Brisbane’s over-supplied new apartment market

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Brisbane’s over-supplied new apartment market

brisbane apartment construction

With the Melbourne apartment market looking over-supplied, and suitable land in Sydney becoming hard to find, developers are looking north to Brisbane for better value. We’re already seeing an increase of off-the-plan residential apartments available in the inner city areas and city fringe areas of Brisbane, and that’s likely to increase in the next three to five years.

Brisbane City Council noted that 14 new apartment projects are planned which, if built, will increase the new supply by a total of 2800 apartments.  Even more new apartment projects are mooted and most of these have applications in Brisbane City Council. Underlying annual demand is for 350 new apartments across postcode 4101 over the next 5-10 years

Currently there are two and three bedroom apartments selling off-the-plan for between $400,000 and $750,000 in South Brisbane, Milton, West End/Highgate Hill and Brisbane CBD. These are being marketed to foreign investors and Gen Y buyers, which now make up a third of Brisbane’s population. Along with local youngsters, and those from interstate, are many international students and young educated skilled migrants who prefer to live in the inner city.

That increased demand from the Gen Ys for low-maintenance rental apartments is competing with the demand from wealthy Baby Boomers who make up another twenty percent of Brisbane’s population and are also looking to either invest or downsize themselves into similar low-maintenance inner city properties.

That makes the prospects very attractive for a developer indeed. But does buying an apartment off-the-plan represent the best value opportunity for the investor?

What’s important to remember is that while off-the-plan apartments are often marketed as offering a good value opportunity, their sale price usually includes the developers’ margin of 20-30 per cent.

Investors also need to be careful that when a foreign investor decides to sell, they will not be able to sell to other foreigners, significantly reducing the pool of potential buyers, causing significant price decreases for re-sales of apartments

We believe there are better value opportunities for investors in established houses and townhouses that have an element of scarcity in the property. We see excellent value in townhouses and houses in blue-chip growth corridors that have close proximity to good infrastructure. Established townhouses are selling in these areas for $400,000 to $550,000, and houses for $500,000 to $800,000. It is possible to buy a good-sized older style unit for $300,000 to $400,000 that can be improved cosmetically and usually at a low cost but you do need to be careful of the potential oversupply issues in this sector.

Either way, however, Brisbane’s strong population growth, education, infrastructure investment and excellent employment opportunities mean its residential market represents one of the best buying opportunities of all the capital cities in Australia currently.