Despite recent positivity, development heavyweight Lendlease has said that Brisbane's inner city apartment market is the "most challenging" in Australia.
The comments, made at an investor presentation on Friday, comes as the developer finalises more than 2000 apartments in its $2.9 billion RNA Brisbane showground development.
Lendlease chief executive for property in Australia Kylie Rampa said that the company expects there will be a rise in defaults in the Brisbane apartment market over the short term.
“We are working through our relatively small exposure at our RNA projects in Brisbane, including identifying potential alternate buyers, or holding the residual units for a period and renting them out," Rampa said.
Related reading: Lendlease’s Last Commercial Tower Tops Out in Victoria Harbour
Related reading: Lendlease Wins Approval for Timber Tower at Barangaroo
The Royal Commission into the banking sector has impacted bank restrictions and access to credit but Rampa described this as a “short-term pressure point” adding that it was too early to measure how this might influence the company's residential portfolio.
“The rental yield in Brisbane is reasonably attractive and has been increasing and we feel very comfortable about taking product back and renting it,” she said.
“We expect calendar year 2018 to be the peak of the current oversupply in this market and are forecasting Brisbane to strengthen in the medium term.”
--Chief Executive Officer Property Australia Kylie Rampa
Related reading: Impact Investment Seeks Co-Investors in World’s Largest Timber Office Building
The Brisbane Showgrounds project is a mixed-use development comprising residential, commercial office and retail with an estimated end value of nearly $3 billion.
The project has an anticipated completion date of 2029.
Lendlease has seven major projects in four gateway cities, with $15.7 billion urbanisation development in the pipeline comprising $10.2 billion in residential (9,307 apartments) and a $5.5 billion commercial component comprising 412,000 square metres.
