Against a backdrop of stalling property markets in Sydney and Melbourne, Brisbane’s apartment market is set to stabilise as positive economic conditions and population growth pick up supply.
Brisbane’s apartment market is the most advanced Australian capital in the cycle, with supply levels peaking in 2016.
About 6,000 apartments across 34 projects are under construction in inner Brisbane, with 20 projects currently in the marketing phase, according to data revealed in JLL’s Apartment Market report for the third quarter.
An unfavourable lending environment and negative sentiment means commencements are expected to remain subdued over the short to medium term. Nonetheless, JLL is largely upbeat about Brisbane’s apartment market.
“In terms of pricing in Brisbane, existing apartment prices have fallen by just over five per cent since their mid-2016 peak, but have now shown strong signs of stabilising,” JLL head of residential research Leigh Warner said.
“For new stock, resales data shows that over half of resales occurring are below the initial pre-sale contract price, but this too is stabilising.
“Further, there are still many examples of quality projects in the market than are achieving positive resales growth.”
As new and residual supply is absorbed, market conditions are expected to remain challenging although the “the worst is likely to have passed”.
Brisbane’s experience should provide a window view into what Sydney and Melbourne can expect over the next 12 to 18 months, Warner says.
“Supply in Brisbane peaked in 2016 and fear of a hard landing and significant repricing was very high through that period and 2017.
“Conditions have undoubtedly been tough in Brisbane, but nowhere near as bad as many expected.”
“Rental vacancy rose, and rents have come under some moderate downward pressure, but vacancy is now falling and rents are stabilising.”
Developers are catering to owner-occupier driven projects and are embracing medium-density as they move away from larger scale development.
Approvals for inner city apartments fell sharply over the year, declining by nearly 24 per cent.
Construction activity increased with seven projects commencing in the quarter including R&F’s 200-apartment “Domain” project in Kangaroo Point and a 61-apartment project on West End’s Victoria Street.
West End was particularly active for development over the quarter, with several large scale development sites transacting.
Sydney’s Crown Group secured the site for its controversial 400 apartment West End project, paying $35 million for the Victoria Street parcel.
In August, developer Sekisui House lodged its second stage development application for two residential towers in West Village, adding nearly 200 more apartments to the West End block.