly cashflow of owning a property.”
FAST FACTS
(QUEENSLAND)
Population: Approx. five million
Total area: 1.853 million sq km
Currency: Australian Dollar
Gross State Product (GSP) per capita: AU$63,209
GSP growth: 3.8 percent
Future transport: Proposed Cross River Rail through central Brisbane
Average apartment price: AU$380,000
Distance from Singapore: Approx. 5,000 km
INTERNATIONAL HIGHLIGHTS
Brisbane hopes to draw foreign investors with two new integrated lifestyle communities.
NEW PROJECTS
The Terraces at Rochedale Estates
Rochedale, Brisbane, Queensland
Type: Terrace homes
Developer: Aveo Group
Tenure: Freehold
Facilities: Swimming pool, lap pool, gymnasium, tennis courts, barbecue and picnic areas, entertainment lounge, theatrette
Nearby Key Amenities: Shopping centres, technology park, university, proposed town centre
Nearest Transport: Bus terminal, major roads and expressways
Starting Price: AU$589,000 (S$620,747)
Located just 12 km from Brisbane’s city centre, The Terraces at Rochedale Estates comprises 61 single- and two-storey terrace homes within a master planned community of more than 1,000 residents.
Developed by Aveo Group, all the homes are offered as turnkey and come with landscaping, quality tiles and carpets, stone kitchen bench tops, range hoods, dishwashers and ducted air-conditioning, among other features.
Residents and guests will also enjoy membership at the development’s Lifestyle Centre, which includes a resort swimming pool, heated lap pool, gymnasium, tennis courts, and an entertainment lounge. Shops and schools are located nearby.
Dusit Thani Brookwater Golf & Spa Resort at First Residence
Brookwater, Brisbane, Queensland
Type: Resort
Developer: World Group LLC UK Limited
Tenure: Freehold
Facilities: Restaurants, cafes, bars, grand ballroom, spa, swimming pools, gymnasium, golf course, clubhouse
Nearby Key Amenities: Shopping malls, schools, commercial offices, hospitals, parks
Nearest Transport: Springfield Train Station, Springfield Central Train Station
Starting Price: AU$607,000 (S$634,562)
The Dusit Thani Brookwater Golf & Spa Resort at First Residence is located in the suburb of Brookwater, about 30 km from the Brisbane CBD. The 14ha luxury resort is operated by Thailand-based Dusit International.
Currently under development, the project is the first fully integrated golf, spa, retail, leisure, dining and recreation resort in Australia.
Construction commenced this year and will be completed in five stages. There will also be 520 two- and three-bedroom resort apartments, each with a private pool and garden, all overlooking the Greg Norman-designed Brookwater Golf Course.
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