Brisbane’s off the plan apartment supply surge hasn’t yet reached its peak, with supply set to mount between late 2016 and 2018 according to BIS Shrapnel’s Inner Brisbane Market Apartment Brief released today.
The period between peak demand and the subsequent lag of pipeline supply reaching the market has apartment completions set to soar to record levels over the next few years with the report stating the demand for inner-Brisbane apartments seen back in 2013 will result in record-high levels of stock completions during late 2016 to 2018.
The report says inner-Brisbane area completions are on track to escalate above the record levels in 2015/16, increasing to a peak of 7,182 apartments in 2016/17, 6,468 apartments in 2017/18 and 5,497 apartments in 2018/19. The West End and Inner North precinct will be the main source of new apartments in the inner-Brisbane area over the three years to 2018 accounting for 60% of all new supply. Apartment completions as a proportion of total inner Brisbane area (IBA) expects to be next greatest in CBD/Spring Hill (13%) and Toowong (10%)
Rising vacancy rates will limit rental growth in 2015/16 to an estimated 0.1%. Moreover, preliminary data suggests unit prices may have declined, as the record level of apartment completions in 2015/16 creates increased competition and has a negative impact on resale prices. With a decline expected in prices of 2% in 2015/16, the indicative yield for a two bedroom apartment in the inner-Brisbane apartment (IBA) area will improve slightly to 5.19% at June 2016. The report says unlike middle and outer Brisbane, vacancy rates in Inner Brisbane have increased since 2013/14, reaching 3.8% at December 2015.
BIS stated that while some of this rise may reflect the rate of new stock coming to the market and the time required to fill the stock, the steady rise in vacancy rates through 2014 nevertheless suggests “an excess of rental stock is emerging within inner Brisbane.”
The report lists Brisbane’s top development suburbs as CBD/Spring Hill, Inner East, Inner North, West End, Toowong, Woolloongabba and Hamilton. Brisbane’s less expensive apartment prices are expected to attract investors in favour of Brisbane rather than investing in Melbourne or Sydney.
Rising vacancy rates will limit rental growth in 2015/16 to an estimated 0.1 per cent. The report states “preliminary data suggests unit prices may have declined, as the record level of apartment completions in 2015/16 creates increased competition and has a negative impact on resale prices.”
With a decline expected in prices of 2% in 2015/16, the indicative yield for a two bedroom apartment in the IBA area will improve slightly to 5.19% at June 2016.
The report’s age profiling suggests three main groups driving occupier demand: students, younger adults, and older empty nester adults with students account for 1 per cent of the IBA population and within that, 56 per cent representing overseas students.
The rise in off–the–plan sales has allowed a greater number of projects to reach sufficient pre-commitment levels to obtain finance and begin construction. As a result, the IBA area experienced a sharp increase in apartment completions in 2014/15 to 2,920 apartments.
In 2015/16, BIS estimates that approximately 3,250 apartments will be completed, surpassing the record high set just the year before.
Rental apartments account for 58% of total apartments in the IBA area, considerably higher than the 29% share for all dwellings across Greater Brisbane. This highlights the preference of investors to purchase properties close to good transport links and major commercial, retail and entertainment centres, where tenant demand is likely to be greatest.
Originally Published On:http://www.theurbandeveloper.com/