Inner city Brisbane home to "excess of rental stock": BIS Shrapnel

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Apartment completions in Brisbane are set to peak in 2016/17 financial year, however they will remain at elevated figures until at least 2019 according to new research from forecaster BIS Shrapnel.

Released this week, BIS Shrapnel’s latest brief for Brisbane’s apartment market has revealed that the record 2015/16 total of around 3,250 apartment completions will soon be topped as continual demand from investors drives supply.

“Based on the current pipeline, completions are on track to peak in 2016/17 at over 7,000 apartments, of which investor owners will continue to form the bulk of underlying demand,” the brief said.

“Relatively less expensive apartment prices, and more attractive rental yields compared to their respective home markets, is likely to sustain demand for IBA stock from investors in Sydney and to a lesser extent, Melbourne,” the brief said.

According to BIS Shrapnel, the inner Brisbane market will see work completed on of 7,182 apartments in 2016/17, 6,468 apartments in 2017/18 and 5,497 apartments in 2018/19.

While BIS Shrapnel predicts investor demand will continue for apartment markets in inner Brisbane, the area’s already crowded rental market could result in diminishing returns in coming years.

The BIS Shrapnel research claims that 58% of all apartments in inner Brisbane are currently rental properties and that has already led to some softening of the city’s market.

“Unlike Middle and Outer Brisbane, vacancy rates in Inner Brisbane have increased since 2013/14, reaching 3.8% at December 2015,” BIS Shrapnel said.

“While some of this rise may reflect the rate of new stock coming to the market and the time required to fill the stock, the steady rise in vacancy rates through 2014 nevertheless suggests that an excess of rental stock is emerging within Inner Brisbane.”

BIS Shrapnel estimates the rise in vacancy rates will restrict rental growth to just 0.1% in 2015/16, with capital growth also set to fall.

“Preliminary data suggests unit prices may have declined, as the record level of apartment completions in 2015/16 creates increased competition and has a negative impact on resale prices. [There] is a decline expected in prices of 2% in 2015/16.”

A suggested is the case in Sydney and Melbourne, BIS Shrapnel also believes there is a significant portion of apartments in inner Brisbane that are being allowed to sit vacant.

“Unoccupied dwellings—those that are held as second homes or kept empty as a speculative investment— comprise 11% of total apartment stock in the IBA area, compared to 8% across Greater Brisbane.

“It is expected that this level will increase from 2014/15, given the level of overseas demand and the potential that many may be held and not released to the rental market.”
 

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