‘Ominous’ outlook for Brisbane apartment market

The Australian 12:00am January 20, 2017

Rosanne Barrett

Brisbane’s apartment market outlook is “ominous” thanks to reduced foreign investment and tightened lending, as Queensland builds almost double the number of apartments than in its previous market peak in the late 1990s.

Lower investor activity and the state government’s new foreign-buyer surcharge could snowball with strong supply in inner-city suburbs to create short-term turbulence, according to a new report by Perth-based property firm Momentum Wealth.

It also found there would be a widening gap between prices for houses and apartments, as housing supply remains below the 10-year average.

“Given the high levels of activity in the Brisbane apartment sector coupled with this easing demand from foreign investors (who predominantly buy in this property segment), the short-term prospects for the apartment market are ominous, particularly in areas with a high concentration of new projects, either planned or under construction,” he said.

Managing director Damian Collins warned investors to avoid suburbs with high concentrations of new stock and opt for existing homes.

“The research report explains that as the pipeline of new apartment projects comes to market, it’s going to weigh on rental returns and capital growth for these types of assets, particularly in those areas with a high concentration of new stock,” Mr Collins said.

The report found there were “serious supply concerns” within the inner ring, notable in Brisbane city, South Brisbane, Newstead, Bowen Hills, West End and Kangaroo Point.

The number of apartments approved in South Brisbane is 2084, in Brisbane city 1731, Newstead and Bowen Hills 1493 and 846 in West End.

It also notes that outside the inner ring, in the northern suburbs of Nundah and Chermside, there was a significant pipeline of projects “that run the risk of becoming oversupplied”.

Property listings were up 7.4 per cent in a year. The median weekly rent fell from $430 to $400 and it was taking longer to sell properties.

However, despite the short-term issues, the research found the fundamentals of the Brisbane market remained strong — with rising employment and stable population growth — and demand from owner-occupiers was “robust”.

Yields remain higher in Brisbane because the prices are so much lower than in Sydney, Melbourne and Perth, and, with higher interest rates expected, it would provide a lower risk.

“There is a lot to like about Brisbane — it has a growing labour market, stable population and a history of consistent and sustainable growth,” the report said.

“In Brisbane it currently requires 4.86 times the average household income to purchase a house at the median price, significantly lower than Sydney and Melbourne at 7.31 and 6.03 respectively.”