Thousands of new apartments to flood Brisbane

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An estimated 32,000 new units could flood Brisbane’s apartment market over the next two years, which would drive already softening prices further downward.

Andrew Wilson, chief economist for the Domain Group, made this estimation based on approvals for apartments in Brisbane over the past 24 months.

“You could speculate that over the next two years you could have that quantity of apartments coming into the Brisbane market,” he said. “You may get some developments that are shelved, put on hold. And that does happen as well.”

Wilson believes there is no clear way to manage these incoming units. “That’s the conundrum for the developer, isn’t it? They’re putting supply into a market where supply is already ahead of demand. We’re moving into the peak of the supply cycle. And there’s negative factors impacting the demand cycle.”

The Reserve Bank of Australia (RBA) has expressed repeated concerns over the large number of new apartments poised to inundate the Brisbane property market, as well as the potential hit facing investors who’ve bet on making capital gains.

Michele Bullock, the RBA Assistant Governor (Financial System), said the central bank was less concerned about the wave of high-rise construction in Sydney and Melbourne due to stronger demand and population growth in these markets.

With apartment prices and rents already softening in Brisbane, and some banks tightening their loan conditions, Bullock said there was potential for further price declines in the Queensland capital.   

“The current stock is due to increase by 25 per cent in the next two years. That's an awful lot of apartments to come into Brisbane,” Bullock said.  

Some apartments in premium inner-city developments have yet to settle, with some analysts warning that “crunch time” has arrived.

About 20% of the first tower of property developer Gurner’s 520-unit FV development are yet to settle, although the company maintains sales-to-date mean the $180m in debt linked to the project has been repaid in full.

More than 6,400 apartments in major developments are due for settlement this year in the inner-city, according to Urbis.

Despite the troubling forecasts, Gurner founder Tim Gurner said Brisbane’s property fundamentals were strong and “negative whispers” about the market were “way too simplistic and alarmist” since quality apartments were settling well, generating healthy rents, and achieving substantial resales.

“People have been discussing Brisbane’s property market like it’s the end of the world as we know it,” he told The Australian. “However, the fundamentals are strong, and with rental yields high and price points low compared to other major Australian cities, I believe Brisbane’s quality apartment market has only just started to hit its straps.”


Related Stories:
Brisbane Apartment Values Could Fall Drastically
Reselling Brisbane Apartments Means Selling At A Loss

 

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