Vacancy Rates Rise As New Developments Attract Inner City Buyers

Vacancy rates for new Inner Brisbane apartments remained tight at 2.3 per cent over the December quarter 2016, according to new research released by Urbis. 

The Urbis Inner Brisbane Apartment Rental Review found that new developments are out-performing older, established projects with lower levels of amenity.

The Real Estate Institute of Queensland (REIQ) reported a higher vacancy rate of 3.6 per cent for the total Inner Brisbane rental market over the same period.

Urbis Associate Director of Property Economics and Research Paul Riga said that the indicative vacancy rate of 2.3 per cent for new apartments is a slight increase on the September quarter 2016, which recorded 2.2 per cent.

“Given that 2016 has seen the highest number of new apartments to ever settle within Inner Brisbane, this is a positive result,” Mr Riga said.

The report, which surveyed 23 projects containing over 4,000 apartments, found that close to 50 per cent of renters in the new projects had moved from Middle and Outer precincts of Brisbane, and increased choice, competitive rents and desirable locations were driving renters’ movements.

The Middle Ring (5-20km) and Brisbane Local Government Authority recorded vacancy rates of 3.3 per cent and 3.4 per cent respectively (REIQ).

“These vacancy rates are expected to rise as the trend for new apartments attracting residents from the outer areas into Inner Brisbane continues," Mr Riga said.

While vacancy remained tight, the competitive nature of the Inner Brisbane apartment market drove softening rents over the December quarter, resulting in a decrease in average rental yields.

Building managers also reported that new buildings were taking longer to reach full occupancy.  

However, well-located, high-quality buildings with strong amenity are largely unaffected, recording little rental price decreases and have seen minimal ‘renter churn’ – with renters happy to stay on despite new projects available around them.

According to the report, there were indications the inner Brisbane apartment rental market had begun to self-regulate.

Positive absorption of new apartment rentals was already evident through the 24 per cent increase in bond lodgements for the December quarter, compared to the same period 12 months prior, based on Residential Tenancies Authority (RTA) data.

The growth in bond lodgement is expected to continue over the next 12 months, boding well with a declining level of new apartment supply coming to the market. Additional research from Urbis indicated that new projects launching were significantly down on this time last year.

“The continued decrease in future apartment supply will give the rental market time to absorb new apartments,” Mr Riga said.