Investor demand for Brisbane apartments will start to moderate and both rental and capital growth will slow because of concerns over major oversupply, says leading real estate firm JLL.
The gap between home values in Brisbane and Sydney has grown and has encouraged interstate investors to south east Queensland, but there is some growing concern about the 19,800 apartments either under construction or being marketed within the inner-city precincts of Brisbane.
“The Brisbane apartment market has continued to flourish off the back of strong investor demand, as interstate and foreign investors seek to take advantage of the lower price point and higher yields Brisbane currently has to offer compared to capitals like Melbourne and Sydney,” JLL’s head of residential development valuations Troy Linnane said.
But JLL’s director of residential research Rupa Ganguli said strong demand will now start to slow.
“We do anticipate the investor market will moderate over the next 12 to 18 months, as large numbers of new apartments enter the rental market during 2016-2017,” Mr Ganguli said.
“JLL anticipates that rental growth will ease with potential for median rents to decline when the unprecedented levels of supply enters the market coinciding with decreased rate of population growth.”
He said that would create problems for “investor type” stock but opportunities would be available to those developers focused on the high-end, owner-occupier market.
“The strong supply pipeline is also expected to limit the pace of capital growth in the apartment market out to 2017. Given the intensity of competition and future supply, some developers have moved away from the highly competitive investor stock and are focused on smaller owner-occupier projects.”
The warnings from JLL echo misgivings reported in the QBE LMI Australian Housing Outlook report prepared by BIS Shrapnel.
BIS managing director Robert Mellor said there were concerns over the three-year prospects for Brisbane units.
“The message has been out there for a while on Melbourne but I’m worried about Brisbane as well,” Mr Mellor said.
For the 2015 financial year, apartments made up over 45 per cent of all approvals to build new private-sector dwellings which was a record high.
Approvals for new apartments soared almost 84 per cent to 3145 in September, pushing the overall monthly total up 42 per cent to 5168.