Notwithstanding the strong supply of new apartments experienced in 2016 and 2017 in Brisbane, the significant and ongoing tightening of the commercial credit markets since, has seen a dramatic reduction in the completion of apartments in Brisbane.
Banks are still feeling considerable pressure from APRA in respect to their commercial lending arms and while this continues, it’s difficult to see supply rebounding any time soon.
According to Urbis, apartment completions in the inner Brisbane market are set to decrease dramatically in 2018.
Where 2017 saw about 7500 apartment completions, 2018 should see only 5,500 complete with 2019 and 2020 completions dropping further still to 2,200 and 2,000 respectively.
Forward looking indicators – specifically, apartment approvals – indicate that trend is set to continue. The March quarter saw only 306 apartment approvals in inner Brisbane.
At the peak of the apartment approvals market (2014-15) there were, on occasion, 5,000 per quarter.
While approvals and starts aren’t 100 per cent correlated, the difference in those numbers is significant. It is also important to note that the broader housing market (apartments, houses and townhouses) is not over supplied.
As per JLL’s chart below, in only three of the last 16 years has supply exceeded underlying demand.
It is because of this – coupled with the lack of apartments being built and the outlook for strong population growth – that there is a very real chance of the market being undersupplied in 2020 and beyond.