OVERVIEW OF THE INNER BRISBANE APARTMENT MARKET FORTITUDE VALLEY SUBURB PROFILE BY MATUSIK PROPERTY INSIGHTS Fortitude Valley Over the past decade, the suburb of Fortitude Valley has recorded the highest average annual population increase of all inner-ring suburbs apart from the CBD itself, and with a staggering 73% of households in Fortitude Valley renting, strong demand exists for additional rental accommodation. Metro Property Development and Pearls Australasia’s new Brooklyn on Brookes project is set to meet this demand. Location, location Fortitude Valley is located just two kilometres from Brisbane’s central business district (CBD). It is just one stop from Brisbane’s Central Station; two stops from the Roma Street parklands (and transit centre); three stops from the Brisbane Convention and Exhibition Centre and the Queensland Performing Arts Centre; and four stops from Brisbane’s world-famous Southbank parklands. Additional public transport options include buses, CityCats and ferries. From mid-2010 the City Glider bus service has linked Newstead and West End with regular (5-15 minute) services through Fortitude Valley and the CBD. Fortitude Valley also offers quick and convenient road and rail access to Brisbane’s domestic and international airports, and easy access to Brisbane’s extensive road network including the inner city bypass, Story Bridge, Kingsford Smith Drive, and the Gateway Motorway for access north to the Sunshine Coast and south to the Gold Coast. Urban renewal For a decade from the late 1990s, under the guiding hand of Brisbane City Council’s Urban Renewal Taskforce, the Fortitude Valley area was transformed from a predominantly industrial area into a thriving, mixed-use precinct with boutique apartments, fashionable shops and a wide range of eateries and entertainment venues. Fortitude Valley has a unique place within Brisbane's urban environment and history, with a distinct identity and cosmopolitan character. Major features of the Fortitude Valley area include Valley Metro Plaza, Emporium Shopping Centre, Brunswick Street Mall, Chinatown Mall, Centro Complex, James Street Market, Cathedral Village Shopping Centre, Homemaker City, Homemaker City North, Institute of Modern Art, Australian College of Natural Medicine, Valley Pool, Centenary Place and two schools. Queensland Inner Brisbane Rest of Qld Gold Coast 6% 5% 4% 3% 2% 1% Matusik Property Insights - Source: Queensland Government (OESR). Data for March quarter each year. 20 11 20 10 20 09 20 08 20 07 0% 20 06 With almost three out of four (73%) households in Fortitude Valley renting, tight vacancy rates have put significant upward pressure on rents. For example, the Residential Tenancies Authority reports a 4.4% increase in median weekly rents over the past year for two-bedroom apartments in Fortitude Valley, and gross rental yields in Fortitude Valley are currently 5.8% according to Australian Property Monitors. Residential rental apartments vacancy rates 20 05 Strong demand Vacancy rates are extremely tight across Inner Brisbane at present, a trend that has accelerated over the past 12 months. See chart 1 opposite. Inner Brisbane Ten-year average population growth 8% 6% 4% 2% ey Va ll Fo rtit ud e Hi ll Bo we nH ills nd rin g Sp tE W es in Gr ov e Ka ng ar oo Po int Fa rm Ke lv Ne w oo ng ab ba 0% oo ll According to the Queensland Government’s South East Queensland Regional Plan 2009-2031, an additional 156,000 dwellings will be required to house the increase in Brisbane City’s population over the next twenty years. Population growth rates - ten year average W Looking ahead, new apartments which allow sharing to occur – in essence, two-bedroom/two-bathroom configurations with equal-sized bedrooms – should do best with regard to rental returns into the future, as well as well-designed (and not necessarily large) one bedroom apartments. Matusik Property Insights - Source: Australian Bureau of Statistics Cat. No. 3218.0. Most - 138,000 or 88.5% of these new dwellings - are to be “infill” in nature, meaning medium density in existing residential areas, such as inner northern suburbs like Fortitude Valley. More people will therefore call Inner Brisbane “home” and this high level of population and employment growth augers well for the long-term performance of residential property in and around the Brisbane CBD. To this end, it should be noted that there are currently 41 major infrastructure projects, worth $38.770 billion, underway or committed across Brisbane City. The majority of this expenditure ($29.442 billion) is located in 18 projects across Inner Brisbane. Top performance There were 182 settled apartment sales in Fortitude Valley during 2010 with a median sale price of $410,000. Whilst this was just a 1% increase from the median sale price in 2009 of $406,000 it is an impressive 11% increase from 2008, where the median sale price was $370,000. Examining the re-sale performance of individual apartments is a much more accurate way of gauging price movements than relying on median sale prices, and the re-sale performance of apartments in several projects in Fortitude Valley over the past year was a much more impressive 6.2%. Average annual gains of around 7.0% per annum were recorded in several projects, with the average capital gain upon re-sale of an impressive $133,112 across the projects examined. New development The latest apartment project to be released in Fortitude Valley is Brooklyn on Brookes by Metro Property Development and Pearls Australasia. This project will comprise 191 residential apartments in a 15storey tower within walking distance of the CBD, the Valley entertainment and business zone, major employment centres and public transport, and is adjacent to the fabulous Emporium centre with its 35 retail outlets and boutique hotel. High petrol prices make proximity to public transport more important than ever. The importance of the site’s proximity to public transport infrastructure – buses are at the door and the railway station is a fiveminute walk away – should not be underestimated, as research shows this can translate into higher demand from both the owner-occupier and permanent rental market, increased property values, a wider geographic area from which buyers and renters come from, and greater “rentability” and hence higher rents and rental yields. Disclaimer Whilst this information has been carefully compiled no warranty or promise as to its correctness is made or intended. The information enclosed also represents subjective interpretation by Matusik Property Insights Pty Ltd (ABN 85 088 308 847) and should not be relied upon for investment decisions. Interested parties should undertake independent inquiries and investigations to satisfy themselves that any details herein are true and correct. The material in this publication is copyright. Reproduction only allowed with permission. Phone (07) 3720 9988. Date compiled July 2011. Information is valid for six months from date of compilation. SUBURB PROFILE - MATUSIK Fortitude Valley’s extremely tight vacancy rate is at least partly due to the fact that the Valley’s population has increased by an average of 8.0% per annum over the past ten years, the highest growth rates of all suburbs across Inner Brisbane outside of the CBD itself. See chart 2 below. FORTITUDE VALLEY SUBURB PROFILE BY RESOLUTION RESEARCH suburb profile 2011 SUBURB PROFILE FORTITUDE VALLEY Location Fortitude Valley is an eclectic inner city suburb with a rich heritage as an early merchant trade centre for Brisbane. Its immediate proximity to the Brisbane CBD through the arterials Ann and Wickham Streets has formed the logical extension of the CBD, bringing with it, massive amounts of infrastructure, business, investment and population. It is well serviced in terms of lifestyle amenity with a diverse and thriving heart along the Brunswick Street Mall and adjacent Chinatown precinct. This area is arguably Brisbane’s cultural hub, with trendy bars and clubs, restaurants, live music venues and theatres all aligned under the newly designated ‘entertainment precinct.’ The only precinct of its kind in Australia, the area is under a separate planning leadership and has specific responsibilities in promoting a safe, integrated and quality urban environment. The suburb is host to a number of festivals and community events throughout the year including the Valley Fiesta, Jazz Festival, Chinese New Year and the weekly Valley Markets. Fortitude Valley is also home to the James Street retail and lifestyle precinct containing the landmark Emporium development. This precinct features a number of high end restaurants, boutiques and furniture retailers and the popular James Street Markets. Transport and Infrastructure Fortitude Valley is well serviced by a range of public transport options affording easy access to all areas of greater Brisbane. The Brunswick Street train station is one of only four stations within Brisbane that offer accessibility to all train lines, including the air train which services both the International and Domestic Airports. Buses run regularly from bus stops to the CBD and further afield to the Northern and Southern suburbs. The ‘City Glider’ is an express service that links Fortitude Valley to New Farm, the CBD, across the river to Southbank and West End which runs every fifteen minutes. By private car, the CBD is accessible via Ann Street with the Northern suburbs and the Domestic and International Airports accessible via Wickham Street and Gympie Road. The Storey Bridge links Fortitude Valley to the Southern suburbs and the Pacific and Gateway Motorways which both provide direct access to the Gold and Sunshine Coasts. The $3 billion redevelopment of the RNA Showground’s on the fringe of Fortitude Valley will see the 22 hectare site transform over the coming fifteen years to include a combination of residential, retail, commercial, recreation and entertainment activities, combined with large tracts of dedicated parklands. The sheer volume of this investment will not only drive a dramatic transformation of the residential and employment landscape of Fortitude Valley but will fuel significant demand for residential accommodation over the long-term. July 2011 Fortitude Valley Apartment Market Performance 2006 to 2013 $500,000 450 $450,000 400 $400,000 350 $350,000 300 $300,000 250 $250,000 200 $200,000 150 $150,000 100 $100,000 50 $50,000 0 0 2006 2007 2008 2009 2010 2011 Number of sales Median Price 2012 2013 Source: Resolution Research – The Valuer General’s Office – July 2011 Fortitude Valley – Median weekly rents – one and two bedroom apartments 2006 to 2011 $550 $500 $450 $400 $350 $300 $250 $200 JUN’06 JUN’07 JUN’08 JUN’09 JUN’10 JUN’11 JUN’12 JUN’13 JUN’14 One Bedroom Two Bedroom Source: Resolution Research – The Residential Tenancies Authority – July 2011 Fortitude Valley Property Market The demand for inner city properties has seen significant improvements in the past twelve to eighteen months following the lows of the global financial crisis in 2007 and 2008. Fortitude Valley ranks as the fourth most affordable apartment market within the twenty one suburbs that make up the innercity. The median price for an apartment within Fortitude Valley has recorded a healthy 4.8% average annual growth across the five years to December 2010, recording $410,000 in 2010. Population and Demographics Current figures place the suburb with a population of just over 6,200 residents. The Queensland Government forecast that by 2031, more than 22,000 new residents will have moved to Fortitude Valley, representing an increase of around 1,000 residents per year. Additionally, a further 75,000 new jobs are anticipated to be created in the next two decades. With its immediate proximity to the Brisbane CBD and its exceptional level of lifestyle amenity, Fortitude Valley’s demographics have been transformed in the past couple of decades, largely reflecting a greater acceptance and demand for inner city living and demand for lifestyle. The median age within Fortitude Valley has declined dramatically from 40 years in 1996 to 29 years in 2006 which is a clear indication of the Residents of Fortitude Valley also on average, earn higher incomes than the Australian average with the mean individual income within Fortitude Valley recorded at a 43% premium to the rest of Australia. These demographics indicate that Fortitude Valley is an in demand suburb for younger generations, on higher than average incomes, attracted to the suburb’s proximity and accessibility to employment nodes and to its high degree of lifestyle amenity. Rental Market According to the most recent data made available by the Residential Tenancies Authority, the median weekly rent for a one and two bedroom apartment within Fortitude Valley was recorded at $340 and $470 respectively. Across the past five years to June 2011, the median weekly rent has seen growth in excess of 6% per annum for both product types. Resolution Research forecast that this trend is likely to continue through to 2013, contingent on stable market conditions. According to Australian Property Monitors, Fortitude Valley is one of only two markets in metropolitan Brisbane achieving gross rental yields in excess of 5.7%, second only to the Brisbane CBD. With strong underlying rental demand, low injections of new supply in recent years and a high level of lifestyle amenity existing, this trend is forecast to continue throughout the short to medium term. Fortitude Valley at a glance » Fortitude Valley is an eclectic inner city suburb with a rich heritage as an early merchant trade centre for Brisbane. Its immediate proximity to the Brisbane CBD through the arterials Ann and Wickham Streets has formed for the logical extension of the CBD, bringing with it, massive amounts of infrastructure, business and investment to the suburb in recent years. » It is well serviced in terms of lifestyle amenity with a diverse and thriving heart along the Brunswick Street Mall and adjacent Chinatown precinct. This area is arguably Brisbane’s cultural hub, with trendy bars and clubs. » The suburb is host to a number of festivals and community events throughout the year including the Valley Fiesta, Jazz Festival, Chinese New Year and the Valley Markets. » Current figures place the suburb with a population of just over 6,200 residents. The Queensland Government forecast that by 2031, more than 22,000 new residents will have moved to Fortitude Valley, representing an increase of around 1,000 residents per year. Additionally, a further 75,000 new jobs are anticipated to be created in the next two decades. » Fortitude Valley is also home to the James Street retail and lifestyle precinct containing the landmark Emporium development. This precinct features a number of high end restaurants, boutiques and furniture retailers and the popular James Street Markets. » Fortitude Valley is well serviced by a range of public transport options affording easy access to all areas of greater Brisbane including the Brunswick Street train station, which is one of only four stations within Brisbane that offer accessibility to all train lines and the ‘City Glider’ which is an express service that links Fortitude Valley to the inner city suburbs of New Farm, West End, South Brisbane and the CBD. » The $3 billion redevelopment of the RNA Showground’s on the fringe of Fortitude Valley will not only drive a dramatic transformation of the residential and employment landscape of Fortitude Valley but will fuel significant demand for residential accommodation over the long-term. » Fortitude Valley ranks as the fourth most affordable apartment market within the twenty one suburbs that make up the inner-city. » The median age within Fortitude Valley has declined dramatically from 40 years in 1996 to 29 years in 2006 which is a clear indication of the suburbs popularity with younger generations X and Y. » Rental tenure also dominates the household profile of the suburb at 55% compared to the Australian average of 27%. Additionally, lone person households account for an overwhelming majority of households, representing almost half (44%) of the total. » Residents of Fortitude Valley also on average, earn higher incomes than the Australian average with the mean individual income within Fortitude Valley recorded at a 43% premium to the rest of Australia. » According to the most recent data made available by the Residential Tenancies Authority, the median weekly rent for a one and two bedroom apartment within Fortitude Valley was recorded at $340 and $470 respectively. » The median price for an apartment within » Across the past five years to June 2011, » Given the introduction of new supply in the » According to Australian Property Monitors, Fortitude Valley has recorded a healthy 4.8% average annual growth across the five years to December 2010, recording $410,000 in 2010. suburb in the coming years, it is forecast that the median price will rise to in excess of $450,000 by 2013 following a period of low injections of new supply. the median weekly rent has seen growth in excess of 6% per annum for both product types. Fortitude Valley is one of only two markets in metropolitan Brisbane achieving gross rental yields in excess of 5.7%, second only to the Brisbane CBD. Disclaimer: Whilst this information has been carefully compiled no warranty or promise is made in relation to its accuracy or correctness. The information outlined within this document is a subjective interpretation by our company and should not be relied upon for investment decisions. Interested parties should undertake independent inquiries and investigations to satisfy themselves that any details herein are true and correct. No forecasts are being made by our company about potential capital gains. Any historical price growth information does not imply such growth will occur in the future. This document and the material contained herein are copyright and cannot be reproduced without our permission. This document was compiled in July 2011 and remains current for six months from compilation. The product and pricing information contained within this document is based on price lists, brochures and third party information obtained throughout the course of our research. This information has been verified to the best of our ability but Resolution Research & Marketing Pty Ltd accepts no responsibility for reliance on this information. This information has been prepared independent of our client (nominated above) and at our own direction. SUBURB PROFILE - RESOLUTION Sales volumes over the past five years have averaged 298 apartments per annum, peaking in 2007 with 408 sales. Since then, the below average sales volumes have been recorded, reflecting a situation with low injections of new supply, suggesting a pent up level of underlying demand. Given the introduction of new supply in the suburb in the coming years, it is forecast that the median price will rise to in excess of $450,000 by 2013. suburbs popularity with younger generations X and Y. Rental tenure also dominates the household profile of the suburb at 55% compared to the Australian average of 27%. Additionally, lone person households account for an overwhelming majority of households, representing almost half (44%) of the total. FORTITUDE VALLEY INVESTMENT ANALYSIS BY RESOLUTION RESEARCH INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION INVESTMENT ANALYSIS - RESOLUTION FORTITUDE VALLEY INNER BRISBANE APARTMENTS BY BIS SHRAPNEL Inner Brisbane Apartments 2010 – 2017 “How long before sentiment recovers to drive an upturn in the Inner Brisbane apartment market?” RESIDENTIAL PROPERTY © BIS Shrapnel Pty Limited November 2010 The information contained in this report is the property of BIS Shrapnel Pty Limited and is confidential. All rights reserved. No part of this report may be reproduced or transmitted in any form, nor may any part of or any information contained in this report be distributed or disclosed to any person who is not a fulltime employee of the Subscriber without the prior written consent of BIS Shrapnel Pty Limited. The Subscriber agrees to take all reasonable measures to safeguard this confidentiality. The Subscriber may not, under any circumstances, use information in this report for promotional purposes. B5380/AZ/AR/JB/sf BIS Shrapnel contact: Angie Zigomanis BIS Shrapnel Pty Limited Level 1, Rialto North Tower 525 Collins Street Melbourne VIC 3000 Australia Tel. +61 (0)3 9614 0011 Fax +61 (0)3 9614 0033 Acknowledgement This report has been prepared by Angie Zigomanis, Andrew Raponi and Jodi Birch. Administrative support was provided by Sylvia Foo. INNER BRISBANE APARTMENTS - BIS SHRAPNEL Note: Although great care has been taken to ensure accuracy and completeness in this project, BIS Shrapnel Pty Ltd has not independently verified, and does not accept responsibility for, the completeness and accuracy of the factual information on which its opinions and assumptions are based, which information has been derived from public authorities or government bodies. Executive summary Inner Brisbane Apartments 2010 – 2017 Executive summary EXECUTIVE SUMMARY The Inner Brisbane Apartment (IBA) market has experienced a collapse in new supply, with completions of just 420 apartments in 2008–09 and 570 apartments in 2009–10—considerably below the long term (1995–2010) annual average of 1,340 apartment completions. New supply during these last two years was constrained by weakened pre–sales to investors, change of use of apartment sites to commercial or serviced apartments, and eventually due to the credit environment preventing developers funding their proposed projects. . . . although rental growth has increased by 5 per cent over this period due to weak tenant demand. Despite the low levels of new supply, rental growth have been moderate at best, rising by just 5 per cent in total over the last two years to 2009–10, after increasing by an average of 9 per cent per annum from 1999–2000 to 2007–08. New tenant demand as growth in Inner City employment stalled, whilst tenants were also enticed to buy given the fall in mortgage rates and increased Federal Government first home buyer incentives. In 2010, overseas student numbers have steadied, further lowering the pool of new tenants. With apartment completions expected to remain low in 2010–11 . . . New apartment supply in the IBA area is on track to remain low at 600 completions in 2010–11 as the impact of the constrained lending environment flows through. However, there has been some pick up in off–the–plan sales due to improved investment fundamentals and economic growth, with projects under construction or about to commence scheduled to take completions to 1,400 apartments in 2011–12. . . . and not become significant until 2012–13 . . . While the challenging economic environment in 2010–11 will prevent a significant upswing in pre–sales during the year, an expected strengthening in economic growth the following year is projected to underpin improvement to investor demand and strengthen pre–sales activity through to 2012–13. The time lag between off–the–plan purchase to completion means this will not translate into a significant increase in annual new supply in the IBA area until 2012–13 and beyond. . . . rentals are forecast to increase by 14 per cent over the two years to June 2013 . . . Subsequently, the combination of limited new supply and recovery in tenant demand as the economy improves will see empty stock rapidly backfilled and a tightness in vacancies re–emerge over the three years to 2012–13. Stronger rental growth is consequently forecast to return in 2011–12 and 2012–13, with rising interest rates during these years further encouraging landlords to pass increasing costs onto tenants. Total rental growth for the overall IBA area of 14 per cent is projected in the two years to 2012–13. © BIS Shrapnel Pty Ltd 2010 iii INNER BRISBANE APARTMENTS - BIS SHRAPNEL New apartment supply in the Inner Brisbane Apartment (IBA) market has collapsed over the two years to 2009–10 . . . Inner Brisbane Apartments 2010 – 2017 Executive summary . . . before growth is projected to slow during thereafter in the forecast period as new rental supply outpaces tenant demand. The rental growth should lead to more robust investor demand in this period, which will be encouraged by improved economic conditions and some return in price growth. As the upturn in pre–sales leads to completions, the apartment deficiency in the IBA area is expected to be substantially eroded over the three years to 2015–16, with the annual average of 2,150 completions being significantly greater than demand. As a result, rentals are forecast to increase by a more moderate 10 per cent over this three year period, before rental growth improves to 6 per cent in 2016–17 as tenant demand picks up and surpass new rental supply again. The median apartment price in the IBA area rose by 5 per cent over the two years to 2009–10 due to weak sentiment amongst purchasers . . . Similarly, price growth in the IBA area accelerated by an annual average of 13 per cent over the six years to 2007–08, before slowing to increase by an average of under 5 per cent per annum in the last two years to 2009–10. The downturn in economic conditions during 2008–09 and the slow recovery through 2009–10 has sapped purchaser demand with sentiment still weak. Furthermore, relative low indicative rental yields over 2009–10 has discouraged a more significant return of investors to the IBA area purchaser market. . . . although price growth is expected to accelerate through 2012–13 . . . The deterioration in affordability after the 200 basis point increase in the housing variable rate between October 2009 and November 2010, will keep purchasers cautious, and prices are forecast to rise by 3 per cent in 2010–11. However, with more stable interest rates rises during the remainder of 2010–11 and in 2011–12, confidence will improve. Economic growth will also accelerate from 2011–12 as investment in the resource sector in Queensland ramps up, and with the return of solid rental growth and improving yields, this will increase optimism amongst investors, leading to apartment prices in the IBA area jumping by a forecast 6 per cent in 2011–12 and 7 per cent in 2012–13. . . . and remain solid thereafter through to 2016–17 . . . A more aggressive round of interest rate rises is anticipated in 2012–13, as emerging skills shortages lead to wage growth and inflationary pressures, which will constrain affordability. This is expected to be followed by a weakening in the economic cycle, and is projected to further restrict price growth of apartment in the IBA area to a low 6 per cent over the two years to 2014–15, before price growth picks up again during the latter part of the forecast period. . . . to register total growth of 38.9 per cent over the forecast period. Total median price growth for apartments in the IBA area is projected to be 39 per cent over the seven years to 2016–17, equating to average annual compound price growth of 4.8 per cent. Apartment stock Since June 1994, the stock of Inner Brisbane Apartments has more than trebled . . . iv The stock of apartments in buildings of three storeys or greater in the Inner Brisbane study area was 10,200 dwellings at June 1994. By June 2010, the estimated apartment stock is 31,650 dwellings, just over three times 1994 stock levels, and representing an average increase of 1,340 new apartment completions per annum. © BIS Shrapnel Pty Ltd 2010 Inner Brisbane Apartments 2010 – 2017 Executive summary . . . and is forecast to increase by 11,600 apartments in the forecast period. By June 2017, the Inner Brisbane Apartment area stock is forecast to be over 43,250 apartments. This is a further increase of 11,600 apartments or an average of over 1,650 apartments per annum— somewhat above the average of the last sixteen years to 2009–10. Apartment completions remained solid from 1997 to 2008, with new supply averaging 1,570 apartments . . . The collapse in new apartment supply from 2008–09 occurred after a twelve year period of sustained robust levels of new apartment supply in the IBA area. From 1996–97 to 2007–08, an average of 1,570 apartments were completed annually in the IBA area, with completions peaking at 2,150 apartments in 2005–06. However, over the three years to 2007–08, many residential apartment sites in and around the Brisbane CBD were re–scoped for proposed office development, due to weak rental returns for investors and greater profitability of commercial development during this period. In addition, many apartments were turned over to the serviced apartment market upon completion to benefit from the greater returns being offered by this use. As a result, new supply in the IBA area deteriorated, with just 420 and 570 residential apartments completed in 2008–09 and 2009–10 respectively. . . . before collapsing over the last three years to 2010–11. Although conditions tilted in favour of residential development from 2008–09, the impact the Global Financial Crisis had on both demand (via reduced confidence) and supply (via an inability to finance new construction) during the year delayed the recovery in apartment activity. Subsequently, new supply in the IBA area is expected to remain low at 600 completions in 2010–11. Chart I: Completions of major IBA projects 1995 to 2017 © BIS Shrapnel Pty Ltd 2010 v INNER BRISBANE APARTMENTS - BIS SHRAPNEL Source: Australian Bureau of Statistics & BIS Shrapnel Inner Brisbane Apartments 2010 – 2017 Executive summary New apartment supply in the IBA area is forecast to improve thereafter . . . A rebound in the economic climate and the return of some capital growth has initiated the first stages of a recovery in investor demand during 2009–10. Weak local conditions in the Queensland economy and rising interest rates have seen this improvement stall into the second half of 2010. However, buoyed by forecast improving economic growth into the medium term, investor activity is likely to eventually strengthen, whilst high rise residential development will also benefit from more readily available finance going forward as the tightened credit concerns dissipate. Completions in the IBA area are consequently projected to pick up to long term levels in 2011–12 and 2012–13, before increasing further over the following two years to peak at an estimated 2,500 apartments in 2014–15. . . . and surpass 2,000 completions in both 2013–14 and 2014–15. The upturn in demand will place upward pressure on prices and weaken rental returns for investors, which will also be impacted on by a forecast peak in interest rates during 2013. Subsequently, purchaser demand is expected to ease in 2014 and into 2015 and lead to a fall in new supply over the latter part of the forecast period, with completions slowing to a projected 1,400 apartments in 2016–17. Potential new apartment supply is greatest in the North East precinct over the forecast period . . . Table I depicts BIS Shrapnel’s forecast of annual completions by precinct to the end of the forecast period in 2016–17. The precincts with the most potential for new supply include the North East, CBD/Spring Hill, West End, Inner North and Woolloongabba, whilst the Toowong and Kangaroo Point precincts will experience less apartment completions due their limited availability of potential residential developable sites. Table I: Forecast IBA completions by precinct, 1994–95 to 2016–17 Year ended June 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 CBD/ Spring Hill 203 130 553 733 92 307 140 386 250 129 267 1,018 331 711 52 0 Kangaroo Point 40 141 285 82 137 229 193 207 350 155 192 11 110 16 18 28 North East 455 81 87 781 784 292 848 581 512 729 393 497 234 158 36 129 West End 128 119 154 139 231 190 41 95 54 104 208 375 269 223 126 277 Toowong 111 107 389 22 231 250 412 379 270 154 0 160 268 39 118 51 Inner North 38 52 22 63 7 55 19 0 47 32 253 93 426 169 69 88 0 50 250 150 150 100 100 198 300 400 450 600 500 300 136 250 300 350 450 250 200 97 100 100 350 150 100 100 106 300 200 250 350 300 200 Woolloongabba 0 6 0 0 6 0 0 0 0 0 18 0 0 203 0 0 Total IBA Area 975 636 1,490 1,819 1,488 1,324 1,653 1,648 1,483 1,303 1,331 2,154 1,638 1,519 419 573 Forecast 2011 42 2012 250 2013 350 2014 300 2015 500 2016 400 2017 350 Source: BCI & BIS Shrapnel vi 22 150 150 250 300 200 150 601 1,400 1,750 2,100 2,500 1,850 1,400 © BIS Shrapnel Pty Ltd 2010 Inner Brisbane Apartments 2010 – 2017 Executive summary . . . followed by the CBD/Spring Hill and West End precincts. The trend for apartment completions in each precinct generally follows the overall IBA area. New supply is expected to be relatively low in most precincts in 2010–11, with no apartment completions forecast for Kangaroo Point, based on projects already in the development pipeline. Thereafter, as pre–sales demand picks up, new apartment supply is forecast to rise and peak in nearly all precincts in 2014–15, which will equate to a record high annual level of completions during that year. Apartment demand The key drivers of underlying apartment demand will remain solid, although will be slightly lower than in recent years . . . Analysis of apartment occupiers from the 2006 Census of Population and Housing indicates that the three major demand sources that have driven the occupancy of new Inner Brisbane apartments are: Students—who comprise 18 per cent of apartment occupiers and have been dominated by growth in overseas student numbers; Young Apartment Dwellers—who are primarily aged 20 to 34 years old, and typically have moved to the inner city to be close to their place of work; and Empty Nesters—single persons, or couples whose children have left the family home and are now seeking smaller, low maintenance premises, compared to their larger detached home. Apart from brief periods, the main drivers of these demand sources have all averaged strong overall growth since the mid 1990s. . . . with more moderate growth in overseas students . . . The population growth of overseas students stalled in 1998 as a result of the Asian economic crisis. Growth in overseas student numbers has since recovered and averaged a strong 21.4 per cent per annum between 1999 and 2003, and 19.7 per cent per annum more recently from 2006 to 2009. © BIS Shrapnel Pty Ltd 2010 vii INNER BRISBANE APARTMENTS - BIS SHRAPNEL We expect that overseas student enrolments stabilised in 2010, increasing by 2 per cent, and will decline by 3 per cent overall during the following two years to 2012. This will be partly due to the high Australian dollar making other locations more attractive. In addition, changes to residency eligibility have meant that it has become more difficult to gain permanent residency for overseas students studying particular vocational courses. This has reduced the demand for vocational study, which has been the main growth sector in recent years. Beyond 2012, it is forecast that growth in overseas student numbers will return, although remain moderate at around 3 per cent to 4 per cent. Inner Brisbane Apartments 2010 – 2017 Executive summary Chart II: Sources of Inner Brisbane Apartment occupier demand apartment demand students (18%) non-students (82%) domestic overseas (0%) (100%) . . . and young apartment dwellers underpinning occupancy, . . . young apartment dwellers (68%) empty nesters (32%) Demand from the Young Apartment Dweller group has reflected the growth in the Inner City stand alone office work force (as the majority tend to be employed in white collar professions close to the CBD). The Young Apartment Dweller group experienced moderate to solid growth in demand from 1999 to 2008, supported by the Inner City work force increasing by an annual average of 5.1 per cent during that ten year period. With the downturn in economic conditions being shallower than expected, Inner City employment remained stable overall in 2008–09. Furthermore, as the first stage of a recovery in the economy came through in 2009–10, growth in Inner City employment rose to 2.1 per cent during the year. Over the forecast period, growth in Young Apartment Dweller demand is expected to continue to be moderate, reflecting a slower growth rate of the Inner City stand alone work force compared to the majority of the 2000s decade. . . . although empty nesters demand should be strong. The Empty Nester age group (i.e. those aged 50 years old and above) has been Brisbane’s fastest growing age group in absolute numbers. Apartment occupier demand averaged 1,560 apartments over the eleven years to 2008– 09 . . . Occupier demand remained solid from 1998–99 through to 2008–09, averaging 1,560 apartments per annum, and peaking at a little over 2,000 apartments in 2005–06. Continual robust demand for Inner Brisbane apartments was supported by strong average annual growth in both Inner City employment (4.7 per cent) and overseas student enrolments (14.7 per cent) over this eleven year period. viii © BIS Shrapnel Pty Ltd 2010 Inner Brisbane Apartments 2010 – 2017 Executive summary Table II: Growth in demand drivers and annual underlying demand for IBA area apartments, 1994 to 2017 Non-student YADs 1 Empty Nesters Year Ended June Stand alone W’force (’000) Annual Growth (%) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e 86.3 90.8 91.7 93.8 94.3 98.8 103.0 106.5 113.4 119.4 121.8 130.0 141.8 150.5 155.5 156.4 159.7 161.5 165.4 171.3 175.7 178.3 183.7 190.4 Overseas Students Annual Growth (%) Annual Underlying Demand (Apartments) Popul’n (’000) Annual Growth (%) Popul’n (’000) 5.2 0.9 2.3 0.6 4.7 4.3 3.4 6.5 5.3 2.0 6.7 9.1 6.1 3.3 0.6 2.1 446.3 461.1 476.7 491.6 507.3 522.8 538.8 556.5 574.6 594.1 612.6 628.7 644.2 663.4 681.1 699.6 716.2 3.3 3.4 3.1 3.2 3.0 3.1 3.3 3.2 3.4 3.1 2.6 2.5 3.0 2.7 2.7 2.4 14.3 17.5 22.7 22.7 20.1 20.4 25.1 34.0 38.5 44.3 47.3 49.0 53.0 59.5 74.0 90.8 92.5 22.7 29.7 0.0 -11.4 1.3 23.1 35.4 13.2 15.0 6.8 3.7 8.1 12.3 24.4 22.6 1.9 1,094 1,426 919 536 1,545 1,162 1,944 1,004 1,679 1,123 1,456 2,030 1,621 1,910 1,696 859 1.2 2.4 3.6 2.5 1.5 3.1 3.6 734.1 752.4 770.9 791.9 814.5 838.9 863.2 2.5 2.5 2.5 2.7 2.9 3.0 2.9 89.6 89.4 92.4 96.1 100.2 104.9 109.6 -3.1 -0.2 3.3 4.0 4.3 4.6 4.4 488 856 1,255 1,199 1,107 1,434 1,551 Forecast 2011 2012 2013 2014 2015 2016 2017 Source: ABS/Australian Education International/BIS Shrapnel YADs – Young Apartment Dwellers Underlying occupier demand slowed significantly to 860 apartments in 2009–10 in response to marginal growth in the stand alone office work force and overseas student enrolments. Softer demand for IBA area stock is expected to continue during the two years to 2011–12, with a forecast decline in overseas student numbers. Furthermore, more moderate growth in both Inner City employment and overseas student enrolments thereafter is forecast to lower occupier demand to an average of 1,300 per annum between 2012–13 and 2016–17. A profile of the purchasers within the IBA market reveals: We estimate that around 15 per cent of the apartment stock that is purchased will not be regularly occupied. This can be in the form of a second home, or a speculative purchase to be held for a long term capital gain. The remainder of new Inner Brisbane Apartments purchased comprise both investor and owner–occupier purchasers. The groups can be segmented as follows: 61 per cent are investor owners . . . © BIS Shrapnel Pty Ltd 2010 61 per cent investor owners. These purchasers are influenced by movements in the rental market, particularly vacancies and prices. ix INNER BRISBANE APARTMENTS - BIS SHRAPNEL . . . before falling to 860 apartments in 2009–10, and recovering to a lower level than over the last decade. Inner Brisbane Apartments 2010 – 2017 Executive summary . . . 17 per cent are owneroccupiers aged under 45 years . . . 17 per cent owner-occupiers under 45 years of age. Many will be upgrading from IBA rental apartments and also be on relatively high professional and “new economy” salaries, meaning their decision to purchase will be little affected by the stage of the economic cycle, provided interest rates are conducive to affordability. . . . 22 per cent are owneroccupiers aged 45 years old and older. 22 per cent owner-occupiers aged 45 years and older. Many in this segment will be influenced by the price they will receive for their Brisbane detached house. Demand from this segment will be greatest during an upturn in the Brisbane residential cycle and somewhat less during a downturn. In this instance, demand from this group is not expected to pick up until 2011–12. Rental market The IBA rental market has been in underlying deficiency since 1999–2000 . . . The IBA rental market moved into a balanced position at June 1999, and is estimated to have since experienced an increasing deficiency of apartment stock, which has underpinned strong rental growth over this period. Additions to the IBA residential rental stock remained solid at an average of 820 apartments per annum over the nine years to 2007–08. With slightly stronger demand due to sizeable growth in overseas student numbers and Young Apartment Dwellers, it is estimated the underlying deficiency steadily rose from 50 apartments to 1,320 apartments during this period. This drove solid average rental growth in the IBA area of 9 per cent per annum between 1999–2000 and 2007–08. . . . which has grown to equivalent to 14 per cent of total IBA area stock at June 2010. IBA rental completions are estimated to have collapsed to 100 apartments in 2008–09, and have remained low at just 270 apartments in 2009–10. This level of new supply has been considerably below underlying tenant demand, even though demand also slowed noticeably during 2009–10 to 520 apartments. As a result, we estimate a significant dwelling underlying deficiency in the IBA area of 2,500 apartments or equivalent to 14.4 per cent of total IBA rental stock emerged at June 2010. Rents in the IBA area have steadied though over the past two years to 2009–10 . . . Despite the shortage of rental apartments in the IBA area becoming more acute from 2008–09, rents have steadied during this period, increasing by a moderate 5.2 per cent over this two year period to 2009–10. With the rapid falls in interest rates during 2008–09, the gap between rent and mortgage repayments narrowed, which encouraged tenants into owner occupation. At the same time, the weakness in the Queensland economy and uncertain employment prospects have prevented new tenants entering the rental market. As a result, there has been an increase in vacancy rates, and to retain their own tenants, landlords are expected to have kept rental rises to a minimum through 2009 and into 2010, particularly as relatively lower interest rates had removed any financial need to pass on costs. x © BIS Shrapnel Pty Ltd 2010 Inner Brisbane Apartments 2010 – 2017 Executive summary Chart III: Underlying tenant demand and rental apartment supply, IBA area, 1995 to 2017 1,600 IBA weighted Median Rent ($ per week) Apartments 650 Forecast 600 1,400 550 Demand (LHS) 1,200 500 1,000 450 800 400 350 600 300 400 200 Rent (RHS) 250 Supply (LHS) 200 150 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 as at June Source: ABS, Rental Tenancies Authority & BIS Shrapnel . . . although rents are forecast to increase by 18 per cent during the next three years to 2012–13 . . . The rise in vacancies is expected to be short–lived. As economic conditions improve we expect that the vacant stock will be rapidly back filled due to the solid underlying rental deficiency. Despite new rental supply in the IBA area being forecast to outpace our measure of tenant demand from 2010–11 to 2015–16, the lag between commencement and completion will not result in a significant erosion of the underlying deficiency in the IBA area until 2013–14. This is projected to underpin a solid 18 per cent escalation in IBA area rentals over the three years to 2012–13. . . . before increased new apartment supply towards the end of the forecast period leads to the absorption of the stock deficiency and an easing in rental growth. The upturn in apartment completions will begin to significantly erode the deficiency of rental dwellings in the IBA area from 2013–14. An average of 1,200 rental apartments is anticipated to be completed each year during the three years to 2015–16, eroding the underlying IBA area deficiency to an estimated 730 apartments or a minimal 3.2 per cent of total stock at June 2016. Overall, in the seven years to 2016–17, median rents in the IBA area are forecast to increase by 37 per cent, or 10.8 per cent in real terms. This equates to 4.6 per cent growth per annum, or 1.5 per cent per annum in real terms. © BIS Shrapnel Pty Ltd 2010 xi INNER BRISBANE APARTMENTS - BIS SHRAPNEL Consequently, rents are forecast to rise by a modest 10 per cent in total between 2013–14 and 2015–16. With tenant demand projected to finally overtake new supply in 2016–17, IBA area rental growth is estimated to improve to 5 per cent during the year. Inner Brisbane Apartments 2010 – 2017 Executive summary Table III: Inner Brisbane apartment rental market, 1999 to 2017 Year ended June Expected demand for new IBA rental apartments Expected supply of new IBA rental apartments Estimated vacant apartments Estimated vacancy rate (%)* 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1,070 810 1,350 610 1,030 690 890 1,240 990 1,170 1,040 520 740 760 900 910 750 690 680 1,130 850 750 100 270 0 -50 -490 -190 -460 -450 -660 -770 -910 -1,320 -2,260 -2,510 0.0% -0.5% -4.3% -1.5% -3.5% -3.3% -4.6% -5.0% -5.6% -7.7% -13.1% -14.4% 300 520 770 730 680 880 950 320 780 950 1,170 1,430 1,000 710 -2,490 -2,230 -2,050 -1,610 -860 -730 -970 -14.0% -12.0% -10.5% -7.8% -3.9% -3.2% -4.1% Forecast 2011 2012 2013 2014 2015 2016 2017 Source: BIS Shrapnel Note: Negative vacancy rate represents pent up demand Rental yields Rental yields fell to long-term lows in 2006–07 . . . Rental yields improved over the early 2000s, rising from 5.14 per cent at June 1999 (as defined by the median two bedroom unit rent divided by the median unit price) to 6.65 per cent at June 2003, as rental growth remained stronger than the increase in prices. However, four consecutive years of double digit annual price growth from 2004 to 2007 (inclusive) led to yields continually easing back down to 5.10 per cent at June 2007. . . . before rising over the two years to 2008–09 as rental growth strengthened . . . As the deficiency of apartment stock in the IBA area started to escalate at a quicker rate from 2007–08 due to the collapse in new rental supply, it applied further upward pressure on rents. Subsequently, the indicative rental yield in the IBA area increased to above 5.3 per cent during both 2007–08 and 2008–09. Indicative yields in the IBA area are expected to ease to 5.14 per cent at June 2010 due to higher price growth during the year . . . However, despite our estimate of an apartment shortage, rental returns in the IBA area have fallen to 5.14 per cent at June 2010. Short term influences have impacted on rental growth, whilst relatively low interest rates throughout much of 2009–10 led to owner occupation becoming more attractive compared to rental. Tenant demand was further dampened by slower employment growth in the Inner City and a minimal increase in overseas student numbers. Consequently, landlords were forced to keep rental levels competitive through either maintaining on even discounting rents. xii © BIS Shrapnel Pty Ltd 2010 Inner Brisbane Apartments 2010 – 2017 Executive summary Table IV: Unit Prices, Rents and Yields, IBA study area Median 2 Bedroom Unit % var Median Unit Price ($’000) % var Indicative Yield % As at June ($ per week) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 144.3 157.8 178.5 188.6 195.2 194.3 213.5 227.0 247.5 274.8 284.2 315.3 338.9 372.4 422.8 438.4 444.6 9.4 13.1 5.7 3.5 -0.4 9.9 6.3 9.0 11.0 3.4 10.9 7.5 9.9 13.5 3.7 1.4 175.0 168.0 177.0 170.0 187.0 196.5 215.0 200.0 195.0 215.0 245.0 295.0 345.0 380.0 412.0 429.0 450.0 -4.0 5.4 -4.0 10.0 5.1 9.4 -7.0 -2.5 10.3 14.0 20.4 16.9 10.1 8.4 4.1 4.9 4.29 4.88 5.24 5.77 5.43 5.14 5.16 5.90 6.60 6.65 6.03 5.56 5.11 5.10 5.34 5.31 5.14 460.0 490.0 525.0 545.0 560.0 580.0 610.0 3.5 6.5 7.1 3.8 2.8 3.6 5.2 462.0 488.0 520.0 530.0 550.0 585.0 625.0 2.7 5.6 6.6 1.9 3.8 6.4 6.8 5.18 5.22 5.25 5.35 5.29 5.16 5.08 Forecast 2011 2012 2013 2014 2015 2016 2017 Source: Rental Tenancies Authority & BIS Shrapnel Rental returns are forecast to steadily increase over the next four years to peak at 5.35 per cent by June 2014. Through this period, rising interest rates through this period will necessitate a higher rental return, whilst the improvement in tenant demand and persistent substantial underlying rental deficiency is likely to place further upward pressure on rents. As a result, rental growth is expected to outpace the increase in prices until 2013–14. . . . before rental returns firm during the remaining forecast years. Over the latter part of the forecast period, significant additions to new supply will result in rental growth slowing. Conversely, interest rate reductions over the two years to 2014–15 will lead to slightly stronger price growth in subsequent years. As a result, the indicative yield in the IBA area is forecast to move back down 5.08 per cent by June 2017. Price growth After increasing at a solid rate over the six years to 2007–08 . . . © BIS Shrapnel Pty Ltd 2010 Apartment price growth in the IBA area averaged a considerable 13.3 per cent per annum over the six years to 2007–08, remaining particularly resilient in 2007–08, despite housing interest rates increasing by 1.4 percentage points during the year, which significantly deteriorated affordability. xiii INNER BRISBANE APARTMENTS - BIS SHRAPNEL . . . and then improve through to 2013–14 . . . Inner Brisbane Apartments 2010 – 2017 . . . median prices of Inner Brisbane apartments eased to below 5 per cent in both 2008–09 and 2009–10. Executive summary However, the poor affordability eventually initiated a slowing in price growth, which was further augmented during 2008–09 as the Australian economy stalled and the jobs market weakened. This brought on a collapse in purchaser confidence and more stringent requirements by lending institutions. However, initiatives by the Reserve Bank of Australia (rapid lowering of interest rates) and Federal Government (boosted first home buyer incentives) tried to sustain consumer demand, and were enough to still support moderate price growth in the IBA area of 4.1 per cent over 2008–09. Despite young apartment dwellers being enticed into owner occupation, and some recovery in upper quartile house price growth providing older buyers with more favourable conditions to sell their existing home and trade down to an Inner Brisbane apartment, purchaser demand in the IBA area has struggled for momentum in 2009–10. This is mainly attributed to confidence remaining weak as the rebound in economic conditions across Queensland has generally been slower compared to other states. As a result, growth in the IBA median apartment price increased only marginally to 4.9 per cent in the year to June 2010. Apartment price growth in the IBA area is forecast to pick up over the three years to 2012–13 . . . Growth in the IBA median unit price is forecast to slow to 3 per cent in 2010–11, before improving to 7 per cent by 2012–13. A continuing substantial underlying level of apartment deficiency within the IBA area and strengthening economic cycle in this period will facilitate price growth. Chart IV: Forecast price growth by IBA area apartments, 1992 to 2017 700 Median Price (‘000’s) Forecast 600 500 3% 5% 4% 8% 10% 400 2% 7% 17% 300 20% 14% 10% 200 100 6% 7% 6% 4% 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 as at June Source: Residex & BIS Shrapnel xiv © BIS Shrapnel Pty Ltd 2010 Inner Brisbane Apartments 2010 – 2017 Executive summary . . . and remain solid in the latter part of the forecast period. With interest rates forecast to begin to move well past the neutral outpace demand from 2013–14 (eroding a significant amount of the stock deficiency in the IBA area), growth is projected to ease to total 6 per cent over the two years to 2014–15. Thereafter in the forecast period, the increase in apartment prices is anticipated to pick up again to a little above 6 per cent per annum, with strengthening economic conditions driving solid growth. Total price growth for apartments in the IBA area is projected to be 39 per cent over the forecast period, representing average price growth of 4.8 per cent per annum. Over the next seven years, we expect solid underlying demand and rental growth to underwrite price growth in the IBA market. With vacancy rates forecast to remain tight across the overall IBA area, reasonable rental growth, and further forecast growth in the Brisbane house market will underpin price rises across all precincts. However, the degree of growth will vary across each precinct depending on their demand and supply fundamentals: . . . weakest in CBD/Spring Hill and West End . . . Despite the extremely low levels of apartment supply expected in the short term, apartment completions will still remain significant overall in the CBD/Spring Hill precinct throughout the forecast period. Also, due to the precinct’s high level of investor owners and student renters, the recent considerable rises in rents could limit further solid rental increases. As a result, we expect to see rental growth and prices to be below that of the IBA area overall. Although, the West End precinct contains a broader rental market, the significant expected increase in new apartment completions over the forecast period (the West End apartment stock is projected to increase by almost 50 per cent over the next seven years) is likely to result in slightly softer rental and price growth than that of the total IBA area. With the lowest level of investor owned apartments, and limited potential for new supply, in the Kangaroo Point precinct will ensure that both rental growth and price growth remains strong, outperforming our forecast for the IBA area overall. The student market comprises a significant component of demand in the Toowong precinct, and it appears that this is being dampened by the high level of rents. However, the lower level of apartment supply expected over the forecast period, is likely to keep the rental market in Toowong tight. Subsequently, we are forecasting for rental and price growth slightly above that of the IBA area as a whole. . . . strongest in Kangaroo Point and Toowong . . . © BIS Shrapnel Pty Ltd 2010 xv INNER BRISBANE APARTMENTS - BIS SHRAPNEL Price growth in the forecast period is expected to be . . . Inner Brisbane Apartments 2010 – 2017 . . . and on par with the overall IBA area in North East, Inner North and Woolloongabba. Executive summary The North East precinct has experienced the highest number of new apartment completions over the past sixteen years. Projects in the development pipeline will underpin continued high rates of completions, although with the precinct containing a broad occupier spread, we expect to see the increase in rents and prices to be on par with the overall IBA area. The Inner North precinct is forecast to witness greater apartment development activity going forward, from a relatively low base. Although the precinct contains a significant proportion of investor owners, owner occupiers purchased more apartments between the 2001 and 2006 Censuses. With this broad purchaser spread expected to continue, growth in rents and prices are forecast to be slightly below the overall IBA area. Apartment completions in the Woolloongabba precinct over the next seven years are expected to more than triple total stock levels at June 2010. Although, with the majority of apartment stock being relatively new and having very little older stock to compete with, prices and rents in the precinct are expected to move at a marginally slower pace than the overall IBA area. Nevertheless, despite some variations from precinct to precinct, we expect rental and price growth rates to remain solid over the forecast period, only varying by degrees within each precinct. Table V: Comparative forecast price growth of apartments in each precinct Ave Ann. Growth % 2010–2017 Total Growth % 2010–2017 CBD/Spring Hill 4.6 37.0 Kangaroo Point 5.2 43.0 North East 4.8 39.0 Precinct West End 4.6 37.0 Toowong 4.9 40.0 Inner North 4.7 38.0 Woolloongabba 4.7 38.0 Total IBA Area 4.8 38.9 Source: BIS Shrapnel xvi © BIS Shrapnel Pty Ltd 2010 INNER BRISBANE APARTMENTS - BIS SHRAPNEL
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