A senior Queensland academic says inner Brisbane apartment prices could fall as much as 25 per cent over the next 12 to 18 months as Asian buyers walk away from settlements.
Chris Eves, professor of property economics at the Queensland University of Technology, said overseas buyers who had purchased off-the-plan in the past six or seven months might not be able to settle final payments now that China has introduced measures to stem capital flow.
“Developers will have to put these apartments on the market and with the lack of demand they will have to discount their prices. Some developers will go out of business – this always happens in oversupply situations,” said Professor Eves who first warned of oversupply in March last year.
He told The Australian Financial Review that listings of apartments for sale and rent in Brisbane were trending up weekly with estate agents telling him prices and rents were already falling.
Adding further pressure on foreign buyers, he said, would be the new 3 per cent stamp duty surcharge which kicks off in Queensland on October 1.
Professor Eves said Sydney would not be affected as its high prices had already priced out foreign buyers, while Melbourne could suffer price falls, but of a smaller magnitude, because of its bigger and more diverse pool of buyers.
“Brisbane developers have gone overboard with amount of stock in the pipeline and thinking the offshore demand would just continue,” he said.
BIS Shrapnel’s Angie Zigomanis said Brisbane had a big supply pipeline to work its way through, but cautioned that Professor Eves’ forecast of a 25 per cent fall was “probably a bit excessive”.
“We’re forecasting a 5-10 per cent fall in Brisbane high-rise apartment prices over the next two [to] three years,” Mr Zigomanis said.
Low rates to cushion impact
“The saving grace preventing a bigger decline are low interest rates which means investors can cut their rents a little to find tenants. We’re also hearing that developers are giving buyers more time to arrange alternative finance,” he said.
“Nobody wants a huge amount of forced sales. This would have a more depressing effect on prices and does not help developers or lenders, who provide project financing.”
But he agreed with Professor Eves that Brisbane was at a greater risk of a correction than Melbourne because it had a shallower pool of buyers and less population growth to support demand.
BIS Shrapnel forecasts more than 6300 apartments to be completed per annum in inner Brisbane between now and 2019. About 6800 per annum are forecast for completion in Melbourne, a city with more than twice as many people.