Inner Brisbane Apartments
Market Brief
Surging off–the–plan demand for Inner
Brisbane apartments (IBA) since 2013, has
resulted in considerable new apartment
supply. Completions have risen to record
levels in 2016/17 and are on track to
escalate further in 2017/18 and remain high
in 2018/19.
March 2017
Inner Brisbane Apartment Area
Development in Inner Brisbane occurs
mainly in large scale and high rise projects
in the following locations:







CBD/Spring Hill
Inner East
Inner North
West End
Toowong
Woolloongabba
Hamilton.
This paper profiles indicators relating to
demand, supply, rents and prices.
APARTMENT PROFILE
DEMAND PROFILE
As at the 2011 Census, rental apartments accounted for
58% of total apartments in the IBA area, significantly
higher than the 29% share for all dwellings across Greater
Brisbane. This highlights the preference of investors to
purchase properties close to good transport links and
major commercial, retail and entertainment centres, where
tenant demand is likely to be greatest.
The age profile of apartment residents suggests that
people first rent when moving into the IBA area, with
47% of occupants at the 2011 Census in rental
households aged 20 to 29 years old. If people remain
in, or move into, the IBA area beyond 30 years of age,
there is a higher propensity to purchase an apartment.
Owner occupied dwellings formed 31% of IBA area stock,
with a slightly greater share of these having a mortgage
(being purchased). Conversely, a significantly higher 63%
of Greater Brisbane dwellings were owner occupied.
Unoccupied dwellings—those that are held as second
homes or kept empty as a speculative investment—
comprised 11% of total apartment stock in the IBA area,
compared to 8% across Greater Brisbane. It is expected
that this level will increase from 2014/15, given the level of
overseas demand and the potential that many may not be
released to the rental market.
Households with a mortgage were mostly younger, with
50% of people occupying an apartment being
purchased aged 30 to 54 years old. Within fully owned
apartments in the IBA area, the demographic was older,
with 59% of occupants in these apartments aged
55 years old and over.
Chart 2: Age of apartment occupants
by tenure type, IBA area
Percentage of Apartment Occupants
30.0
Fully Owned
Being Purchased
Private Rental
Total Persons
25.0
20.0
Chart 1: Tenure type of households, 2011 Census
15.0
70%
60%
10.0
50%
5.0
40%
30%
85 +
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
0-15
10%
15-19
0.0
20%
Age Cohort
0%
Fully Owned
Being Purchased Private Rental
Inner Brisbane Apartment Area
Unoccupied
Greater Brisbane
Source: Australian Bureau of Statistics, 2011 Census
Source: Australian Bureau of Statistics, 2011 Census
March 2017
The three main groups driving occupier demand are:
Students account for 17% of the IBA population, with 56%
being overseas students. Overseas students create instant
demand for accommodation, opting to reside close to their
place of study.
The young adult apartment population is typified by those
in white collar employment. Inner Brisbane employment
growth has been weak in recent years due to State
Government cost cutting and a reduction in mining
services jobs.
Empty nesters are classified as those aged 45 years old
and over, being either singles or couples without children.
Empty nesters comprised 28% of the non-student adult
population in the IBA area at the 2011 Census.
Chart 3: Underlying demand components
INVESTMENT
Rental Vacancy Rates
Vacancy rates across Inner, Middle and Outer Brisbane
were generally tight over the period between 2010 and
2013 in response to slow dwelling construction.
Unlike Middle and Outer Brisbane, vacancy rates in
Inner Brisbane have increased since 2013/14, reaching
3.8% at December 2016. While some of this rise may
reflect the rate of new stock coming to the market and
the time required to fill the stock, the steady rise in
vacancy rates nevertheless is indicative of the excess of
rental stock that has emerged within Inner Brisbane.
Chart 4: Rental Vacancy Rates, Inner, Middle and
Outer Brisbane
5.0
Vacancy Rate (%)
Inner Brisbane
3,000
4.5
Number of Apartments
Middle Brisbane
4.0
Unoccupied Apartments
Empty Nesters
2,500
Outer Brisbane
3.5
Overseas Students
'balanced' rate = 3%
Non‐Student YADs
2,000
3.0
1,500
2.5
1,000
2.0
1.5
500
2016
2017e
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
2016
Dec‐16
2015
2014
June Quarter
‐500
Year Ending June
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
1.0
0
Source: Real Estate Institute of Queensland
Source: BIS Oxford Economics
Rents, Prices and Yields
Table 1 outlines the weighted median two bedroom (the
most common type of unit) rent and weighted median unit
price of the IBA area post codes, along with an indicative
yield representing the rent divided by the price.
Unit rental yields peaked at 5.48% at June 2012, and
remained at a similar high level over 2012/13. Combined
with the low interest rate environment, investor demand
strengthened and drove solid unit price growth of 6.5%
over the following year. Relatively low borrowing costs
also reduced cash outflows for investors and reduced the
need for landlords to increase asking rents, particularly
with borrowing costs making it easier for tenants to shift
to owner occupation. As a result, rental growth slowed to
below 1% per annum in the three year period to 2014/15.
Unit yields eased to a low of 4.99% at June 2015.
Rising new rental supply has led to an emergence of an
underlying surplus, which has put pressure on rental
growth. Median rents declined 1.4% in 2015/16. Median
unit prices were also impacted, falling 2.0%. This
downward trend in rents and median unit price is
expected to have continued into 2016/17 as completions
continue to ramp up bringing more supply to the market.
Potentially mitigating this rise in rental stock is the sale of
management rights of apartments and their conversion
into tourism accommodation. Similarly, services such as
Airbnb effectively take units out of the rental market for
short stay accommodation. This has the potential to limit
the rise in vacancy rates.
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2
Inner Brisbane Apartments Market Brief
March 2017
Table 1: Weighted two bedroom apartment median weekly rental, median apartment price
and indicative rental yield, IBA area
Quarter Ending
June
2 Bedroom Apartment Weighted
Median Rent
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017e
Weighted Median Apartment Price
($ p/w)
% Change
($000’s)
225.5
244.8
272.6
282.1
313.5
337.3
369.5
419.6
433.5
441.6
466.7
479.6
483.4
486.9
488.4
481.6
470.0
6.5
8.6
11.3
3.5
11.1
7.6
9.5
13.6
3.3
1.9
5.7
2.7
0.8
0.7
0.3
-1.4
-2.4
226.0
250.0
286.0
310.0
350.0
360.0
390.6
450.0
425.0
462.0
450.0
455.0
460.0
490.0
509.0
498.9
476.3
% Change
Indicative Yield
(%)
0.4
10.6
14.4
8.4
12.9
2.9
8.5
15.2
-5.6
8.7
-2.6
1.1
1.1
6.5
3.9
-2.0
-4.5
5.19
5.09
4.96
4.73
4.66
4.87
4.92
4.85
5.30
4.97
5.39
5.48
5.46
5.17
4.99
5.02
5.13
Compounding Annual % Growth
2001-2007
2007-2017
2001-2017
8.6
2.4
9.5
2.0
4.7
4.8
Source: Rental Tenancies Authority QLD, APM PriceFinder & BIS Oxford Economics
e = estimate
Table 2 shows the magnitude of gains and losses
made in re–sales after an initial sale recorded since
1 July 2011. In the IBA area, re–sales across all
apartments yielded a positive gain for 80% of
transactions. Re-sales of an off–the–plan sale
recorded after 1 July 2011 yielded a far lower 60% of
positive transactions. Off-the-plan re-sales also saw a
greater magnitude of loss compared to re–sales. With
losses at 10% or more, an off–the–plan buyer would
have effectively lost his 10% deposit at point of
purchase and could be required to come up with
significant additional equity at settlement (particularly
if banks are offering lower LVR as well).
Table 2: Percentage of Re–sales, IBA,
first sale since 1 July 2011
Positive gain
No change
0-5% (loss)
5-10% (loss)
10-20% (loss)
20% (loss)
Off-the-plan
All re-sales
60%
14%
13%
6%
7%
0%
80%
7%
6%
3%
3%
1%
Source: BIS Oxford Economics, PriceFinder
SUPPLY PIPELINE
The rise in off–the–plan apartment demand within the
IBA area from 2013 can be attributed to attractive
yields, low or volatile returns for other investments and
low interest rates. The rise in off–the–plan sales has
allowed a greater number of projects to reach sufficient
pre–commitment levels to obtain finance and begin
construction. As a result, the IBA Area experienced
surging apartment completions in the subsequent
period to 2015/16 to a record 3,243 apartments. While
in 2016/17, we estimate that approximately 6,522
apartments will be completed; doubling the record high
set just the year before. With declining rental growth
and price growth, investor demand has softened.
Inner Brisbane Apartments Market Brief
As demand from local and overseas investors weaken, fewer
projects will be able to achieve pre-sales hurdles to
commence. Sharply rising construction costs has also meant
that developer margins have been eroded, impacting the
next round of projects, particularly if there is no price growth
to make projects more viable.
Based on the current pipeline, projects already under
construction will see completions in 2017/18 peak at over
9,000 apartments. However, with increasing pressure on
rents and prices, completions are likely to fall significantly in
the subsequent years. Investor demand for IBA stock may be
supported by more attractive affordability compared to
Melbourne and Sydney, which could support prices.
3
March 2017
Consequently, after its peak at 9,130 completions in
2017/18, IBA Area completions are expected to fall
slightly in 2018/19 to 6,547 before being likely to revert to
closer to longer term averages around the 2,000
completions per annum mark. The West End and Inner
North precinct will be the main source of new apartments
in the IBA area with the greatest pipeline of supply. The
apartment pipeline as a proportion of total IBA area next
greatest in Woolloongabba and CBD/Spring Hill.
Chart 7: Projected apartment pipeline,
IBA area precincts
Number of Apartments in Projects
0
5,000
10,000
Chart 6: Projected apartment completions, IBA area
10,000 Apartment Completions
Not yet commenced
9,000
20,000
West End
Under Construction
Average 2017 to 2019
= 7,400 apts p.a.
Completed
8,000
15,000
Inner North
Woolloongabba
7,000
6,000
CBD/Spring Hill
Under Construction
5,000
Toowong
Development Approval
4,000
Development Application
Inner East
3,000
Average 1997 to 2016 = 1,525 apts p.a.
2,000
Hamilton
1,000
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
Source:
Year Ending June
Source:
BCI Australia, Brisbane City Council &
BIS Oxford Economics
BCI Australia, Brisbane City Council &
BIS Oxford Economics
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