Brisbane apartment values could fall drastically

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Blaine Callard, CEO of Harvey Norman Ireland, recently made headlines when his Brisbane CBD sub penthouse sold for $400,000 less than he paid for it eight years ago.

Callard had been asking for offers over $2m for the 216 square metre sub penthouse apartment in the upmarket Admiralty Towers, but only managed to fetch $1.85m. Records show he’d paid $2.25m for the investment property in 2009.

Callard’s investment isn’t the only example of a Brisbane apartment that was resold at a loss. Official property searches indicate that many off-the-plan apartment high-rises completed at the start of the boom have since been resold at considerable losses – as high as 35% in densely built areas such as Newstead, Bowen Hills, and Hamilton.

According to BIS Oxford Economics, Brisbane apartment owners face a potential $4bn drop in property values over the next three years, fuelled by oversupply and a falling market. The research firm has forecasted a drop of 7% in the city’s median unit price by 2020, which would take the median price of a Brisbane unit from $392,500 to $365,025 in today’s terms.

While this forecast is a worst-case scenario, Angie Zigomanis, senior manager at BIS Oxford Economics, said newer Brisbane units were expected to lose value in the short term.

“Anyone who has bought off-the-plan now is unlikely to see a gain at all in the three years,” he told The Australian. “Those losses are bigger when you take into account the stamp duty on the purchases as well. For a lot of purchasers it means their equity has dissipated.”

Nearly a quarter of Brisbane apartments lost money in the first three months of the year, up from approximately 18% of sales making a loss in mid-2016.

Michael Yardney, CEO of Metropole Property Strategists, said buyers who’d purchased off-the-plan apartments in high-rise towers in Hamilton, Bowen Hills, and Fortitude Valley were particularly hard hit.

“This comes after an unprecedented building boom over the last five years, which created a massive oversupply of high-rise apartments,” he said. “It seems that price drops of 20 to 25 per cent are not uncommon for resales after off-the-plan purchases.”

“And things are not going to improve any time soon: Just look at the skyline and you’ll still see cranes everywhere.”

Last month, RBA Governor Philip Lowe said that Brisbane’s building boom was coming under closer scrutiny.

“We are … watching the Brisbane property market carefully, particularly the effect on prices of the large increase in the supply of new apartments,” Lowe said.


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Comments
  • Jetie says on 06/10/2017 01:05:02 AM

    Unfortunately, the hundreds of thousands of South East Queensland unit owners will experience dramatic valuation declines from today’s values of their properties in the range of 15 to 30 percent during the next five years.
    The oversupply glut cannot possibly be rectified until 2023 at the earliest.
    I am a retired real estate professional with experience in excess of 45 years of investing and selling. Many real estate price cycles have come and gone in my experience.
    The ONLY locale that I would ever consider buying a unit in Australia is within 15km of the Sydney CBD. Any other location is fraught with high risk, even in Melbourne.

  • Andrew says on 09/10/2017 03:47:57 PM

    An over-priced sub-penthouse may not be a good example and is always high risk. My 1x1x1 at West End has increase by 4% in the last 12 months. Not all assets are the same. Even a $2-4 million dollar house in Brisbane is high risk until the market comes around to fully support it. No story here. This is a bit like the Four Corners sensationalism a few weeks ago!

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