QLD Excerpt from the 2014 August Market report

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Market defies naysayers

Reports that segments of Brisbane’s market are facing a looming oversupply seem to be overstated, while the market overall continues to move along at a steady pace

All too often, positive news seems to inspire naysayers. One of humanity’s quirks is the presence of people who prefer to see the glass as half-empty or the darkness surrounding a cloud’s silver lining.

Discussion of aspects of Brisbane’s property market has been afflicted by this tendency in recent weeks. In particular, there have been reports of the need to approach the inner-city apartment market with caution, due to a potential oversupply in the near future.

Metropole Property Strategist’s Brisbane director, Shannon Davis, says there is a lot of supply going into the inner-city apartment market and it might take a while for demand to catch up with that supply. 

However, there is also growing interest in smaller dwellings – like one- or two-bedroom apartments or townhouses – and a trend towards both living and investing centrally rather than out in the suburbs.

In the past, a lot of investors invested in property further out in the suburbs for tax deduction purposes, Davis says. “But many have realised that, for an investor, it is not necessarily the best thing to do. Also, many people are tired of commuting. You look at the young professional, empty nest or migrant demographic groups. They prefer apartment living and they are often renters.”

Comments claiming a potential oversupply and the associated risks have been overstated, Real Estate Institute of Queensland (REIQ) CEO Anton Kardash says. “In my view, the inner-city apartment market is actually improving. There has been huge growth in sales activity in certain areas of that market.”

There might come a time when that changes and there is an apartment oversupply, but vacancy rates are quite low, which indicates a reasonably tight market, Kardash says.

“Also, anecdotally we are hearing there might be a general lack of stock in well-established, inner-city Brisbane suburbs. Properties are spending quite a short amount of time on the market, so the demand is out there.”

The latest Place Advisory report on the Brisbane inner-city apartment market also addresses the issue. While some statistics imply the market is likely to be oversupplied in the near term, it directly challenges such statements. 

While there are over 22,000 proposed apartments in the pipeline, this depth of market pipeline has existed for over six years and, given demand, Brisbane was likely to, in fact, remain undersupplied, the report says.

Solid and steady

Overall, the Brisbane market seems to be well placed in terms of value and growth. The latest RP Data Rismark Home Value Index results show that, while there was a slight drop of 1.7% in values in May, over the quarter there was growth of 2.2%.

Davis says that drop is likely to be largely seasonal, as is traditional over April to May. Another contributing factor could be the Federal Budget, which has probably impacted on consumer confidence.

“Pre-Budget, Brisbane was firing up more than most capital cities… And it remains the most pent-up of capital city markets. So, assuming a return to the trend pre-Budget, the market should continue to grow.” 

An attractive feature of Brisbane’s market is that, compared to Sydney and Melbourne, it generates higher rental yields, Davis adds. “This is driving lots of investor interest. Those yields, in comparison to purchase price, means there is lots of activity.”

Kardash agrees with this assessment of the current state of the market. It has been a good year of steady growth in both the house and unit markets, he says.

“The thing with the Brisbane market is that it is never as dramatic as markets like Sydney or Melbourne. So we have seen solid growth and then a slight easing. But, crucially, it remains stable and steady and should continue in the same vein.”

Developing trends

A positive trend worth noting is that both the time (days) properties are spending on the market (DOM) and property discounting have dropped over the last year, Kardash continues.
DOM has dropped by 15 to 20 days in total and, while there will always be some discounting, the drop in the percentages properties are discounted by has been significant.

“This is an indication of a nice, steady marketplace which has increasing demand and where there is a good convergence between sales and stock.”

Meanwhile, an investor trend worth noting is that in Brisbane’s outer suburbs houses are increasingly being favoured over units, Kardash says. “This is particularly prominent in the $350,000 bracket. It reflects a move by investors into houses in particular areas.”

Suburb to watch: Coorparoo

Often described as one of Brisbane’s “best kept secrets”, Coorparoo struggled a little post-floods, despite not being directly affected by them. 

However, the tide has finally turned for the suburb, which sits on the banks of Norman Creek. The latest Herron Todd White report even notes that the mid-ring suburb is showing signs of strong interest and limited supply.

Located just 5km from the CBD, with excellent train and bus links, the hilly suburb also has several of its own shopping and dining precincts along with an abundance of parkland.

Mark Bellingham, from Barry Plant Real Estate, says Coorparoo has a number of excellent private and public schools, good sporting facilities and is generally safe and family-friendly. 

The suburb has a particularly wide range of property types, including Art Deco and even some Spanish Mission Revival homes.  It also has a number of heritage-listed buildings.

“With traditional Queenslanders, renovated post-war homes and architect-designed masterpieces, there is a home in Coorparoo to suit all budgets and tastes,” Bellingham says.

Over the last decade, there have been a lot of developments and new projects in the suburb. Yet Bellingham says it retains a mix of old and new residents and its special community feel.

Coorparoo’s proximity to the CBD, attractive range of service and recreational options, and relative affordability mean it is likely to grow further in both appeal and value.

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