As new apartment prices continue to climb in Melbourne and Sydney, Brisbane is quickly becoming one of the most affordable major capital cities in Australia plus offering the highest rental yields on the east coast of Australia.
A recent report by Knight Frank Research comparing the residential property markets of the capital cities, shows Brisbane as having the best rental yield of all eastern capital cities, 5.20% rental yield overall. This sparked our interest as some positive news finally for the Brisbane apartment market. So we thought we would jump in and have a look a little deeper at the real difference in affordability between the 3 largest capital cities.
In the graph above we have plotted the median apartment price according to the Knight Frank Research and against it we have plotted the median salary according the last national census. Yes it is from 2011 but it is the best we have until the next census data is released.
For the sake of clarity the median salary* in Brisbane is $52 171/yr, Sydney $57 612/yr and Melbourne $52 470/yr.
In the bar graph to the right, we have also plotted the median rent for each of the 3 cities.
As you can clearly see, these show just how attractive Brisbane is when compared to Sydney and Melbourne for both affordability and rental yield.
Currently all the focus is on the Sydney and Melbourne markets and the extraordinary run of capital growth that they have had. Looking forward however, and as we are constantly reminded by various media and government ministers, we now live in a low inflationary environment.
5.2% yield in the 1980’s would not have looked so good. In 2016, this is a stellar return when compared to the vast majority of other asset classes.
Whilst all the talk has been about a potential oversupply of new apartments in Brisbane, unfortunately Brisbane’s high level of affordability and rental yield has been overlooked. Sure we may have some downward pressure on prices if the oversupply does materialise, but if you are investing and holding property for the medium to long-term, as you always should, you should be looking at the long to medium-term trends and statistically data is showing us that Brisbane is the place to invest.
1st – You will get a better return on your money while it is invested. Whether you negatively gear, use cash or borrow, maximising your returns is key to a successful investment and Brisbane apartments will provide better rental yield than Sydney or Melbourne.
2nd – Historical capital growth is not necessarily a good forecast for future capital growth. What is certain though is affordability is a huge driver of property prices. As Brisbane becomes more affordable than Sydney and Melbourne, we see movement in people and prices. As the price differential in real terms becomes larger, the opportunity to sell in Sydney and move to a better lifestyle and better level of accommodation in Brisbane becomes very real. We have seen this in the past and we will be seeing it again in the near future. The commodity boom distorted all prices in Brisbane, and property was no different. What we are seeing now is a return to a more traditional affordability variation between Brisbane, Sydney and Melbourne, and this all bodes well for Brisbane property prices in the medium term.
*Salary based on 2011 report by ABS