Welcome to the late spring edition of HOME TRUTH, trusted journal of Brisbane’s prime residential property market.

In this edition beyond our usual definitive market narrative, given some of the manic even doomsday predictions for the market out there presently we look to inject some common sense back into the post BRC (Banking Royal Commission) debate, and not unrelated stick our neck out further than we have previously on interest rates, and stretch it even further on the intended wholesale dismantling of Negative Gearing (assuming we have a change of government which is likely).

Firstly though as always…



~ Inquiry – Moderate
~ On Show Attendances – High
~ Listing Activity – Very Low
~ Negotiating Activity – Moderate
~ Conversion Index – Low to Moderate
~ Auction Success Rate – Low to Moderate
~ Disparity Index* - High 15 - 20%

*The Disparity Index is the percentage gap between what buyers and sellers think the same property is worth


~ Inquiry Levels –Low to Moderate
~ Listing Activity – Low to Moderate
~ Take-up Rate – Moderate



With the school holidays behind us the market has turned into the home straight and with rare clear air now between us and the Christmas finish line we can expect a busy period ahead.
The spring market thus far has been better than it should given the recent political upheaval coupled with the Banking Royal Commission fallout but nowhere near as good as it should otherwise have been given fundamentals that include:
· The Southern Capitals housing booms are over from where our own always takes off
· Net interstate migration is again heading back towards longer dated trend
· Mining royalties are again flowing in nicely (and very nicely indeed from coal)
· Tourism is going gangbusters
· It’s raining again
Drilling down a bit further but keeping it simple the last little period has been more of a go slow time than it otherwise would have been because banks have greatly slowed down their lending in response to the politically instigated bank bashing blood-lust that the Banking Royal Commission (BRC) has predictably become.
Once the BRC’s recommendations have been formalised (which may take longer than we think because their initial recommendations will probably need to be watered down so they don’t send the country’s economy off a cliff) and the banks adjusted and we the public have fully moved on, expect not just a resumption of business as usual but indeed quite a spring-back.

Whilst the recent significant drop-off in Australian capital cities auction clearance rates has alarmed many, it should have surprised few given it is an entirely predictable reaction to the banks new requirement of greater time to approve finance. This effect has been amplified in Sydney and Melbourne where markets were already slowing as they looked for their new post peak levels.


Starting at home BRISBANE’s housing markets continues its state capital to state capital city rebalancing, bottom lead recovery hampered somewhat recently by the Banking Royal Commission reaching a crescendo. Brisbane’s median house price remains in the low - mid $500,000’s with a slow firming bias that should accelerate once the BRC is over

SYDNEY continues its post peak correction as it looks for a new floor somewhere around 10% off its peak. The politically inspired actions of APRA and the BRC may play with that a little but we doubt in the final analysis that it will be overly. Sydney’s average house price remains in the mid to high $900,000’s on thin volume and has an easing bias

MELBOURNE is following Sydney with a six month lag but the amount of the bounce off its peak could prove higher given just how far the now MIA Chinese drove their market during their very recently finished latest cyclical boom. Their average house price is currently around $700,000 and looking to settle at around or just above $650,000

ADELAIDE not unlike Brisbane but to a lesser degree continues to enjoy some price driven rebalancing from other capitals (but in its case mainly from Melbourne as Sydneysiders rarely look west when they tap out) but with Melbourne correcting sharply and SA’s limited standalone potential, its current mid $400,000’s average price is also likely its peak 

Still ignoring firming commodity prices, PERTH continues to largely contract although there are indications that the 10 year contraction that has taken it from the dearest to almost the cheapest market (with even Hobart knocking on the door) in the land may be bottoming. Perth’s current average house price is at or just under $450,000 with a slowing easing bias
CANBERRA continues to feather its own nest in fine style as it is wont to do and given the political status quo, the prognosis for the market is quite sound and probably second only to Brisbane nationwide presently. Canberra’s average house price remains about 10% above Brisbane’s and 10% below Melbourne in the low $600,000’s but firm
HOBART has finally run out of puff after enjoying its biggest comparative price driven boom in decades that has seen its average house price almost double to its current peak of around $400,000 from where if history follows its usual course it will now settle some 10% or so off there in the mid to high $300,000’s, still a long way up on where it was 2 years ago
DARWIN like its kindred big brother (or sister) Perth continues to be tied to the fortunes of mining investment which despite recoveries in ore prices remains lacklustre and unsurprisingly mirrors Perth’s average house price at a stagnating at best mid $400,000
The COMBINED CAPITALS average house price given the moderating effects of the Sydney and Melbourne markets easing off their recent peaks is today sitting at or just under $600,000 and subject to the size of their end of peak corrections could come down as far as the mid $500,000’s (even with positive inferences from Brisbane)


As the excess(ive) investment apartment stock is slowly but inexorably absorbed in the market, we are seeing a floor starting to form in entry level apartment rents but given the sheer volume of supply the market remains under pressure.
The market for larger and more exclusive apartments however is understandably faring much better given there is less of an oversupply issue.
With lower rent houses, the temptation to lease much cheaper brand new apartments instead of an older house has removed a lot of potential tenants from the rental pool putting downward pressure on prices. The current situation however should ease as the supply of apartments gets taken up.
Higher end rental housing whilst not as robust as a few years ago, is holding up the strongest of all of the rental sectors.


The BRC (Banking Royal Commission) is still the only game in town and you get the feeling it knows it.

With its recommendations about to be handed down, knowing they will probably need to be ugly to satisfy the worked up bloodlust and to vindicate its convening (and likely also totally uneconomic in their application) banks have understandably gone even further to ground with their already greatly muted lending activities making an already lamentable situation worse and in the case of the many hundreds of developers caught in the contrived maelstrom with untold thousands of unsettled investment apartments, tipping them toward probable financial oblivion.
Were it not for the politically motivated acts of APRA and now the BRC, our housing market would be enjoying a far greater flow on benefit of the interstate rebalancing that always follows the end of cyclical booms in our southern capital feeder markets than what we are.
The politically motivated status quo ultimately will not allow the market to defy gravity, for the current record price disparity between the southern capitals and us to remain where it is, for water not to find its true level, but it could slow the process down until the banks are allowed enough clear air to work out how they can continue to operate in the market.
Talk to agents who specialise in lower level house sales however, particularly those operating within 10k of the city and they don’t know what the fuss is all about because they’ve never had it so good (other than 3 months ago when the BRC was having no impact at all or during the last cyclical catch-up boom of the early 2000’s were they around then).
Other sectors of the housing market should also soon have their respective lotto wins as the nascent cyclical boom works its way upmarket.
As we’ve previously observed, booms typically take 2 – 3 years to work their way through the market starting at the lower end closer in and work upwards in price and outwards in geography as they gather momentum.
For a bit more clarity on how (all) booms work (in every capital city in Australia), here is 

The Anatomy of a House Price Boom  

1. All house price booms are bottom up affairs. They start at the lower end of the market and gravitate up from there
2. Brisbane house price growth over the last several booms trough to peak has averaged close to 80%
3. 30 – 40% of housing price growth in a boom is realised in the first 6 – 9 months of the market taking off
4. It takes 12 – 18 months for each market sector (price bracket) to realise the full extent of its boom price growth
5. It takes between 2 - 3 years for the boom to run its full course up through all price brackets
6. Booms start closer to the city centre and radiate out as buyers are priced out of the market closer in
7. When booms start prices seem cheap and when they finish seem dear (they move from too low to too high)
8. As the boom gathers steam momentum will ultimately drive prices higher than they should 
9. Once the boom runs out of steam, prices will settle around 10% off their peaks (e.g. Sydney & Melbourne today)

Other points of note

Houses sell much quicker and for more money as buyers increasingly panic buy as booms gain traction | banks become more amenable to lend as prices rise | vacant land prices go up by more than do built houses | apartment and townhouse prices get taken along for the ride (even with the current levels of oversupply) just not by as much
The BRC and the upcoming federal election might toy with the timing of the above a little but as mentioned, they ultimately won’t stop it because with the booms having occurred in our feeder capitals, the die for Brisbane has effectively been cast.


The country’s official interest rate remains at 1.5% despite the current political uncertainty and a number of (other) downside risks to the economy.
Given the lending hiatus consequent to the Banking Royal Commission, even the RBA who normally peddles caution (and who has maintained a ‘the next move in interest rates is likely up’ stance even as they kept cutting them) has adopted a more neutral tone on future rates movements which is probably the clearest signal from them yet that either any rate rise is a long way off or that the door is now officially open for a further rate cut.


Europe continues to duck and weave as it tries to manage (including through deception) the ultimate reality that any chain is only as strong as its weakest link (which may explain why they are making it so hard for breakaway UK to decouple) and its membership is replete with these.

The US continues to ride the Trump high but as it’s not bringing much else of the world with it, it may soon find itself short of a foundation or fuel to keep it there. 

China certainly won’t be contributing positively as it grapples with the novel reality of a US committed to if not obsessed with re-establishing a level playing field. At the moment it is still hoping that the US playing as hard as they are will only be a temporary aberration and will pass with Trump to return to the previous unfair business as usual (which is not unlikely because there is no one in the wings with his spine or business acumen).
Very telling was Trumps recent comment that the Chinese have been (pleasantly) surprised that no-one has addressed the issue of the unlevel playing field before but obviously were happy to let the imbalance continue unchecked for as long as America would allow.
The UK is in for a very messy divorce assuming it ever gets to sign the papers (but more on that below) which you wouldn’t put your (UK) house on today (while it’s still worth something).
In more detail...


China continues to turn inward on so many fronts and particularly relative to real estate investment. A little surprising given this (to most but not to all) is the fact that all of that money supposedly no longer allowed or able to go off-shore is not sending their share or property markets through the roof.
Indeed since China increased the amount of the penalties to up to 20% of the amount for trying to take money offshore to invest and upped the ante on enforcing them, both their bourse and property markets have actually gone the other way meaning they are either still getting the money out some way or just keeping it under the mattress or a bit of both. Our intelligence is they are keeping their powder dry.
The Chinese appetite for property is legendary as one of their Big Three of HOME, FAMILY, EDUCATION with home ownership sitting at a staggering 87% (to the US 64%) of households so average property prices in the massive markets of Beijing and Shanghai dropping 20% and 10% respectively in the last 12 months is a very noteworthy statistic.
By rote prices are now doing likewise in Hong Kong with recent housing projects having to be discounted by up to 20% on both the island and in the new territories to clear stock (much to the chagrin of those who bought early off the plan or who bought similar product last year).
China of course accelerate the recent depreciation of its currency but that is a double edged sword. It would achieve a softer landing for its exports but that would come at the cost of further falls in property and equity prices which in turn would give even greater impetus to the Chinese to repatriate money offshore (particularly into USD as they have rushed to do ever since Trump got in and Xi Xinping was granted rule for life status.


What a tangled web we weave...
If you think we have got problems with our too often and all too recent cringe-worthy socialist capitalist political tug of war (remember Churchill’s prescient and precise observation ‘democracy is the worst form of government except for all the rest’?), spare a thought for rusty bucket EU with its 27 deeply ingrained (up to 3,000 years in the making) political persuasions running, pushing and tugging in all directions at once. Not even the diplomatically adept Belgians or neighbouring Dutch can her those cats.
You would think from that that 1 less in the UK dropping off might be a godsend.
It’s anything but. As a founding member and one of the, if not the, most mature, forward thinking and pragmatic member nations of the economic alliance, if the UK’s now imminent departure assuming it goes ahead as planned doesn’t cause the alliance to topple completely, it will surely rock its foundation to its very core.
It wouldn’t take much to encourage politically nimble Italy to see sense in a retreat should the UK exit not be overly ugly (as long as in doing so they can get to leave a good amount of debt behind) which could then encourage France to do likewise and bring about its demise.
Germany will of course fight tooth and nail against any country leaving because whilst it might rightly argue that it sets the pace for the rest, its ability to set the pace for the rest is determined by their being a rest.
So with all that uncertainty and obfuscation how can you make money buying property in Europe? By buying outside the EU but still in Europe (Switzerland, Monaco et al) and just popping over the border into the to buy some cheaper products from time to time like so many of the smarter ones do!!


Brexit is increasingly looking like it will be a no deal or next to no deal thing which if it is (or even if it isn’t) expect the pound to get pounded at least short to medium term and for greater London property to be taken down for the ride, perhaps even more so given the additional taxes local governments in their infinite wisdom (out for a penny out for a pound – or should that you might as well be hung for a sheep as a lamb – both good British sayings) have seen fit to impose on non-resident purchasers and owners.

How long before we might see a recovery in UK house prices post Brexit? Well that depends on so many things, not least how far the pound falls and what action is taken by the government to try and remediate the fall and fallout.

In or out of the EU, the UK given its history, population, education and geography will continue to box well above its weight, its just a question of how long long it will take to get back into stride post Brexit and how damaging the exit fight gets. Getting back on to its feet may take it far longer than it would like but not as long as particularly Germany who has the most to lose if it exits anything but very badly might like.


The share market is up nearly 50% since Trump took office and property prices in the main capitals are up about half that. Anyone who took on one or more of the tens of thousands of foreclosed ‘sub-prime’ or ‘jingle mail’ homes a decade ago post Bear Stearns should be feeling pretty happy today (and even happier if they bought from Australia using Aussie dollars as the exchange rate differential would have given them an additional 25% pickup).

America is riding on quite a high economically and as long as their interest rates don’t go up too much too soon, they could continue to soar for quite some time.

A man I used to train with in the US ‘Bob Bohlen’ once said to me (just after 9/11) ‘never underestimate Americas ability to bounce back with a vengeance’. He has been proven right twice since then….

Where to invest in the US? Perhaps the horse has already bolted ‘someways’ (as Americans are wont to say) on the property front… That being the case why not just settle for a little bolt hole near Little Nell at Aspen then. Even if you don’t make much on it (or lose a lot if Trump or the US takes a fall), at least you’ll have fun doing it (once you get acclimatised to skiing above 10,000 feet – all the more reason to take a longer holiday perhaps…)…


TAILWINDS: Record Comparative Attractiveness of Brisbane Houses | Still Cheap Finance (albeit MUCH harder to get)
HEADWINDS: Depressing State & Federal Governance | BRC fallout | RBA Intransigence & Lack of Prescience
CROSSWINDS: ?Phoney? Trade War (may soon be real) | Brexit | Rising Global Tensions | Electoral Spending Spree
CRYSTAL BALL: 0% Benchmark Interest Rate | More Yuan Devaluations | QE Aussie Style | RECESSION


- BUY Brisbane Housing 5 – 10k from the city (after you’ve sold closer in to milk the boom for all its worth – refer below)
- SELL investment property anywhere you still can
- SELL Melbourne, Perth, Darwin and Hobart while the goings good (the latter very soon if you want to get out at the top)
- DO NOT BUY mining industry related or reliant property regardless of how cheap for a long time to come
- HOLD off buying anything coastal for the foreseeable future also unless you have the money to burn


-  Near 0% interest rates globally for as far as the eye can see (except in the developing & third world)
-  Low yield world also until and unless another China rises (unlikely) or global money printing triggers something
-  Share markets will continue to head further North whilesoever interest rates stay low and money printing high
-  The investment apartment oversupply in Australia (particularly in Brisbane & Melbourne) to get uglier still
-  The Chinese will return and probably with a pent up vengeance, it’s just a matter of when and how
-  Brexit given the subliminal subconscious might of the UK will be a game changer (and not just for Europe) 


We have often warned of the danger of putting your money where the government makes it easy and very attractive for you to do so because one day they might just need to call on it.

Do you remember under Gillard | Rudd Bill Shorten’s earnest observation that Australians superannuation contributions ($2.7trillion or 2.5 times what Rudd squandered in his cash splash) would be far safer administered by government?   

Putting the why’s and wherefore’s aside, whilst Bill Shorten’s proposed wholesale deconstruction of negative gearing (on 95% of all property with the other 5% only qualifying for it once when new) doesn’t allow him to get his hands directly on our super, it does allow him to shrink the amount of super that is out there that government can’t get its hands on and in the mix collect more tax from the people whose nest egg has shrunk.

Why take such a sadistic step?

Never underestimate what people will do to become leaders of nations. Just as Kevin Rudd knew at the time that showing greater compassion to asylum seekers was a vote winner but would also have known the disaster that would bring about including possibly the many hundreds of deaths at sea it caused, Bill Shorten equally sees the allure of cheaper house prices as his key play for the keys to the lodge and will worry about the resultant carnage later.

His public face reasoning for the drastic step, a tax system that would make housing more affordable (read drive down property prices) can’t be argued with because its true that a logical immediate consequence of it would be significant downward pressure on prices on the type of properties that had been pushed or propped up by negative gearing over the last three decades since Hawke | Keating last experimented with trying to get rid of it, investment property.

Some thoughts around this:

1. The investment property market is already in a very depressed state right across the country thanks to firstly APRA’s inane and ill-timed (& illogical) intervention and more recently the even more damaging Banking Royal Commission. This further politically motivated intervention will only make a bad situation worse and worst of all in the two eastern seaboard capitals of Melbourne and Sydney that he would be aware have the greatest voter base

2. The construction industry is the country’s biggest employer, responsible directly and indirectly for 1 in 4 jobs. Unwinding negative gearing would send 10,000’s of construction jobs to the wall and unemployment skyrocketing. The economic effect of that on the country would make the mining downturn pale into insignificance

3. Winding back negative gearing on 95% of all property as is proposed would most impact middle Australia given they represent ¾ of those who have negatively geared investment properties

4. The price fallout from the planned wholesale deconstruction of negative gearing could potentially wipe out much or all of the investment nest-eggs of millions of Australians and cost the country trillions of dollars in future welfare payments that it otherwise would not have to pay

5. The building vacuum consequent to the policy implementation would send rents higher very quickly as it did last time

Thinking a bit deeper:

1. Once in power, governments often find ‘genuine’ reasons not to carry out the promises that got them there

2. Even if Bill Shorten stays serious about getting rid of negative gearing, given how many jobs that would cost, it is doubtful the unions that got him into power would allow it (unless there was a huge trade-off windfall for them)

3. If getting rid of negative gearing as proposed only caused a mild recession that might be tolerated by the Labor apparatchik because they could argue it was purely coincidence and that the country was due for a recession anyway (a la Keating in the late 1980’s) but if it triggered something far worse which it could given how structurally entrenched negative gearing has become in the strata of our economy, that would be another thing altogether.

The risk | reward in this if we have a change of government and the policy as promised is adopted...?

That’s a hard one given we have $3.3 trillion of investor wealth tied up in investment residential property, a full third of the country’s total $6.9trillion.

Obviously a substantial amount of money would flow out of investment property immediately, particularly apartments that are already on shaky investment ground, but this only until the price falls become so great there is resistance.

As no-one will be building (even if the banks would lend them the money which they won’t), the rising demand for rental accommodation from our fast rising population will put upward pressure on rental prices so we can look forward to lower prices and higher rents.

Surely higher rents will encourage people back to invest?

They ultimately may but given the complexities of taxation, even though it will broadly not be the case, in most people’s eyes rental returns will have to be 30 or 40% higher for a non negatively geared property to match that of one that is.

As more and more people are priced out of the rental market they will instead look to buy (initially at least) non-investment type property which could see significant pressure on entry level housing prices which of course completely defeats the stated purpose of the move.

The law of unintended consequences is a very grey but very real one. You have only to look at APRA’s intervention in the market and now the Banking Royal Commission for clear evidence of that



That’s it for this edition of HOME TRUTH. Watch for our upcoming brief on ‘Interpreting the Recommendations of the Banking Royal Commission

Until then...

John Johnston