Apartment oversupply could stunt growth
With the completion of over 9,000 apartments in 2016, an oversupply issue is a real and present risk in the Queensland capital market and is expected to limit Brisbane’s prospects for a few years.
“Higher unit supply is progressively weighing down the capital gains across the sector. [This] trend can be seen in Brisbane, where the supply of units across key inner city regions is high,” says Tim Lawless, head of research at CoreLogic.
Most of these apartments are in the CBD, city fringe and inner suburbs, adds Michael Yardney from Metropole Property Strategists.
“Even though forecast completions will decrease over the next few years, the current oversupply will limit capital growth and rental growth for a number of years,” he cautions.
Nonetheless, the broader housing market should still perform reasonably well for now, following a boost in employment and driven by affordability.
“While clearly Brisbane is not the hotspot that some projected, correct property selection can yield a great investment as property prices are around 50% cheaper than Sydney and rental yields are higher,” Yardney advises.
Regional areas emerge
While demand remains strong in Brisbane, other areas of Queensland are starting to make their mark.
“The Gold Coast continues to be a market that is popular with renters, sharers and buyers. There is a significant amount of development occurring,” says Nerida Conisbee, chief economist at REA Group.
“We can expect to see growth on the Gold Coast because the lifestyle continues to be a popular drawcard with both renters and buyers. The upcoming Commonwealth Games will also ensure that the market continues to perform well.”
Being a tourism destination could be another significant advantage for suburbs in regional Queensland.
“Cairns continues to have one Australia’s highest growth rates [because of its] excellent climate, the international airport, rainforests, reef, sophisticated business centre, enriched cultural diversity, abundance of cosmopolitan dining, and being a tourism hotspot,” says Sharyn Anisset, manager at Kenfrost Homes.
She highlights the suburbs of Redlynch, Kewarra Beach and Mount Sheridan as being the most sought after in Cairns at present. Moreover, the southern corridor is a convenient spot, with parklands, schools in close proximity, sports facilities and a childcare centre under construction.
Rentals flourish in Cairns
Rental returns in regional markets are delivering strong yields to investors, with Cairns’ rental market performing better than Brisbane’s.
“If you looked at rental return performance, Cairns’ rentals average about 1% better than Brisbane’s. Cairns’ rental market remains tight and has done so for a number of years,” says Kenfrost Homes general manager Adam Gowlett.
“It is not building new housing at a rate that is greater than has been absorbed by the market. Very few new units have been built in the last five to 10 years and properties on the market for sale have remained fairly stable for a number of years, with the market being considered as balanced.”
While property prices have not increased markedly, investors continue to reap average returns of 5 6% – higher values than in Brisbane and the Gold Coast. The region has also received funding from the state government to support construction and development.
Projects completed in Cairns include the $34m Bill Fulton Bridge, while new facilities such as the performing arts centre, aged care homes and a cinema complex are in the planning stage.
“Cairns looks set to enter a period of more stability and even some growth within the construction and development sectors,” Gowlett adds.
SUBURB TO WATCH
Redlynch: Valley suburb in high demand
Situated 10km northwest of the Cairns CBD, the suburb of Redlynch is known for being one of the stops along the Kuranda Scenic Railway.
Freshwater Creek carved out the valley in which Redlynch sits, and dwellings are primarily established along the lower slopes. The Barron Gorge National Park borders Redlynch on the east and west.
Aside from the railway, Redlynch also boasts of being home to author Xavier Herbert, whose cottage is currently a heritage site. Redlynch has a thriving agriculture industry centred on sugarcane production. St Andrews Catholic College is located on Redlynch Intake Road, and there is a shopping centre at the junction of the Larsen and Redlynch Connector Roads.
Cairns can be reached in less than half an hour via State Round 91, and buses run to the city daily.