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Two-speed apartment market emerges in Brisbane

Posted on 3 July 2018

Source:  Australian Property Journal

NEW research shows Brisbane has a two-speed property market, with the CBD showing strong gains in both apartment sales and values in the December quarter, although concerns remain over the effect of new supply being added throughout the rest of this year.

The Inner City Apartment report from Place Projects shows the CBD, defined as postcode 4000, holds less than 15% of Brisbane's total unit supply, and that the city has numerous "micro markets" that are all performing differently.

There were just 293 apartments available for sale across the Brisbane CBD in the December quarter, with the CBD home to five of 60 active new projects in the region.

North of the river, taking in Newstead, Bowen Hills, Albion and Fortitude Valley, had 914 apartments available for sale across 28 projects. The south, suburbs including West End, South Brisbane, Woolloongabba and Kangaroo Point, had 834 apartments spread between 27 developments.

"The comparatively tight supply in the Brisbane CBD saw sales lift by 60% and prices jump by 45% compared to the previous quarter, resulting in 24 transactions with a weighted average sale price of $1,121,875," Place Projects research analyst, Lachlan Walker said.

"There has been talk of an apartment oversupply across Brisbane, but people should pay attention to the multiple micro-markets within the city, meaning some areas like the CBD have tighter supply than others."

However, a recent research note from property advisory firm, Development Finance Partners, suggested values across the Brisbane apartment market would face their toughest challenge yet in the second half of 2018, with smaller investment-grade units tipped to be the heaviest hit as a new flood of stock comes online.

It said established and new apartments and townhouses in a number of Brisbane areas are caught in a "perfect storm", as owners are also having to deal with tightened lending conditions.

DFP principal, Matthew Royal, said some owners of apartments and townhouses built between five and 10 years ago are getting valuations for their properties that are as much as 20% to 30% below expectations.

"Sections of the market are dire at present, in particular when considering that in the September 2017 quarter, one in four sellers of Brisbane apartments sold at a loss," he said.

CoreLogic data shows the gap between loss-making resales of houses and apartments is widening, with the average loss on an apartment sale now at around $30,000.

Meanwhile, BIS Oxford Economics expects 8,300 apartments will be completed in the current financial year a record total for Brisbane, and a further 5,000 apartments are in the pipeline for 2019, which is expected to further downward pressure on prices and rents.

Walker said a return to quality, owner occupier style apartments over investor stock had led to improved performance across Brisbane as a whole, with the CBD continuing as a market leader.

"In fact, the average sale price across the inner Brisbane - including the CBD, north and south of the river, has lifted 26% over 12 months to reach $700,110 on the back of a shift towards better quality product," he said. "Looking ahead, I expect sales volumes to remain steady in the short term as supply levels continue to be absorbed and confidence gradually returns to the marketplace."

The report said future apartment supply was already tightening, which would further assist with the absorption of current supply.

"Only eight new developments entered the market in 2017, which is significantly less than the 25 new projects in 2016 and 30 new projects in 2013," Walker said. "The handbrakes are on, which will make it easier for current stock to be absorbed and will underpin values moving forward."


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