$2B UNIT SURGE: IS BRISBANE HEADED FOR OVERSUPPLY?
22 January 2015, Written by Jenna Rathbone
CLOSE to $2 billion in apartment projects are poised to be delivered to the Brisbane property market over the next two years, however experts are divided on whether this will lead to an oversupply.
Place Projects, in its Predictions 2015 report, says more than 35 large-scale residential buildings are under way across the city, adding a further 3850 apartments to the market which has expanded strongly in recent years.
Place Projects' Lachlan Walker says the city still needs an estimated 7000 infill apartments each year to satisfy projected population growth when looking at South East Queensland Regional Plan (SEQRP) statistics.
"There has been an undersupply of apartments in Brisbane over the past five years, however over the last couple of years we have had a big influx of new developers enter the marketplace and they are beginning to backfill demand in Brisbane," he says.
"Yes there is a lot of apartments coming to the market in Brisbane but in the long term we are always going to sit in that undersupply space if the SEQRP figures are correct.
"The volume of apartments under way and in the pipeline is bigger than it has been for some years, but it still falls short of what is required to support our growing population."
Property commentator Terry Ryder disagrees and is warning property investors to steer clear of the Brisbane inner-city apartment market.
The founder of hotspotting.com.au says the city is currently facing an oversupply of apartments, despite calls in some quarters for more development and construction.
"The loudest noise in real estate is always the voice of vested interest which is usually agents and marketing people pushing their particular barrow," Ryder says.
"They make their living selling apartments, so they have a vested interest in arguing against the reality that vacancies are already high and are certainly going higher because of the level of new supply that is coming into the market."
Ryder says the additional apartments are only going to make the oversupply worse and developers are building apartments not to supply demand to the local market but they are doing it to sell to offshore investors.
"Developers believe that regardless of local supply, demand and high vacancies they can flog them to the Chinese," says Ryder.
"The impact is going to be that those investors are not going to be able to find tenants or they are going to have to severely cut rent and that is going to have an impact on the overall market.
"When rent is cut, values fall and that will impact existing local property investors and home owners in the Brisbane inner city area.
"Developers will be happy because they will have found buyers and they don't care who buys them and if buyers can't subsequently find tenants.
"I would urge local buyers to stay out of that market because they are going to be hurt by the inevitable decline in rents and values that are going to come from massive levels of new construction that is happening."
Among the projects proposed for Brisbane are Australand and Honeycombes Property Group's $232 million Coorparoo Square; Icon Milton, a $175 million residential projects being undertaken by Hong Kong-based GH Properties; and Property Solutions' $120 million Toowong Tower.
Author: Jenna Rathbone
About: Jenna Rathbone is a Queensland-based journalist who writes on a range of issues including business and property affairs and social issues.Connect via: Twitter