Changing face of Brisbane property
Written on the 17 April 2009
In conjunction with the inaugural State of the Capital Forum, Invest Brisbane released the Brisbane Economic Annual as a snapshot report on Brisbane’s economy and its prospects for the future. With comments and statistics from a wide range of experts, the report addresses the state’s economic indicators, demographics, infrastructure, knowledge industry and strategic precincts.
SAVILLS head of research Paul Day is cautiously optimistic about Brisbane’s relative position in the global property market, with a floor of support from strong population growth and government commitment to infrastructure.
“Brisbane is not a safe harbour from the global financial turbulence and volatile property markets, but it appears to be the best shelter around,” says Day.
“While the Government’s commitment to its infrastructure program continues, employment will remain comparatively strong and underpin that inflow of new residents,” he says.
Day points out that a lot of debt has been funded by overseas banks but these pipelines are running dry and there is likely to be more hurt to come from overseas.
“Clearly, there will be more downward pressure on prices and rents during the year but less than is being experienced overseas,” he says.
“Locally we have seen some easing in yields, decline in prices, reduction in rents or increase in incentives and all this has gone a long way to reinstating risk margins into property ownership or increasing affordability in the case of housing.”
The Annual states that while office sales reduced significantly in 2008, over the last year Brisbane saw a boom in office construction that has resulted in 225,000sqm of new office space in the CBD.
The boom has been fuelled by vacancy rates hitting record lows, alongside strong demand for office space.
“2009 will see more new office buildings enter the market lifting vacancies towards double figures in the short term as demand for space is slowing but a longer term over-supply is unlikely as restricted credit, a product of the current financial climate, is regulating the supply by default,” says Day.
“The new office buildings are changing the face and skyline of Brisbane, opening up new precincts in the CBD as well as the fringe suburbs and delivering world-class standards of office accommodation in environmentally sustainable buildings.”
There has been a decline in the volume of sales in the retail property sector but the Annual predicts the market to pick up towards late this year or early 2010, as sentiment and credit come back to what has been a consistent performer overall.
It says retail property has been the most sensitive to location, but suburban retail has also boomed over the past three years, driving the retail centre class into a highly sought after investment.
“Queenslanders enjoy the highest amount of retail space per capita in enclosed centres nationally, a lot to do with shoppers’ comfort in the steamy summer weather endured in Brisbane,” says Day.
A recent survey of the CBD found there was just below 310,000sqm of retail space spread through 1518 shops with a vacancy of 3.47 per cent.
The Annual states from an investment point of view the industrial market does not have an encouraging outlook, as firms are mindful to contain costs and are content to make do with existing premises, unless larger industrial space is absolutely required.
“Now there is likely to be further pressure on industrial property yields if there is no real rental growth and a possibility of reducing rents,” he says.
Real rents are likely to ease eventually to reflect the lower cost of providing industrial premises, and as Brisbane’s industrial property market moved into 2009 there were a few encouraging signs, with owner-occupiers of mid-sized premises out there looking again.
With a population growth of 2 per cent per annum, the Annual states Brisbane needs 14,000 new dwellings annually, and while new approvals have been exceeding 16,000 much of this construction has gone into specialised developments.
“The net result is that residential vacancies throughout Brisbane remain low while demand has been strong up to the middle of 2008, feeding into rising rents across all residential categories,” he says.
“While rents continue to rise for the moment, house prices are starting to ease as demand, particularly for the top end, has waned in the face of economic instability.”
While median house price has fallen by 5 per cent Brisbane still has a low level of housing affordability, but Brisbane is still favoured to be the least affected by the economic downturn.
“For the present, Brisbane remains the second least affordable capital city for housing behind Sydney, but unlike Sydney, housing quickly becomes more affordable in the outer ring suburbs,” he says.