Over the past few years, Brisbane’s apartment market has undergone many changes due to global economic events and local market movements. From apartment undersupply to an all-time development high, the city is now experiencing an oversupply of apartments. We discuss what the Brisbane apartment market currently looks like, and what it means for property investors and real estate agents.
Median house and unit prices suggest that price growth has slowed in Brisbane’s apartment market. But, whilst price growth is cooling, apartment demand has not showed signs of slowing down. Currently, new inner-city apartment buildings are experiencing close to 100% sales prior to completion. As well, apartment gross yields remain strong at 4.8%, still outperforming houses by over 1.5% per annum.
Brisbane’s new inner-city apartment vacancy rate remains at 3.3%, which equates to an average of 9 days vacancy per year. With new apartments having shorter vacancy rates than older units, tenants are clearly opting for new over old. Saying this, off-the-plan high-rise apartment investors may still experience long waiting periods for tenants once the building is built.
As the Brisbane property market currently stands, investors will have to go further outside of the CBD if they want to purchase a house over an apartment. For example, if your client has a $500,000 budget, they could afford to buy an apartment within 5-minutes of the city, or a house 30-minutes outside of the CBD. Houses and apartments are also experiencing different growth rates depending on their proximity to the CBD. For example, your client will receive 4% annual growth on a house located 30-minutes outside of the city, whereas they would receive 6% annual growth on an apartment located in inner-city Brisbane. Given the current property market, in this instance, the client’s apartment would be valued at $508,000 more than the house after 20 years.
Brisbane’s high-rise apartments have been growing at a rate of 34% to 43% each census since 2001. This year alone, Brisbane has had 9,000 new apartments supplied, which is a massive 200% increase since 2015. As a result, Brisbane currently has a huge supply of new apartments, and is evidently oversupplied in popular inner-city suburbs such as Fortitude Valley, Newstead and West End.
However, over the past 12 months, there has been a large reduction in apartment building approvals as more developers have become fearful of the current market. At the moment, 38% of projects with development approval have been deferred indefinitely. Larger developers are even opting to land bank and sell existing projects as they fear getting stuck with a partial apartment development. This is now contributing to Brisbane’s stalling apartment price growth in the densely populated suburbs.
Some experts say that Brisbane is a good market to invest in if you buy house and land, but not an apartment. They recommend holding off investing in Brisbane for the next two years as there are currently too many apartments being built and too many on the market, with over 15,000 still awaiting council approvals. Other experts believe that most inner to middle-city Brisbane suburbs are in fact undersupplied with new boutique-style apartments or townhouses. These types of properties are easy to rent, generate high net yields and high growth rates, and are within most investors’ budgets, which presents an opportunity for agents if they can find and list these properties.
At the moment, there is still a huge demand for investors and owner-occupiers wanting to buy close to the CBD. If yields meet cash-flow requirements and the asset achieves the highest growth rates possible, property investors will continue to buy in Brisbane and agents will need to help them achieve the best possible outcomes. As such, whilst an apartment oversupply is evident, Brisbane still presents many good investment opportunities if property investors and real estate agents conduct their research.
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