ARE WE BUILDING AN APARTMENT BUBBLE?
29 January 2015, Written by Laura Daquino
NEW data lends itself to the notion that Brisbane's property market is headed for oversupply on the apartment front.
Domain Group's recent House Price Report revealed a revival in Brisbane house price growth over the December quarter, up 1.5 per cent from the previous period, but a sharp fall of 4.2 per cent in unit prices for the same period.
On this measure, Brisbane was the second worst performing city for the period after Hobart, which recorded a 7.9 per cent drop in unit prices.
Andrew Wilson, senior economist for the Domain Group, says development particularly in suburban areas is having an impact on the supply-demand ratio for units.
"It certainly was the worst result for Brisbane over the year," says Wilson.
"But it isn't a surprise because we have seen a lot of new units being built, which will have an impact on moving supply ahead of demand.
"We have also been tracking falling rents in areas that do have high apartment numbers and this is now being correlated with falling prices."
Wilson says the brownfield nature of Brisbane has given rise to this situation, and likens it to what has occurred in markets such as Melbourne and the Gold Coast.
"We see supply moving ahead of demand traditionally in new high rise apartment markets located in brownfield sites being redeveloped, even though over the medium term there will be growing demand for inner-city living and apartments in Brisbane," he says.
"We have seen demand gradually catch up with supply in markets like Melbourne and the Gold Coast, and it really is just the nature of the beast given construction timelines."
Wilson says Brisbane's housing market is in "catch up mode", following Sydney to rank as the nation's second strongest.
Despite recording falls over the September quarter, all together the year measured to deliver Brisbane's best annual result for house prices since 2009.
"This largely reflects the fact that Brisbane was behind the game and slow to start growing when interest rates started to impact the housing market, now it's in catch up mode with more confidence around," says Wilson.
"A lot of the activity is in the middle to upper price level though, with outer suburban markets such as Ipswich, Logan and Moreton Bay still underperforming in comparison."