House prices in Brisbane and Adelaide running hot: here’s why

The reasons why two capital cities’ house prices are doing better than others deliver some good lessons for investors.

Australia’s latest home price data illustrates why it’s a great idea for property investors to look beyond their own backyard and state borders to find financial winners.

Adelaide and Brisbane emerged from the shadows of more expensive capital cities to lead the way in both monthly and quarterly growth, according to CoreLogic’s home value index.

Brisbane took top spot, with a 2.9 per cent rise in median dwelling values in October to $662,000 and a quarterly rise of 7.4 per cent, closely followed by Adelaide climbing 2.5 per cent in October to $558,000 – up 6.5 per cent for the quarter.

Their annual price growth is stunning, with Brisbane up 25.1 per cent and Adelaide up 21.4 per cent, beaten only by Hobart (27.7 per cent), Sydney (25.8 per cent) and Canberra (24.5 per cent).

CoreLogic says the two cities have benefited from fewer Covid lockdowns, better housing affordability, and much lower levels of housing stock than usual.

Most of Australia’s 2.2 million residential real estate investors buy in their home state, but the reasons why Adelaide and Brisbane are going strong are also reasons why it’s a good idea for people seeking second and third properties to consider diversifying.

Brisbane home values surged 2.9 per cent in October and 25.1 per cent annually. Picture: Richard Walker

PRICE

Sydney’s median home value is now $1.09 million, a heartbreaking level for first home buyers, Canberra is $883,000 and Melbourne $788,000.

That’s up to 65 per cent expensive than Brisbane and up to 95 per cent more expensive than Adelaide.

And in a world where employees and bosses have discovered that staff can successfully work remotely, where you live is now less important.

PLAYING CATCH-UP

Until a few years ago Hobart was the cheapest capital city in the nation, but its median home value today of $677,000 has leapfrogged Adelaide, Brisbane, Darwin and Perth. Perhaps it’s time for Brisbane and Adelaide to play catch-up too.

And don’t forget Perth and Darwin, which were among the most expensive cities less than a decade ago before long, painful price slumps. Some experts are eyeing them for strong future growth.

CYCLES

The uniform property price growth of the past 12 months – with all capitals climbing between 15 and 28 per cent – has been unusual and caused by government stimulus, record-low interest rates, FOMO and cashed-up households.

Before this Covid-inspired surge there were always price cycles – typically a few years climbing then a year or two falling or flattening.

Different states have different cycles at different times, making it a smart investment move to focus on buying in cities that were recently struggling and avoiding those at the top of the market.

Trees anyone? Adelaide was recently declared the world’s third most liveable city.

FUTURE FOCUS

Brisbane and Adelaide have attractive lifestyle benefits and are key destinations for future growth industries such as space and health technology as well as recovering industries such as international tourism.

Whenever investing in real estate, always think about how appealing the property might be a decade from now, and whether buyers will want it.

RISK AND TAX

Diversifying any investment – from shares to property to cryptocurrency – is a strong strategy that reduces risk, and investors living in the big capitals will inevitably look to broaden their horizons.

In doing so they’ll get tax benefits, because land taxes are state-based and only kick in when total landholdings reach a certain threshold that varies between states, usually at least $300,000.