Data from the Domain Group shows Brisbane’s median unit price has fallen every quarter since June 2016 and is now sitting at a four-year low.
The latest figures show prices dropped by nearly 3 per cent in the 12 months leading up to March this year and, looking further afield to include Greater Brisbane, the figures are even more glum: units fell by 4.3 per cent in the three months to March 2018 alone.
The three-bedroom, three-bathroom apartment at 962/1 Newstead Terrace, Newstead.
Across town, prices are (often reluctantly) being reduced to meet the market. Recently it was reported a Brisbane unit development had resorted to huge price cuts to move the last of its units – prices for Belise apartments in Fortitude Valley were slashed nearly 25 per cent. In Kelvin Grove, units in the Urban Village that were valued at $450,000 two years ago are now going for $399,000.
But this doesn’t tell the whole story.
While the oversupply of cookie cutter units continues to negatively impact prices, units at the other end of the price spectrum are performing exceptionally well.
Luxury apartments and suburbs with desirable school catchments continue to outperform. Photo: Tammy Law
Agents refer to a “two-speed” apartment market, where demand for units upwards of $2 million is outstripping supply, confidence is high and prices are rising.
It’s in sharp contrast with the rest of the lower end of the apartment market where, although now only minimally, prices continue to track downwards and the dreaded “oversupply” line is thrown around on a regular basis.
“I think people really need to get some perspective on what’s happening in our apartment market as a whole,” says Simon Caulfield of Place Estate Agents Kangaroo Point.
Inside the Abian apartment at 4102/140 Alice Street, Brisbane City, sold to a couple from Wagga for $4.21 million. Photo: Supplied
“We’ve transacted over $50 million in high-end apartments alone this year. I’ve never been busier than I have now. I know that goes against all the negative reports but that’s fact. The facts don’t lie.”
Recently a three-bedroom, three-bathroom apartment overlooking the river at Newstead was snapped up by a cash unconditional buyer, who inspected the property at 3pm and offered to pay the full asking price of $2,449,000 by 5pm.
The super-swift deal was brokered by Mike Ower of Grace and Keenan, who says a marked shift has occurred in the upper end of Brisbane’s apartment market, ironically unfolding during the height of the oversupply.
Across the river from Hawthorne, in Brisbane’s east, apartments at Teneriffe and New Farm are in high demand from owner-occupiers.
“At the same time that the rest of the unit market was not doing so well, the high-end of the market really changed,” Mr Ower said.
“Two years ago, trying to sell an apartment above $2 million was very difficult. Over the past 18 months that’s changed significantly.
“The buyers in this part of the market are a lot more active now. They don’t need finance. They have cash. They know what they want and when they see it, they buy it – no messing around with finance – and they’re not worried about what’s happening with the rest of the apartment market because they’re confident in what they’re buying.”
West Village, West End, which occupies a renowned Boundary Street site. Photo: Domain
Not only are these apartments selling, they’re selling well: there’s rarely price drops or discounting at this end of the market, Mr Caulfield says. And Domain Group data confirms it – while Brisbane units at the lower end were falling by 2, 3 and 4 per cent during 2016 and 2017, units at the higher end were increasing in median price.
“The nature of this market is very different. We just sold our second apartment in the Unison building [at Newstead] – and it’s the second property we’ve sold in six months that has sold for 10 per cent more than what they paid off the plan,” he says.
Mr Caulfield and his colleague Courtney Maguire also sold the top-floor penthouse in the renowned Abian development in Brisbane’s CBD. It originally settled for $4.05 million last year but this month a couple in their 50s from Wagga Wagga in NSW snapped it up for $4.21 million.
The West Village development in West End offers “the full lifestyle package”. Photo: Sekisui House
Colliers reported a number of resales in the same building in 2017 at an average uplift of 23 per cent. Their most recent research from earlier this year found average CBD square metre rates increased by 36 per cent over 2017.
Predictably, a significant portion of buyers spending $2 million-plus on apartments are downsizers. It’s a case study often told: older retired couple sells their large, inner-city family home to swap it for a large, inner-city apartment, often on the river, in the same suburb or a suburb nearby.
But those in the industry are reporting a diversification in the owner-occupier market far broader than asset-rich Baby Boomers.
The apartment at 104/53a Newstead Terrace, Newstead, sold at auction recently for $2,205,000.
At West End, one of the suburbs hardest hit by the apartment oversupply, the developers behind new lifestyle precinct West Village have a new generation of owner-occupier buyers firmly in their sight – and have designed their apartments accordingly.
West Village sales, marketing and property management director Megan Barron says Brisbane is on the cusp of a generational change in housing where living in apartments will become normal.
“We as developers have to think about what that means for our facilities and the way we design apartments,” she says. “There’s so much more to the unit market than you realise – it’s just not as black and white as the data makes out.”
Inside a bedroom of 104/53a Newstead Terrace, Newstead.
Ms Barron describes the demographic change as “active re-sizing”.
“No matter what the age, we’re seeing a demand for lifestyle. These are not buyers who want to live in an apartment and eat out every night – they want a gourmet kitchen like you’d get in a house so they can cook their own meals. They don’t want to live in vanilla apartments.”
When complete, West Village will include eight apartment buildings with the the former Peter’s Ice Cream factory as their centrepiece and about 13,000 square metres of retail and commercial space all linked by pedestrian and cycle laneways.
Views for days: 104/53a Newstead Terrace, Newstead.
“We’re seeing families of all ages – young kids, older kids – and particularly families where both parents are still working and know that, in their 50s, they’ll be working for another 15 to 20 years, buy at West Village. They want to be able to enjoy that time,” Ms Barron says.
Mr Caulfield says his buyers range in age from their 20s to their 70s and everything in between and while affordability is sometimes a factor, given apartments can cost a fraction of equivalent located houses, most buyers are usually motivated by a specific lifestyle.
“Often they’re not saving money; they’re selling a $3 million house and buying a $4 million unit,” Mr Caulfield says. “The price points are well in advance of what people are prepared to pay for houses.
Construction has slowed and development approvals come to a standstill, which means the apartment market is on the road to recovery. Photo: Robert Shakespeare
“They’re buying a lifestyle. The overarching theme is an improved quality of life: lock up and leave, close to the city, low maintenance.”
It’s important to remember that while apartments in the upper echelons are mainly flourishing, there are still developers unable to settle on new buildings and unit owners struggling to sell their asset.
LJ Hooker New Farm agent Pauline Karatau says she is contacted every week by unit owners desperate for her to sell their property.
“There are a lot of people hurting. I get emails from them every week,” she says. “You know they paid well over the odds and it’s hard.
“There’s been some really good sales at the higher end, which is wonderful – we just sold a riverfront apartment at Newstead under the hammer for $2,205,000 –but yes, there’s still difficulties at the other end of the spectrum.”
High-rise development officially collapsed in Brisbane last year, when ABS figures revealed building approvals had plummeted 63 per cent.
While the figures seem alarming, what they actually indicated was the beginning of the market correcting itself.
“Approvals over the last 18 months have dramatically declined in south-east Queensland. This will give the market time to absorb stock from projects currently under construction; remembering that the last few years of unprecedented building has filled the gap created by very little residential construction in the years following the GFC,” says Greg Turner from Red & Co.
Nearly a whole year on, that hiatus of new projects is taking effect and unit prices are stabilising. While units fell by more than 4 per cent in December 2016, the latest Domain data shows negative growth has slowed to minus 1.9 per cent over the six months to March 2018.
Mr Caulfield says there are “obviously less cranes in the sky”, which will have an impact as stock gets sold and the market corrects itself.
“I think we’re in a good position. Sales are happening month after month and a lot more [units] are turning over than people realise.”
Moreover, Mr Caulfield is in no doubt about the effect sales at the high end will have on poorer performing segments of the market.
“If people are spending $2 million to $3 million comfortably, those purchases are going to have an impact on the other end of the market, because it gives buyers confidence,” he says.
“And so much of real estate is about confidence.”
Source: www.domain.com.au
