Below is a summary of the two-bedroom apartment rents for the inner Brisbane postcodes and their corresponding change in the number of new apartment bonds lodged.
Housing markets, at the local level, are heavily influenced by supply and demand.
The superficial lifts in weekly rents in postcodes 4010 and 4064 are a reflection of the number of new apartments settled in those locations over the last 12 months. For example, the number of new apartments for rent in Albion has increased by 75% since early 2016.
Many of these new apartments rent for more than the older stock. Incentives are also in place to attract tenants at the promoted (and often inflated) rents used to help attract an investment sale.
Furthermore, rents for older apartment digs, in many locations across inner Brisbane, including the two magic postcodes mentioned above, are starting to slide. This is what happens when new rental supply is ramping up. Some 5,500 new rental apartments are up for rent across inner Brisbane over the past 12 months.
The vacancy rate in postcode 4010 is currently 7.5% and for postcode 4064 is about 5.9%.
The aim of this Missive is threefold:
1. When looking at rental growth, one must check what has happened to supply. Are we comparing apples with apples?
2. Instead of regurgitating the media release, I wish more journalists would check out the validity of what has been issued and the reasons given as to why something is happening.
3. Also, what we need here is a common rule for measuring rental growth.
That, however, can only come from sampling and, as when it comes to capital growth, by looking at the same set of apartments over time. Substantially renovated apartments also need to be excluded from the sample set.
ARTICLE SOURCED FROM MATUSIK MISSIVE
WORDS BY http://matusik.com.au/#home
Brisbane’s apartment market has been the talk of the town (and city, and country) for a few years – ever since the first cranes started to populate the skyline. Property watchers obsessively focus on the looming oversupply, predicting it will crash settlements, prices, rents and the market generally in the 5km ring. However, even though the forces of supply and demand have been heading in opposite directions, the Brisbane apartment market has contracted at a remarkably sedate pace and so far to a stubbornly small degree. No collapse in sight. To be sure, the short-to-medium term outlook of this market is uncertain. Supply is slowing a surge of demand would doubtless benefit the market.
A close look at the data reveals the anticipated sharp fall in prices has not yet arrived. The annual median sale price has nudged downwards by about 1.1 percent for the 12 months to September 2016. Compare this with a growth rate of 8.3 percent over the past five years and a whopping 40.3 percent over 10 years. A dip of 1.1 percent over the past 12 months is not alarming.
Does this mean the unit market in Brisbane is remarkably resilient or does it mean that the fall is still coming?
Affordability and an enviable position have been the key drivers behind the performance of the unit market in Brisbane over the medium-to-long term. Over the past 12 months, local real estate agents have described the Brisbane apartment market as patchy. Most of those investing in prestige riverfront apartments are achieving successful investment outcomes. However, other market pockets, such as the affordable two-bedroom apartment in Brisbane’s middle-ring, are, in some instances, not performing up to the investor or owners expectations. The September 2016 Queensland Market Monitor reveals that roughly half of Brisbane LGA suburbs have grown their annual median sale price of units, houses and townhouses, (with the other half generally recording a fall in the annual median and house prices). Very few suburbs held steady, which is another indicator of the markets overall patchiness and inconsistency.
Increasing SupplyThe supply of new units in Brisbane has been on the rise over the past decade. The number of listing has showed an upward trend, increasing by 94 percent (of the equivalent to 6.8 percent per year), from 5749 listings for September 2006 to 11,149 for September 2016. Similarly, the number of building approvals increased by 230 percent, from 4860 in financial year 2013 to 16,046 approvals for financial year 2016 or the equivalent of 49 per cent per year. Brisbane inner city represented about 47 percent of building approvals in financial year 2016 followed by Brisbane north and Brisbane south which represented each about 19 percent of building approvals for the same period. The top 10 suburbs expecting to concentrate a large number of medium-to-high density dwellings over the coming 12-36 months are South Brisbane, Brisbane City, Newstead/Bowen Hills, West End, Chermside, Coorparoo, Wooloowin, Lutwyche, Woolloongabba, Upper Mt Gravatt and Hamilton.The indisputable upward trend in supply compared to the estimated 10 year average population growth (to June 2015) in Brisbane about 1.8 percent per year may trigger a contraction in prices over the next 12 to 24 months. The magnitude and timing of the contraction is still uncertain and will most likely show a lag effect. The lag effect will be heavily dependent on the interest rate environment, building cost trend, timing of project completion, housing policy for foreign and local investors and volume of first-home buyers, amongst others.
Building approvals are the only safety brake that could slow supply down over the coming year. Assuming the trend of falling approvals will continue for the rest of financial year 2017 (and disregarding seasonality of the data) the expectations are that the total approvals for financial year 2017 will sit around 12,500. This would represent about 77 percent of approvals for the past financial year 2016.Developers are also conscious of the power they hold on their hands to manage medium-term supply and support the implementation of a market self-correction strategy. Contraction in DemandThe demand for units and townhouses in Brisbane has been volatile over the past decade. The annual number of sales peaked at about 15,500 transactions in the second half of 2014. Since then, the number of annual sales has reduced to about 10,350 in September 2016. This represents a contraction in demand of about 33 percent since mid-2014. One of the main reasons Brisbane is an attractive investment is its affordability compared with Sydney and Melbourne. For the 12 months to November 2016, Sydney apartments were about 69 per cent more expensive than Brisbane apartments, while Melbourne apartments were priced about 20 per cent higher than Brisbane apartments. Brisbane is a city mid-transformation with large investment being delivered in quality infrastructure. However, the Brisbane economy has underperformed since the mining downturn. Brisbane GDP grew at 1.1 percent (for financial year 2016) compared to Australia’s GDP growth of 2.8 percent. The residential property market, particularly medium-to-high density properties, has mirrored the economic underperformance. It is unlikely that demand will lift significantly in the short-to-medium term unless market conditions shift significantly. As a result, if the market is to reach equilibrium, the driving force must be reduced levels of supply.
Is market equilibrium achievable? Over the past two years, supply and demand levels have been heading in different directions with the gap between increasing supply and dwindling demand widening. The question remains as to the impact – will prices fall and if so, by how much and when? Buyer confidence, a contracting rental market and tougher lending conditions are probably the biggest issues stifling demand for units in Brisbane. However, affordability is also a key issue for both owneroccupiers and investors. There are early signs that the market is starting to self-regulate itself with the number of building approvals apparently slowing down. As Brisbane’s dramatic transformation continues, its future will be shaped by how well interstate immigration and also employment figures rebound. The city is taking a giant step towards world-city status, and its appeal to southern investors and interstate owner-occupiers seeking a lifestyle change should rise. Sophisticated entertainment precincts are taking shape, such as the Queens Wharf development, and these projects will offer a vibrant and entertaining inner-city lifestyle. Ambitious projects such as the joint project between QUT. PwC and Brisbane Marketing which is turning Brisbane into a start-up capital will attract new business and workers to the city. It is likely that while there may be some short-term softening of the unit sales and unit rental markets in Brisbane, these will form part of the bigger property cycle and the future for the medium-to-long-term is positive. The dire predictions declaring an economic Armageddon is on the horizon are unlikely to come to fruition. The current trends are within normal property cycle and there is so far no data to suggest the Brisbane apartment market is operating outside of that trend.
ARTICLE SOURCED FROM THE REIQ JOURNAL
WORDS BY REIQ RESEARCH ANALYST, KARINA SALAS.
Brisbane property has been a bit of a heart-breaker over the past few years, offering so much promise, but failing to live up to the hype – and anyone hoping 2017 would prove to be “The Year of the Brissie” will probably be disappointed again.
The hoodoo continues to be employment-fueled interstate migration and, truth be told, we can’t see anything on the economic horizon to suggest southern buyers will start heading here in droves. That’s not to say we shouldn’t be ignored – on the contrary, Brisbane is one of the country’s most forgiving capital city markets. There are very few disappointed long-term buyers in our sunshine state’s big city, provided they stuck with the fundamentals and bought the right property in the right position at the right price.
With this historic performance as a foundation, there are opportunities to get into Brisbane and hold tight that will leave you feeling very satisfied with your decision come a market cycle or two. Inner-city property continues to be our strongest performer. Agents report a reasonable start to the year and if you’re hoping to get into some of our really cool café suburbs such as Paddington, Bulimba, Stones Corner or Woolloongabba, don’t expect to find much under $700,000 as a low buy-in for a modest detached house. While these areas will continue to offer great potential, make sure you seek good quality property with strong tenant appeal for the best long term results.
Middle ring addresses are experiencing some capital gains fueled by the affordability wave, and steady growth over 2017 is likely in locations such as Kedron and Wavell Heights. You’re still in the $600,000 plus price points in order to buy something decent, but as long as the land size and position are appealing, then there’s solid real estate to be had.
One of the surprise performers over the past few months have been the fringe suburbs. There is a continued shift towards house and land packages particularly from investors scared off by the threat of a looming unit oversupply. While no-one is calling a boom for this once very sleepy sector, activity has been strong.
Our team are also noting gains in the western corridor towards the Ipswich region as facilities and infrastructure continue to attract business and residents. Some of the bigger estates in this batch are seeing 30 to 40 land sales per month – and most developers would call this a roaring success. Prestige property has seen a bit more media attention of late too. In many ways, this sector operated outside the constraints impacting other price points due to many high-end buyers being cashed up and immune from interest rate variations. When the right buyer meets the perfect property, record prices can result. We probably see a few more of these benchmark sales occur in 2017.
At the risk of saying “more of the same from 2016 into 2017”… it really is more of the same from 2016 into 2017. There is one area where we’ll vary our opinion from previous years. Herron Todd White Brisbane has always been keen on well-located second hand units as a strategy for those trying to get a foot on the market. They usually offer an affordable option in a great location, and while capital gains aren’t always mind blowing, good tenant demand ensures you can continue to serve the mortgage without too much stress.
There is, however, a very real oversupply risk looming for investor units in our city as new stock struggles to find demand. This is having a negative flow onto our traditionally solid second-hand unit market. If you buyer investor-grade unit stock in particular – new or old – please tread with caution in 2017.
Despite these modest predictions, we will still say, “Come on up you Sydneysiders and give Brisbane a go!” because we could use the help. Oh, and by the way – the old excuse that summer is too hot here in Queensland just doesn’t hold up any longer. While we’ve been complaining about temperatures hitting the low 30 degrees, most other capital cities have been touching into the 40 degrees this summer, so you might as well head north for our more temperate climate and successful football team.
ARTICLE SOURCED FROM THE REIQ JOURNAL
WORDS WRITTEN BY HERRON TODD WHITE