This article is from the Australian Property Journal archive
THE Brisbane apartment market will remain tight despite 2,000 new units being completed in 2011/12, however the period following 2013/2014, according to BIS Shrapnel.
According to BIS Shrapnel’s Inner Brisbane Apartments 2012 to 2019 report, a combination of new and latent tenant demand, as well as the volume of apartment pipeline being made available as affordable rental under the National Rental Affordability Scheme, will ensure that the current potential apartment supply will be able to be absorbed.
Report author and senior project manager Angie Zigomanis said there will be enough tenant demand to absorb the current pipeline of apartments being marketed in the inner Brisbane area.
“However, the likelihood of further new projects entering the pipeline that will add to supply beyond the next couple of years will eventually lead to an excess of apartments.
“The lag time from apartment construction commencement to completion means that many larger projects that are currently being marketed and have either just commenced construction or are due to be commenced in 2013 will not be completed until 2014/15 or – depending on the date of commencement – 2015/16,” he added.
“An estimated 2,000 new apartments were completed in inner Brisbane in 2011/12 – the second-highest level recorded – yet vacancy rates still tightened. On the supply side, there are more than 800 apartments in proposed developments in inner Brisbane that have NRAS approval.
“After peaking at a near-record 2,000 apartments in 2011/12, apartment supply is on track to ease to a more normal 1,200 dwellings in each of 2012/13 and 2013/14. Despite weaker overseas student numbers, and a brief setback in 2012/13 caused by public sector redundancies from the new state government, there is expected to be enough latent tenant demand for these apartments to be taken up,” he continued.
Zigomanis said based on current projects being marketed, up to 3,000 apartments in total are likely to be completed in 2014/15 and 2015/16, which BIS Shrapnel’s calculation of tenant demand suggests would take the market close to balance by June 2015.
“However, if a substantial number of additional new apartment projects begin to enter the picture, then this would tip the market into oversupply in 2015/16.
“Indeed, this is what BIS Shrapnel expects to happen. The relatively tight rental market expected in 2012/13 and 2013/14, together with low interest rates and improving population growth is likely to encourage price growth and further off-the-plan sales. This will result in additional projects being brought to the market in this period,”
“Consequently, completions are forecast to rise to nearly 4,500 apartments in total over 2014/15 and 2015/16 – above that required to be accommodated by tenant demand.
“However, the size of the forecast excess supply will be moderated by the number of apartments being made available to tenants under the NRAS. This will reduce the supply of investment apartments in the next few years that will be made available to regular tenants and therefore reduce the extent of the forecast oversupply. It will also reduce the period for the oversupply to be worked through once new apartment sales and completions subsequently fall,”
“This picture means that inner Brisbane apartment rents and values will show a rise through to 2014/15 while the market remains tight, before weakening in 2015/16 as the excess supply comes through and impacts on rents and purchaser demand, which in turn will flow through to apartment prices. Similarly, apartment pre-sales are forecast to remain relatively buoyant in this time, and then fall back for the next two to three years until the oversupply is absorbed, before moving into the next upturn cycle towards the end of the decade.
“Compared to the double digit annual percentage rises prior to the GFC, the forecast upturn in prices through to 2014/15 will be fairly moderate, averaging five to six per cent per annum, before slowing again in subsequent years, and being below five per cent per annum on average in the seven years to 2019. The current higher yields (median rents compared to median prices are now in excess of five per cent) are also expected to become a staple for investor owners as an offset to the more moderate price outlook compared to the last 15 years,” Zigomanis concluded.
Property Review
