WINTER 2016
www.m3property.com.au
INNER BRISBANE APARTMENT MARKET
MARKET TRENDS
 Strong growth in dwelling approvals and
finance commitments.
 Some approved developments being
This report examines current trends and conditions in the Inner Brisbane multidwelling market. We define the Inner Brisbane market to comprise of five core
precincts; the CBD, Inner North, Inner South, Inner East and Inner West.
postponed on the back of fears of
oversupply.
 Tightening in lending criteria and
regulations.
 Declining rental rates.
 Vacancy continuing to increase
equilibrium across the majority of Inner
Brisbane suburbs.
 Development site values within the CBD
and near city suburbs to decrease 20%
- 30%, with development site values
within middle and outer ring suburbs
holding.
IN THIS REPORT
Market Overview
1
Key Residential Influences 2
Supply
6
Sales Activity
7
Rental Market
9
Outlook
11
KEY INDICATORS
Precinct
Median
Unit/Townhouse Price
(2016 to date)
Unit/Townhouse
Capital Growth
(CAGR 2005 to 2015)
Median Weekly Rental
Rate (Two-Bedroom
Units)*
Multi-Unit Dwellings
Under Construction
(Completion 2016/17)
Vacancy Rate Range
(June 2016)
CBD
$452,500
2.9%
$570
1,377
4.9%
Inner North
$495,000
3.6%
$435 - $500
4,303
3.4% - 8.1%
Inner South
$461,000
4.4%
$345 - $510
5,285
2.2% - 5.5%
Inner East
$475,500
4.7%
$350 - $475
1,331
2.6% - 4.8%
Inner West
$448,500
4.8%
$395 - $425
1,554
3.2% - 5.4%
Source: Median Price and Capital Growth: RP Data; Median Weekly Rental Rate: Residential Tenancies Authority; Dwellings Under Construction: BCI
Australia; Vacancy Rate: SQM Research; m3property.
Notes: * Based on sample of suburbs analysed within the precinct.
KEY RESIDENTIAL INFLUENCES
INVESTOR HOUSING FINANCE
Investors have been particularly active in the residential market over the past two
years, and finance for the construction of new dwellings in Queensland is currently at
its highest level since prior to the onset of the GFC.
•
Figures from the ABS indicate the number of investor finance commitments in
Queensland increased by 34.6% over the year-ending May 2016 (from the yearending May 2015).
•
The total value of investor finance commitments for the construction of new
dwellings was approximately $134 million during the month of May 2016.
Millions
•
$3,000
Finance for the Construction of New Rental
Dwellings
$2,500
$2,000
$1,500
$1,000
11111111
$500
$0
Source: ABS, m3property
Year-Ending
QUEENSLAND FIRST HOME OWNERS’ GRANT
First home buyers accounted for
13.9% of national owner-occupier
housing finance commitments in
May. The average loan size for first
home buyers was $326,400.
•
The Queensland First Home Owners’ Grant (previously the Great Start Grant and
prior to this, the First Home Owner Construction Grant) was implemented by the
Queensland State Government in the 2012-13 State Budget.
•
The grant applies to new dwellings (capped at $750,000) being purchased by first
home owners to be used as the principal place of residence.
•
As at 30 April 2016, there had been 17,916 grants paid across Queensland (since
the Grant’s implementation in September 2012), of which, 843 were for dwellings in
the Brisbane Inner City Statistical Area Level 4.
•
As part of the 2016-17 State Government Budget, the value of the grant was
increased from $15,000 to $20,000 for a 12-month period starting 1 July 2016.
AFFORDABILITY
National housing affordability
decreased 3.7% during the June
2016 quarter and was 2.1% lower
than it was in the June 2015 quarter.
www.m3property.com.au
•
Housing affordability is a significant factor driving residential investment and the
entry of owner occupiers into the market. Cost of finance compared to income
levels, government grants and taxation, and dwelling prices are all factors that
influence the affordability of property.
•
According to the HIA Housing Affordability Index (June 2016), housing affordability in
Brisbane deteriorated 0.2% from the March to June quarter and 3.1% over the year
from the June 2015 quarter.
•
The deterioration in affordability is largely the result of an increase in the median
dwelling price over this period. Furthermore, earnings growth in Queensland is
currently the weakest of all states and territories.
Comm3ntary Winter 2016 | P2
KEY RESIDENTIAL INFLUENCES
DWELLING APPROVALS
•
During the 2016 financial year (to end of May), there have been 9,504 non-house
dwellings approved in Inner Brisbane. The Inner South precinct has accounted for
39.4% of approvals and the Inner North precinct has accounted for a further 23.6%.
Non-House Dwelling Approvals
10,000
9,000
Over the past five financial years
(current financial year to May only),
there have been 30,769 non-house
dwellings approved within Inner
Brisbane. The Inner North has
accounted for 39.9% of approvals
(12,288 approvals) and the Inner
South has accounted for 30.5% of
approvals (9,396 approvals).
8,000
7,000
6,000
CBD
Inner North
Inner South
Inner East
Inner West
5,000
4,000
3,000
2,000
1,000
0
2012FY
2013FY
2014FY
2015FY
2016FY to May
Source: ABS, m3property
Precinct / SA2
The South Brisbane, Brisbane City
and Newstead – Bowen Hills SA2s
have seen the largest number of nonhouse dwellings approved during the
2016FY to date.
www.m3property.com.au
CBD
Brisbane City
Spring Hill
Inner North
Albion
Ascot
Fortitude Valley
Hamilton
Kelvin Grove – Herston
New Farm
Newstead – Bowen Hills
Wilston
Windsor
Inner South
Annerley
Fairfield – Dutton Park
Greenslopes
Highgate Hill
South Brisbane
West End
Woolloongabba
Yeronga
Inner East
Balmoral
Bulimba
Camp Hill
Coorparoo
East Brisbane
Hawthorne
Kangaroo Point
Morningside - Seven Hills
Norman Park
Inner West
Ashgrove
Auchenflower
Bardon
Newmarket
Paddington – Milton
Red Hill
St Lucia
Taringa
Toowong
Source: ABS, m3property
Number of Approvals 2016FY to May
1,828
1,731
97
2,247
63
88
53
327
19
28
1,501
0
168
3,749
100
33
164
12
2,084
766
410
180
1,394
24
55
44
468
189
23
328
181
82
286
0
18
84
10
46
0
82
35
11
Comm3ntary Winter 2016 | P3
KEY RESIDENTIAL INFLUENCES
REGULATORY CHANGES
According to the RBA’s (May 2016)
Statement on Monetary Policy, the
changes enforced by APRA have
had the desired result of a decline in
turnover in the housing market and
slower growth in the average size of
loans.
Over the past year, there have been a number of changes to lending practices and
legislation that have had an effect on domestic and offshore investor demand. A
summary of major changes is provided below.
•
In late 2015, the Australian Prudential Regulation Authority (APRA) introduced
measures to force banks to slow growth in their housing investor loan portfolios. As
a result of these requirements, the major banks tightened their credit requirements
and raised interest rates for property investors.
•
All four major banks have recently enforced stricter borrowing requirements on
foreign buyers by tightening their rules on the source of income and increasing the
size of deposits required. These changes have been implemented as a result of
increased concern regarding fraud and money laundering by offshore purchasers.
Notable changes include:
o maximum loan-to-value ratios for foreign buyers of 70% (previously 80%) for
CBA, Westpac and ANZ, and 60% (previously 70%) for NAB;
o no lending to applicants with 100% foreign income (ANZ);
o no lending to applicants using self-employed foreign income where borrowers are
residents receiving foreign currency income (CBA);
Changes to lending to foreign buyers
have the potential to see a number of
contracts not proceeding to
settlement, particularly given the
large number of off-the-plan unit
sales to overseas buyers that have
occurred over recent years.
o no lending to offshore customers who are not citizens or residents of Australia
with an eligible visa (Westpac); and
o no lending to offshore applicants who do not have existing Australian income
(NAB).
•
As part of the 2016-17 State Government Budget, a 3.0% surcharge on stamp duty
for foreign buyers, referred to as the Additional Foreign Acquirer Duty, will come into
effect from 1 October 2016. This move is in-line with Victoria and New South Wales
who have also recently announced the introduction / increase of stamp duty
surcharges for foreign purchasers. This has the potential to have a major impact on
confidence in the residential market.
•
The major banks’ appetite for development funding has declined over the past year,
largely due to increased settlement risk at the end of the project. Banks have
typically tightened their lending criteria, requiring lower loan-to-value ratios and a
larger amount of presales. Some banks are also reportedly not lending for particular
projects (based on location) due to fears of oversupply in the location.
•
The Federal Government’s withholding tax regime legislation started on 1 July 2016.
Under the new legislation, vendors selling a property for over $2 million will need to
apply for a clearance certificate showing they are an Australian resident to avoid the
purchaser withholding 10% tax from the purchase price and paying that amount to
the Australian Tax Office. The tax is limited to taxable Australian property including
real property (land, buildings, residential and commercial property). Because the
legislation is only applicable to property transactions with a market value of over $2
million, we expect that the majority of dwelling sales will be unaffected by the tax. It
is important to note, however, that development site sales over $2 million will attract
the tax unless the vendor has a clearance certificate.
CONSTRUCTION COSTS
www.m3property.com.au
•
According to data from the ABS, the cost of ‘other residential building construction’
(excludes houses) in Queensland has increased 11.6% over the past two years
(March 2014 quarter to March 2016 quarter). This is the strongest growth across all
states and territories and compares to national growth of 4.2% over this period.
•
It has been reported that concerns surrounding rising construction costs have
resulted in a number of major approved projects being postponed. For example,
Gurner Property Group’s 184-apartment project on Alfred Street in Fortitude Valley
will reportedly not be developed during the current residential cycle due to the
“escalation of construction prices in Brisbane in the past 12-18 months” (AFR, New
apartments approved but developers hold out for the next property cycle, 23 June
2016).
Comm3ntary Winter 2016 | P4
KEY RESIDENTIAL INFLUENCES
MAJOR BRISBANE INFRASTRUCTURE PROJECTS
Star Entertainment Group has also
unveiled plans for a new 700-room
hotel and apartment tower at Jupiters
Casino at the Gold Coast. The
development would take the current
$345 million redevelopment to $850
million and also includes future
development options with up to five
hotels / apartment buildings and
recreational facilities.
AEG Ogden has also drafted a
proposal for an arena complex at the
Parmalat site in South Brisbane. The
proposal only includes the arena
facility (without the public space and
ancillary facilities), given the site
having a much smaller area.
•
There are a number of major projects planned which we expect would boost the
desirability of living in Inner Brisbane, and thus contribute positively to demand over
the longer term (if they proceed).
•
Star Entertainment Group’s proposed $3 billion Queen’s Wharf Development will
include over 50 new bars and restaurants, over 1,100 hotel rooms across five new
hotel brands, 2,000 residential apartments across three new towers, over 12 football
fields of public space, a pedestrian bridge to South Bank and function area and new
retail space (including the conversion of the Treasury Building to retail).
Construction is anticipated to commence in 2017 with the entire project estimated to
be completed in 2024 (the development will be staged, however, with the Integrated
Resort component scheduled for completion in 2022).
•
AEG Ogden has recently announced plans for the $2 billion Brisbane Live
Entertainment Precinct. The plans include a new 17,000 seat arena situated
above the Roma Street rail lines (and stations for the proposed Cross River Rail Link
and Brisbane Metro), 12 hectares of public space, cinemas, and a number of
restaurants and bars. A longer-term masterplan could include up to 4,000
apartments, a hotel, high-rise offices, medical facilities, cultural facilities and an
education campus. The project would be privately funded.
•
The Brisbane City Council has proposed a $1.54 billion Brisbane Metro system.
The high-frequency subway system would link Woolloongabba to Herston, and
would be constructed over six years. It would be segregated from the road network,
involve the Victoria Bridge being converted to a “Green Bridge” (no cars) and largely
be underground. The Brisbane City Council has allocated $16 million to develop the
business case for the construction of the Brisbane Metro in the 2016-17 budget.
•
The Cross River Rail is a proposed 10.2 kilometre rail link from Dutton Park to
Bowen Hills, with 5.9 kilometres of tunnel under the Brisbane River and CBD. The
project would connect the northern and southern rail networks, with stations planned
at Boggo Road, Woolloongabba, Albert Street and the Exhibition showgrounds. The
$5.2 billion project has an estimated construction timeframe of five years. The State
Government has recently committed $50 million as part of the 2016-17 budget to
establish a Cross River Rail Delivery Authority. In addition, $634 million has been
committed over the next eight years to establish a new rail signalling system for the
project.
Proposed Brisbane Live Entertainment Precinct
Source: AEG Ogden Pty Ltd 2016
www.m3property.com.au
Comm3ntary Winter 2016 | P5
SUPPLY
RESIDENTIAL WORK COMPLETED - QUEENSLAND
•
The total value of new residential work completed in Queensland has increased over
the past four years. Growth of 24.6% in total completions from the year-ending
March 2015 to the year-ending March 2016 was driven by strong growth in nonhouse completions (up 39.5%).
•
The two leading indicators of residential supply / work completed are building
approvals and finance commitments. Across Queensland, housing finance has
increased considerably over the past year and building approvals have remained
relatively stable. These indicators suggest that residential completions across
Queensland will continue to increase during the remainder of 2016.
Billion
Qld Value of New Residential Work Completed
$8
House
Non-House
$7
$6
$5
The total value of new residential
work completed in Queensland
during the year-ending March 2016
was $11.43 billion.
$4
$3
$2
$1
$0
Year-Ending
Source: ABS, m3property
STOCK UNDER CONSTRUCTION – INNER BRISBANE
•
It is well documented that there are a large number of apartments under construction
and due for completion over coming years in the Inner Brisbane market.
•
According to BCI Australia, during 2016 there will be an estimated 5,710 multidensity dwellings completed (across developments with 10 or more dwellings that
are currently under construction or have been completed within the first half of this
year) within the Inner Brisbane market. In addition, there is an estimated 8,140
multi-density dwellings currently under construction that are expected to be
completed during 2017.
•
As shown on the following chart, the Inner South and Inner North precincts account
for the majority of these expected completions.
Stock Under Construction Expected to be
Completed in 2016 and 2017
CBD
In addition to stock under
construction, there are a large
number of approved developments in
the Inner Brisbane market that are
yet to commence construction.
1,377
Inner North
4,303
Inner South
5,285
Inner East
1,331
Inner West
1,554
0
1,000
Source: BCI Australia, m3property
www.m3property.com.au
2,000
3,000
4,000
Number of Dwellings
5,000
6,000
Comm3ntary Winter 2016 | P6
SALES ACTIVITY
NUMBER OF SALES
•
The following chart shows the number of unit and townhouse sales recorded with RP
Data per annum across the Inner Brisbane market over the past decade.
Number of Sales
9,000
The number of sales in the Inner
Brisbane market peaked in 2007
prior to the onset of the GFC.
Following this, there was a more
subdued level of sales activity for a
number of years, with the number of
sales bottoming in 2011.
CBD
Inner South
Inner West
8,000
7,000
Inner North
Inner East
6,000
5,000
4,000
While the number of sales for 2016 to
date looks low in comparison with
previous years, it is important to note
that there is typically a delay of
several months between the sale
occurring and the sale being
registered with RP Data.
3,000
2,000
1,000
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: RP Data, m3property
2015
2016
to date
•
From 2005 to 2015 there was an average of 6,812 sales per annum recorded across
the Inner Brisbane market.
•
During 2015, there were 7,019 sales recorded, down 13.9% from 2014 and 17.1%
from the post-GFC peak of 8,465 sales in 2013.
•
The Inner North accounted for the largest proportion of sales (30.9%) during 2015,
followed by the Inner East (20.4%), Inner West (17.7%), Inner South (17.5%) and
CBD (13.5%).
•
During 2016 to date (sales recorded with RP Data as at 20 July 2016), there have
been 2,251 unit and townhouse sales. By precinct, the proportion of sales largely
follows the same trend as seen during 2015.
•
The following table shows the top ten Inner Brisbane locations according to the
highest number of sales recorded over the five years from 2011 to 2015 (and
inclusive of 2016 to date).
Location
Precinct
Number of Sales
Inner North
3,814
CBD
3,807
Fortitude Valley
Inner North
2,308
South Brisbane (including South Bank)
Inner South
2,055
Kangaroo Point
Inner East
1,835
New Farm
Inner North
1,757
Hamilton
Inner North
1,635
Kelvin Grove - Herston
Inner North
1,421
West End
Inner South
1,412
Newstead - Bowen Hills (including Teneriffe)
Brisbane City (including Petrie Terrace)
Source: RP Data, m3property
•
www.m3property.com.au
Windsor (Inner North) experienced the strongest compound annual growth in the
number of sales per annum over the five years to 2015 (30.1%), following by West
End (Inner South) and Morningside – Seven Hills (both 13.8%). Strong growth was
also seen in the Inner West locations of Red Hill, Toowong, Paddington – Milton and
Bardon (all above 10.0%).
Comm3ntary Winter 2016 | P7
SALES ACTIVITY
MEDIAN PRICES
•
The median price of units and townhouses in Inner Brisbane 2015 during was
$490,000. The median price grew at a compound annual growth rate of 4.1% from
2005 to 2015. During 2016 to date (sales recorded with RP Data as at 20 July
2016), the median price was $468,000.
•
The following table shows the median price of units and townhouses by precinct
during 2016 to date. The median price is highest in the Inner North.
Precinct
The median price of $468,000 in
Inner Brisbane compares with a
median price across the wider
Brisbane City LGA of $430,000 and a
median price of $392,250 in the
Greater Brisbane Region (includes
Moreton, Redland, Logan and
Ipswich LGAs).
Median Sale Price 2016
CBD
$452,500
Inner North
$495,000
Inner South
$461,000
Inner East
$475,500
Inner West
$448,500
Inner Brisbane Market
$468,000
Source: RP Data, m3property
The most affordable SA2s (based on
median prices to date in 2016) are
Spring Hill, Red Hill and
Greenslopes.
•
The SA2s with the highest median prices to date in 2016 are Hawthorne (Inner East)
- $605,000; Camp Hill (Inner East) - $595,000; and Bulimba (Inner East) - $591,500.
•
Between 2005 and 2015, median price growth was strongest in the Inner West and
Inner East precincts (4.8% and 4.7% compound annual growth respectively).
Growth in the CBD has averaged 2.9% per annum, while growth in the Inner North
and Inner South has averaged 3.6% and 4.4% respectively.
•
The following chart shows compound annual growth rates for all SA2s across Inner
Brisbane from 2005 to 2015.
CAGR by SA2
The Windsor SA2 experienced the
strongest annual growth of all Inner
Brisbane locations from 2005 to 2015
(6.6%).
The Inner Brisbane market
experienced compound annual
growth of 4.1% between 2005 and
2015.
Windsor
Woolloongabba
Annerley
Highgate Hill
Balmoral
Yeronga
Toowong
Coorparoo
Wilston
Morningside - Seven Hills
Hawthorne
Bardon
Paddington/Milton
Norman Park
St Lucia
Bulimba
East Brisbane
Ascot
Kelvin Grove - Herston
Spring Hill
West End
Taringa
Total
Inner Brisbane
Inner
Brisbane
Market
New Farm
Hamilton
Albion
Ashgrove
Red Hill
Greenslopes
Newstead - Bowen Hills
Newmarket
Auchenflower
Kangaroo Point
Camp Hill
South Brisbane
Fortitude Valley
Brisbane City
Fairfield - Dutton Park
0%
www.m3property.com.au
6.6%
6.3%
5.7%
5.6%
5.4%
5.3%
5.2%
5.2%
5.1%
5.0%
5.0%
4.7%
4.7%
4.7%
4.7%
4.6%
4.5%
4.4%
4.4%
4.1%
4.1%
4.1%
4.1%
4.1%
4.0%
3.8%
3.8%
3.8%
3.7%
3.5%
3.5%
3.5%
CBD
3.4%
Inner North
3.2%
Inner South
3.1%
Inner East
2.7%
Inner West
2.5%
1.2%
1%
2%
3%
4%
5%
6%
7%
Comm3ntary Winter 2016 | P8
RENTAL MARKET
MEDIAN WEEKLY RENTS
•
The following table shows median weekly rents for the June 2016 quarter for
residential units across a selection of Inner Brisbane locations.
OneBedroom
TwoBedroom
ThreeBedroom
$400
$570
$800
Ascot and Hamilton
$400
$435
$490
Fortitude Valley and Newstead - Bowen Hills
$360
$480
$650
New Farm
$370
$500
$680
Greenslopes
$260
$355
$370
South Brisbane, West End and Highgate Hill
$350
$510
$725
Yeronga
$285
$345
$450
Balmoral, Hawthorne and Bulimba
$300
$450
$525
Coorparoo
$290
$350
$450
Kangaroo Point and East Brisbane
$340
$475
$585
Ashgrove
$230
$425
$395
Paddington - Milton
$360
$410
$730
Toowong and Auchenflower
$320
$395
$500
Precinct / Suburb
CBD
Brisbane City and Spring Hill
Inner North
We have not included all locations
within the Inner Brisbane market due
to the Residential Tenancies
Authority (RTA) grouping data
according to postcode (and thus
some postcodes include additional
suburbs outside of the area we have
defined as the Inner Brisbane
market).
Inner South
Inner East
Inner West
Source: RTA, m3property
•
The chart below shows average annual growth in median weekly rental rates for the
above-noted selection of Inner Brisbane locations over the past year, five years and
ten years.
Growth in Median Weekly Rental Rates
6%
5%
4%
5.0%
One-Bedroom
Two-Bedroom
Three-Bedroom
4.2%
3.8%
3%
1.5%
2%
1%
1.6%
1.7%
0.3%
0%
-1%
-2%
-1.9%
-3%
-4%
-3.4%
One-Year
Five-Year
Ten-Year
Source: RTA, m3property
There was strong growth in the
number of rental bonds lodged from
the June 2015 to the June 2016
quarter (One-Bedroom – 18.2%,
Two-Bedroom 11.3%, ThreeBedroom 10.9%). Despite stronger
demand, however, rental growth over
the year was flat / negative.
www.m3property.com.au
•
Rental rates have declined / remained flat over the past year. This is in comparison
with the stronger average annual growth seen over the past five and ten years.
•
The decline in rental rates over the past year has not, however, been a function of
lower demand, evidenced by the total number of rental bonds lodged in the abovenoted locations being 13.9% higher in the June 2016 quarter than the total number
of bonds lodged during the June 2015 quarter.
•
Instead, the decline in rental rates is the result of the increased amount of supply in
the Inner Brisbane market, which has pushed the vacancy rate above the equilibrium
level.
Comm3ntary Winter 2016 | P9
RENTAL MARKET
VACANCY
The Brisbane City LGA vacancy rate
of 2.8% is the third highest of all
capital cities (behind Perth - 5.0%
and Darwin – 3.0%) and compares
with a national vacancy rate of 2.5%.
•
SQM Research publishes vacancy rate data for established dwellings (data is not
broken down according to type of dwelling). According to SQM Research, as at
June 2016, the vacancy rate in Inner Brisbane was 4.5%. This is in comparison to a
vacancy rate across Brisbane City LGA of 2.8%.
•
Since 2011, the vacancy rate in Inner Brisbane has followed the long-term trend of a
gradual increase.
•
The following chart shows the vacancy rate for Inner Brisbane locations (based on
postcodes). As shown by the chart, the majority of locations have vacancy rates
higher than the market equilibrium level of 3.0%, indicating there is an oversupply of
rental accommodation in these locations.
Vacancy Rate - Inner Brisbane Locations
Brisbane City/Spring Hill
Ascot /Hamilton
Albion
Fortitude Valley/Newstead/Bowen Hills/Herston
New Farm/Teneriffe
Windsor
Wilston
Dutton Park/Woolloongabba
Fairfield/Annerley
As at June 2016, Fairfield, Annerley,
Greenslopes, Camp Hill and
Coorparoo were the only Inner
Brisbane locations with a vacancy
rate below the equilibrium level of
3.0%.
Greenslopes
South Brisbane/West End/Highgate Hill
Yeronga
Balmoral/Hawthorne/Bulimba
Camp Hill
Coorparoo
Kangaroo Point/East Brisbane
Norman Park/Morningside/Seven Hills
Ashgrove
Bardon
Newmarket
Paddington/Milton
CBD
Inner North
Inner South
Inner East
Inner West
Red Hill
St Lucia
Taringa
Toowong/Auchenflower
0% 1% 2% 3% 4% 5% 6% 7% 8% 9%
Source: SQM Research, m3property
Landlords currently have little scope
to increase rental rates. The high
vacancy rate across the Inner
Brisbane market, paired with minimal
pricing differential between
established and new stock, means
that tenants are increasingly moving
from established stock into newer,
better-located developments with a
higher level of facilities than existing
stock.
www.m3property.com.au
•
While the overall vacancy rate in the large proportion of the locations graphed above
is above the equilibrium level of 3.0%, it is important to note that vacancy within
suburbs can vary greatly. Some newly developed projects have minimal vacancy
while older stock may have a higher level of vacancy (as tenants have moved from
older to newer apartments).
•
As shown by the chart, all suburbs within the Inner North and Inner West precincts
have vacancy rates higher than 3.0%. The vacancy rate in Ascot/Hamilton (8.1%)
was the highest of all locations.
•
Increasing vacancy in Inner Brisbane has been a key driver behind the decline in
rental rates seen over the past year. The Inner Brisbane rental market has become
considerably more competitive as a result of the high vacancy rate and is favourable
to tenants.
Comm3ntary Winter 2016 | P10
m3property Research
For more information please
contact:
Research Contact
www.m3property.com.au
Casey Robinson
P 07 3620 7906
[email protected]
OUTLOOK
The outlook for the Inner Brisbane apartment market is negative.
Key Valuation Contact
The Inner Brisbane apartment market has
entered into a period of oversupply. This is
expected to continue over the short term, given
the large number of multi-unit dwellings that
have been approved over recent years, of which
a considerable proportion are currently under
construction.
John Falvey
Given the large amount of stock yet to be
completed, we expect that vacancy rates in the
Inner Brisbane market will remain high over the
foreseeable future, and that this will continue to
put downward pressure on rental rates. Rental
rates are expected to come under the strongest
downward pressure in the Inner North and Inner
South precincts, given these precincts are
expected to see the largest amount of
completions over the remainder of 2016 and
2017. They have also accounted for the largest
proportions of approvals during recent years.
It is expected that tenants will increasingly look
to relocate to newly completed developments,
given the high level of amenity offered in these
developments and the small price differential
between new and established stock.
In addition to factors negatively affecting supply
in the Inner Brisbane apartment market, there
are also a number of factors negatively affecting
investment demand at present. The tightening
of lending conditions and new State Government
regulations have had, and will undoubtedly
continue to have, an adverse effect on
investment
demand
(particularly
foreign
investment demand) for multi-unit dwellings.
We expect that these factors, which negatively
impact on both supply and demand in the Inner
Brisbane apartment market over the short term,
will encourage the postponement of construction
on some approved projects. They are also likely
to result in relatively flat capital growth over the
foreseeable future.
P 07 3620 7905
[email protected]
In the CBD and near city market we expect a
decrease in development site market values
between 20% and 30%, given the significant
premium paid for sites above their alternative
use value as commercial or industrial properties.
The momentum of market values changing will
gather pace as developers seek to refinance
sites. In the middle and outer ring suburbs the
premium paid for development sites was
generally not significantly above the underlying
residential single lot value and this will provide a
floor if the market conditions worsen.
As a result, developers are expected to
increasingly shift their focus to suburbs that,
while in close proximity to the CBD, fall outside
of the defined Inner Brisbane market. These
locations typically appeal more to the owneroccupier market looking for a boutique
development with larger floor plans than what is
generally offered in inner-city high-rise
developments.
Looking further ahead, there are a number of
factors that will support occupier demand in the
Inner Brisbane market. For example, there are a
number of large proposed infrastructure projects
such as the Queen’s Wharf Development,
Brisbane Live Precinct and improved public
transport systems, that are expected to increase
the desirability of living in close proximity to the
Brisbane CBD. Furthermore, the low value of
the Australia dollar is expected to continue to
support the growing international education
sector (and demand for accommodation that
emanates from this sector).
[email protected]
OFFICES
Adelaide
Brisbane
Melbourne
Level 3
44 Waymouth Street
Adelaide
South Australia 5000
T 61 (8) 7099 1800
F 61 (8) 7099 1850
Level 2
15 James Street
Fortitude Valley
Queensland 4006
T 61 (7) 3620 7900
F 61 (7) 3620 7999
Level 29
600 Bourke Street
Melbourne
Victoria 3000
T 61 (3) 9605 1000
F 61 (3) 9670 1658
Perth
Sydney
Disclaimer
Unit 2
168 Stirling Highway
Nedlands
Western Australia 6009
T 61 (8) 6500 3600
F 61 (8) 6500 3698
Level 23, MLC Centre
19 Martin Place
Sydney
New South Wales 2000
T 61 (2) 8234 8100
F 61 (2) 9232 5144
This report has been derived, in part, from sources other than
m3property. In passing on this information, m3property makes no
representation that any information or assumption contained in this
material is accurate or complete.
To the extent that this material contains any statement as to the
future, it is simply an estimate or opinion based on information
currently available to m3property and contains assumptions which
may be incorrect. m3property makes no representation that any
such statements are, or will be, accurate.
Definitions
CAGR / Compound Annual
Growth Rate: The mean annual
growth rate over a period of
time.
Median Price: Middle value
from a set of unit sales over a
defined period of time.
SA2 / Statistical Area Level 2:
A
medium
sized
general
purpose area built up from whole
Statistical Areas Level 1 (SA1s).
Their aim is to represent a
community
that
interacts
together
socially
and
economically. SA2 boundaries
typically align with suburb
boundaries.
Precincts:
CBD is defined to include
suburbs located within the
Brisbane City and Spring Hill
SA2s.
Inner North is defined to include
suburbs located within the
Albion, Ascot, Fortitude Valley,
Hamilton, Kelvin Grove –
Herston, New Farm, Newstead –
Bowen Hills, Wilston and
Windsor SA2s.
Inner South is defined to
include suburbs located within
the Annerley, Fairfeld – Dutton
Park, Greenslopes, Highgate
Hill, South Brisbane, West End,
Woolloongabba and Yeronga
SA2s.
Inner East is defined to include
suburbs located within the
Balmoral, Bulimba, Camp Hill,
Coorparoo,
East
Brisbane,
Hawthorne, Kangaroo Point,
Morningside – Seven Hills and
Norman Park SA2s.
Inner West is defined to include
suburbs located within the
Ashgrove,
Auchenflower,
Bardon, Newmarket, Paddington
– Milton, Red Hill, St Lucia,
Taringa and Toowong SA2s.