If you were to ask any Australian how Melbourne lifestyle has changed in the last decade, most if not all would say very little. Melbourne for the large part has stayed pretty much the same over the last 10 years but only recently it has been awarded as the most liveable city in the world for 6 consecutive years – a record unmatched by any other city in the world. What made the difference?
Melbourne is a great city, but never much on anyone’s radar as a prosperous city until Australia stood out from the world with its strong economy as a financial safe harbour during the global financial crisis. Kevin Rudd, the then Prime Minister of Australia, propelled the country onto the world stage with his sharp foreign relation skills. Melbourne quickly captured everyone’s attention from tourists to developers and investors with its enviable lifestyle and its strong art and culture scene.
Property prices naturally skyrocketed as it became forerunner and face of Australia to the world. Sydney as the leader of the pack, saw even greater growth than that of Melbourne, given its stronger pedigree and economic foundation. The question that now remains is whether Brisbane will soon follow suit. To understand the present state of these 3 cities, let’s take a look at their fundamentals.
PRICE & YIELD COMPARISONS
Table 1 shows the price and yield gaps, comparing Melbourne and Brisbane against Sydney. For example, you will see that for houses, Melbourne prices are only 72.65% of Sydney while Brisbane is 54.19%.
For units, the numbers are 70.19% and 55.36% respectively. Yield-wise, there is very little difference between Sydney and Melbourne both for houses and units while Brisbane is 46% higher for houses and 33% higher for units.
Lower prices with higher yields. Perhaps it is due to jobs and salary differences? Well, Brisbane is marginally higher when it comes to unemployment rate at 6.3% compared to 5.7% in Melbourne and 5.0% in Sydney.
The difference is not as significant as one would think, at least not to justify a 50+% difference in price. How about average income?
Well, at $80,132 for Sydney, $75,634 for Melbourne and $75,936 for Brisbane. Brisbane in fact is marginally higher than Melbourne despite the significant price gap.
What about vacancies? Perhaps oversupply conditions are constricting prices in Brisbane. Whereas Sydney’s vacancy rate is at 1.9%, Melbourne is at 1.7% and Brisbane at 3.3% (SQM Research).
So yes, vacancy in Brisbane is higher. However, it is interesting to note that yields in Brisbane are also 33- 46% higher than that of Sydney or Melbourne. That is hardly any surprise given the significantly lower property prices and almost equitable income levels.
EXCITING TIMES AHEAD
It does seem that Brisbane’s lower prices can be explained by a lack of demand due to a smaller population. But will that change?
Now there are many reasons that propel a city to become world class. Of most importance is whether it is getting the attention of the world in terms of business and migration.
With Sydney and Melbourne saturated in many ways, prompting the government to penalise international participation, we think Brisbane is looking to benefit greatly from such.
While we would not guarantee that Brisbane will become a world class city overnight, it is ready, in our opinion, to capture a significant share of the Australia growth pie in the next 5 years as it transforms beyond its current state.
Especially when we are witnessing a record number of major projects currently underway in the city. This includes:-
• Queens Wharf – A 9.4 hectares riverside project by ASX-listed gaming company Star and Hong Kongbased Far East Consortium and Chow Tai Fook featuring 5 new hotels, 3 residential towers, a major shopping centre.
• Brisbane Metro – A $1 billion dollar high-frequency transportation subway system to carry over 30,000 passengers per hour across the city.
• Brisbane Live – A $450 million project to deliver Brisbane’s answer to New York Madison Square with a 17,000 seat world class arena to showcase worldclass concerts and performances as well as sporting events.
• Brisbane Quarter – Brisbane’s first $1 billion integrated, mixed use precinct in the heart of the city that will include Australia’s first purpose-built W Hotel, two levels of riverside dining and luxury retail shopping beneath a 40 storey Prime Grade office tower and an 82 storey luxury residential apartment building.
• Brisbane Airport Redevelopment – A 10-years, $3.8 billion expansion of the existing award-winning, 24/7 curfew-free airport including adding new runways, expanding the terminal/ concourse, industrial park, hotels etc.
These are but a subset of developments happening all across South East Queensland from the north of Sunshine Coast to the south in Gold coast. Indeed these are exciting times for Brisbane and Queensland. International developers are arriving on the shores of Brisbane as well. Starting with the renown Banyan Tree that is now building its first Australian 6-stars accommodation in Kangaroo point to a who’s who list of developers across Singapore, Malaysia and China.
Greenland, for example, remains committed to Brisbane despite losing on the Queens Wharf project. Adding to the list the upcoming 2018 Commonwealth Games and the whispering hints of Olympics 2028, I think we do have the quiet makings of a world class city in the works. One which investors should well take note as the city once again, catch up to its two better-pedigreed siblings who are slowing down their pace. Brisbane, doubtlessly, is on its way to international stardom.