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Apartment oversupply pushes Brisbane vacancies higher

Posted on 3 July 2018

Source:  Australian Property Journal

BRISBANE renters were drawn to the middle-ring suburbs over the December quarter, as the oversupply of apartments in the inner city push vacancy rates up to 4% for just the third time in a decade.

Meanwhile, regional Queensland broadly continued its year of recovery, with a number of markets moving from weak situations towards healthy status.

The latest data from the REIQ showed inner Brisbane vacancies were up from 3.7% to 4% over the quarter, while the middle ring taking in between 5km and 20km from the city centre tightened dramatically from 3.4% to 2.1%.

Inner Brisbane has only hit the 4% mark twice since REIQ began tracking data in 2008; in December 2013 at 4.1% and March last year at 4.4%.

REIQ chief executive officer Antonia Mercorella said the news was disappointing for investors, but not unexpected.

"We knew vacancies in inner Brisbane would edge up for the duration of 2017 thanks to strong levels of apartment supply coming to the market," she said.

"Approvals have fallen in the past six months and we know that this period where supply exceeds demand is likely to be only temporary thanks to a steadily growing population and consistent demand for inner city accommodation.

"Just how temporary is difficult to predict but our expectation is that demand will start to catch up to supply very quickly and vacancy rates will return to the typically healthy levels this market usually achieves of around 2.5% to 3.5%," she said.

SQM Research numbers for December showed vacancies across Brisbane had lifted from 3.4% to 3.8% over the month, and had firmed from 4.1% over the year.

Rents saw modest gains over the month; in annual terms they were unchanged for houses at $448.7 per week, while units were down by 0.9% to $368.1 per week.

Mercorella noted that the middle-ring market is affordable; in most suburbs there is the convenience of good infrastructure and public transport, and tenants have a good range of options to suit many budgets.

Vacancies in the outer ring suburbs of Ipswich, Caboolture, Pine Rivers and Redland eased slightly but remained in healthy territory, while Logan and Redcliffe firmed.

The Gold Coast, the Sunshine Coast and the Fraser Coast all tightened and are now in among the state's tightest markets, at 1.1%, 0.7% and 1.6% respectively.

Caloundra and Maroochydore are down to record lows of 0.4%.

Mercorella said markets that remain consistently tight will eventually see upward pressure on rents.

"It's no surprise that the Gold Coast, which has officially been classed as a tight market for the better part of the past five years, is the most expensive place in Queensland to rent a three-bedroom house or a two-bedroom unit," she said.

Beyond the south-east corner of the state, Cairns reached an equal all-time low of 1.6% after a sustained period of gradual tightening, while the Fraser Coast had begun the year at 3.9%.

Rockhampton moved from 8.6% in March to 5% by the end of 2017, and Townsville from 6.2% to 4.6% in the same period.

"These rental markets were facing extremely difficult conditions however the improving broader economy, in particular the recovering coal price and strengthening employment figures, is having a positive impact on regional rental markets and this is good news," Mercorella said.

Toowoomba was the only regional market early in the year to be operating in the "healthy" range, and was at 3.1% in December. Bundaberg and Mackay moved out of the "weak" range by the end of the year, moving from 4.6% to 1.7% and 6.4% to 3.0% respectively.


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