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Undersupply Looms in Brisbane Apartment Market

Posted on 10 February 2020

POPULATION growth will drive Brisbane's apartment market towards undersupply within 18 months, assisted by the low cost of finance, new first home buyer incentives and the slowdown in new construction.

The Inner Brisbane Unit Market Residential Residual Stock Analysis from m3property showed 10.6% of units in developments with at least 50 units or around 1,500 units completed since January 2016 remained in the ownership of the project's developer.

However, few high density projects have commenced since 2018 and supply has now reached a low point in the cycle.

Report author, m3property director of research, Casey Robinson, found the CBD had the highest proportion of residual stock at 25.6%, a result of major supply completion last year, but remained the most sought after market with the highest turnover of stock, and an average 7.6% price increase according to resales.

m3property managing director (Queensland) Ross Perkins, said the inner Brisbane unit market had received considerable negative attention during the past three to four years, with reports of oversupply and significant losses borne by investors, but that the worst appeared to be over.

"Some investors have recorded very disappointing resale results and that has been the result of a number of factors including the very strong demand and the easy access to finance which allowed investors to buy at what now appears to be a premium to true value.

"The subsequent spike in construction predictably saturated the market to the point where values went the other way. The good news is that we are now seeing signs that the market is turning the corner and in the short term that will deliver some welcome stability," Perkins said.

Robinson said the key driver population growth may exceed expectations on the back of major infrastructure improvements including Brisbane Airport's second runway, and the Cross River Rail and Queens Wharf projects.

Brisbane's inner ring is forecast to increase by about 31,000 people between 2019 and 2024.

Price growth is expected as the market heads into a period of undersupply.

While average values have increased in the CBD, resale prices north of the river had fallen 7.4% and by 2.9% south of the river.

"We found it was common for units in the CBD and higher quality/prestige developments to experience positive capital growth on resale. The CBD also had a higher proportion of units that were resold compared with the north and south of the river precincts," Robinson said.

The average sales rate of projects completed since 2016 that had sold all units was 2.8 units per month, and the rate of sale increased for projects completed in 2018 compared with 2017. Sales rates are expected to increase for 2019 projects as the low cost of finance and new first-home buyer incentives encourage increased purchaser activity.


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