Inner city Brisbane not oversupplied: REIQ

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The fear of oversupply has been a dark cloud over the apartment market in inner-city Brisbane for some time now, but one of Queensland’s peak real estate bodies claim conditions currently aren’t as bad as many people have made them out to be.

CoreLogic RP Data this week said the steady flow of new rental properties on to the market is one of the main reasons for poor rental market conditions across Australia, but the Real Estate Institute of Queensland (REIQ) believes the inner-city Brisbane market is still a “healthy one.”

According to March quarter vacancy rate figures released this week by the REIQ, the Brisbane CBD vacancy rate fell from 3.1% to 3% over the quarter.

“The inner five kilometre ring is at 3.3% and the middle ring is at 2.5% – these levels continue to fall within what the REIQ considers the healthy range,” REIQ chief executive officer Antonia Mercorella said.

“We are clearly not oversupplied – at this stage,” Mercorella said.

But not everybody is quite as optimistic as Mercorella and the REIQ, with news of a decline in the inner Brisbane vacancy rate described as “surprising.”

“It’s a little surprising that the [inner city] vacancy rates have come down a bit recently,” Adam Duffy, partner at investment consultancy firm Meridian Australia said.

“That’s probably a good thing for Brisbane in general, but there is quite a bit of new supply that’s going to come into those markets in the next two or three years,” Duffy said.

Duffy said the next couple of years are likely to see a huge wave of new supply hit Brisbane’s inner suburbs, with some of the more heavily marketed suburbs of particular concern.

“One of information sources we use is Cordell Connect and we looked at Queensland in April and all the new supply coming in to the state. If you look at it all, 36% of all [new supply] is heading into greater Brisbane and if you look at the ABS figures Greeter
Brisbane has 48% of Queensland’s population,” he said.

“But if you have a look at all the new property coming into Greater Brisbane, 57% of it is going within two kilometres of the city, so there’s a quite a substantial amount going into that area.

“Those areas like Fortitude Valley, South Brisbane and those suburbs that are very heavily marketed are for us areas of concern.”

While the REIQ may class the inn city rental market as healthy, Duffy believes that might be a stretch as landlords realise they may need to incentivise their properties for tenants.

“In those markets that have been saturated and vacancy rates are quite high we’re starting to see things like free iPods being given away [to tenants], free iPads, free TVs, free rental periods and reductions in rent.

“People are having to resort to those strategies so they have a point of difference and can actually lease their properties.”

 

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