Market glut hits apartment demand
The Australian 12:00am July 10, 2017
Rosanne Barrett
When unit owners contact Frank Gosdschan’s office looking to put their properties on the market, the Brisbane real estate agent asks: “Do you really need to sell?”
Amid sluggish capital growth and an influx of new apartments on to the inner-Brisbane market, the McGrath agent said sellers had to be aware they probably would lose money if they had held the unit for fewer than five years.
“I would say, ‘do you really need to sell it because the capital growth hasn’t appeared’,” he said. “This market is very, very tough.”
Mr Gosdschan has a South Brisbane unit for sale with a price guide of $525,000 to $565,000. Official property records show it last sold for $579,000 in 2012.
A wave of off-the-plan construction has added more than 5300 units in the inner city this year, with more than 11,000 being built now. The sudden supply has dovetailed with a clampdown on bank lending to foreigners and investors to cool overheating down south, and the market for one-bedroom and two-bedroom units is oversupplied.
Among the units for sale near the city is one in Merivale Street, South Brisbane, for $365,000, which was bought in March 2015 for $409,000; a Charlotte Street city unit that sold in 2007 for $400,000, now listed at $385,000; and a high-rise unit with panoramic city views in the city centre, bought in 2008 for $770,000, now seeking offers over $690,000.
In nearby Bowen Hills, resales have seen losses above 30 per cent. A high-rise two-bedroom unit sold for $400,000 in October, having sold off the plan for $528,500 in 2010. Another unit, bought for $521,000 in 2011, sold in November for $400,000.
In its most recent “Pain and Gain” report, researcher CoreLogic found almost 25 per cent of unit sales in Brisbane in the first quarter of this year were at a loss.
While southern capital unit prices have seen rampant growth, to a median price of $785,000 in Sydney and $530,000 in Melbourne, BIS Oxford Economics said Brisbane’s median unit price was $425,000, which with low interest rates made it the most affordable level since the 2000s.
Felicity Moore, from the Real Estate Institute of Queensland, said agents were not reporting heavy losses, but price falls of 5-10 per cent were emerging: “We expect we will see a continued softening of the apartment market for a short period. We expect the upswing will start to emerge certainly in 12 to 18 months.”
Rental yields for Brisbane units continue to be higher than in Sydney and Melbourne, despite lower capital growth, with REIQ data showing record high vacancies of 4.4 per cent in the inner city. The oversupply, mainly in the smaller, large-scale “investor market”, is not expected to last, given a 50 per cent drop in unit approvals last year.