As the residential apartment boom comes to the end of its cycle, the Inner Brisbane market has undoubtedly seen a transformation with many new buildings being developed, existing lifestyle precincts evolving and new communities created. This did however, temporarily create a supply surplus and subsequent subdued price growth in the region was widely recognised during this period.
Today we sit on the cusp of change. Simultaneous strengthening of the local economy and increasing population growth is seeing supply absorption occur and the rental market strengthen in parallel - helping the Inner Brisbane’s property market transition into a new growth cycle.
Low-Rise Apartment Buildings contain a maximum of 10 apartments. These buildings are the most prevalent of any category throughout the Inner Brisbane region and are located in all parts of the region. However, the proportion of low-rise apartment buildings decreases closer to the CBD.
Mid-Rise Apartment Buildings contain a minimum of 11 apartments and a maximum of 40. These buildings are generally located between 1km and 3km to the CBD’s east and 3-4km to the CBD’s south west.
High Rise Apartment Buildings saw substantial development during the residential construction boom. These buildings contain at least 41 apartments and are most commonly located from Toowong across the CBD to Teneriffe. The majority of these buildings are within 3km of the CBD.
Apartment sales account for the vast majority of all in sales in Inner Brisbane and have generally hovered around 2,000 sales per six months over the past 10 years. However, during the apartment boom, sales volumes peaked at a record high of 4,738 in the September 2015 six-month period – 3,125 were new residential sales of which approximately 72% were sold to investors.
High rise apartment buildings accounted for 70% of all sales between September 2013 and September 2016 compared to an average of 63% over the past 10 years. During the peak market period 70 of these high rise transactions were new sales. Following the implementation of bureaucratic measures such as, Stamp Duty increases, FIRB purchaser limitations, lending restrictions to investors etc. - which were designed to curb and reduce the levels of residential sales occurring - the number of new developments entering the market declined as quickly as they entered, and sales volumes followed suit. As at the end of the September 2018 six-month period only 1,704 transactions occurred – approximately only one third of the sales recorded at the peak of the market.
As demand began to soften in the Inner Brisbane apartment market but with large amounts of new supply remaining, median prices also began to weaken and fall to a new equilibrium price where they have now stabilised. In the most recent six-month period ending September 2018, high-rise apartments recorded a median price of $500,000, whilst mid-rise apartments and low-rise apartments were recorded at $475,250 and $395,000 respectively.
Despite weak market conditions in recent years, the future of this property market appears more optimistic in a positive sign for the many property owners who own an apartment in Inner Brisbane and those looking to enter the market in the near future.
Softening sales rates have caused many projects to be either suspended or abandoned, whilst the subdued price growth has led to a record price differential between Brisbane and Sydney. This has spurred migration to the region at increasing levels. Currently, there still exists some excess supply in the Inner Brisbane market but with demand increasing in recent periods, absorption of this stock is underway. Additionally, we are forecasting only low levels of new stock to enter the market in the short term and given an average construction lag of between 2 and 3 years, Inner Brisbane will face a residential undersupply within the next 12-18 months.
After analyzing the Inner Brisbane apartment market by breaking it down by building size, we have revealed that after recent weakness, the Inner Brisbane apartment market is showing signs of a stabilizing market and early signs of returning to positive growth. This comes as no surprise when considering the strong and increasing population growth, and a sharp reduction in new unit supply to the region. Despite stricter lending conditions in the current economic environment, the future potential for price growth remains strong for Brisbane.