Part Two: Could the Brisbane CBD market actually be in a state of undersupply?

 

Last week we posed the question – “Could the Brisbane CBD property market actually be in a state of undersupply?” Despite everything you may have read in the media. If what some of the industry experts are saying is correct, then Brisbane City is a far cry from being in a state of oversupply. In fact, the situation could seemingly be quite the opposite.

 

Could it be true? Remember last week we finished off with this statement from Consolidated Properties Executive Chairman, Don O’Rorke –

“The market will be crying out for new product in 2019. We certainly don’t see any oversupply issues in the CBD.”

  

Let us recap… in Part One last week we shed some light on O’Rorke’s argument in favour of undersupply. We did this by exploring the number of apartments that are currently under construction in the Brisbane CBD, according to the latest Urbis research. This quickly illustrated that only 1812 units are under construction (over four projects) in the CBD from now until 2019.

 

  1. 666 units are due for completion this year (2017)
  2.  810 units are due for completion next year (2018)
  3.  336 units are due for completion in 2019

 

This week we turn it up a notch by investigating another five other major contributing factors, including:

 

  1.  apartment pre-sales for these four projects
  2.  where Brisbane sits in comparison to surrounding suburbs
  3.  apartment vacancy rates in CBD
  4.  population growth
  5.  infrastructural developments

 

We begin with point one. According to the Urbis report, the majority of the previously mentioned 1812 units have already been presold with no further developments scheduled to complete until the Queen’s Wharf Casino project finishes its first stage in 2021/2022. “The only certain fact is that the four buildings under construction in the Brisbane CBD will be the only additions to the existing market stock in the coming years and 1812 apartments, by any measure is a small number,” he said. “With the majority of those apartments already pre sold, there is clearly an excess of market demand for new product.” 

 

 Next we shift our attention to point two – Where does Brisbane sit in comparison to its surrounding suburbs? Well, according to O’Rorke Brisbane is very much a fragmented market. “A buyer or tenant who wants to be in the CBD does not want to be in The Valley, Newstead or South Brisbane – all of which have substantially more stock completing in 2017 and 2018.”

 

The Urbis report indicates the following figures:

 

  1.  3,879 apartments are due for completion in 2017 and 2018 across the Northern Market (Fortitude Valley and Newstead) 
  2.  3,403 apartments are due for completion in 2017 and 2018 across the Southern Market (West End and South Brisbane)

 

Remember that over that same two-year period there are only 1,476 apartments due to be finished in the CBD, which is only a very small percentage in the total scheme of things. Now, if we look at the vacancy rate, Urbis’ current tenancy report shows a vacancy rate of only 2.3 per cent - clearly indicating that the supply is being fully absorbed by the rental market.

 

Furthermore, the latest Brisbane Inner City population growth figures show an increase of 1.8 per cent. And we can certainly expect this number will continue to rise, given the number of infrastructural developments like the Queen’s Wharf, Howard Smith Wharves and Brisbane Airport (just to name a few) on the cards for Brisbane over the next few years.

 

According to research by Property Council of Australia the number of white collar jobs also continued to grow in the last quarter of 2016. This may just the beginning of things to come, given that the Queen’s Wharf project alone is expected to tipped to inject 10,000 employment opportunities from construction through to completion.

 

 

Let us put it all together…

 

Brisbane can expect to see 1812 apartments due for completion over the next three years, which (as we now know) is a small fraction when compared to its northern and southern markets comparatively – including surrounding suburbs such as Fortitude Valley and Newstead. (Could it be that when referring to previous comments about oversupply, the industry experts are referring to Brisbane’s surrounding areas – not actually the CBD?). When combined with the scarcity of development locations, as well as population growth and an increase in employment opportunities – both driving strong demand for CBD apartments for sale and rent.

 

Does this sound like a city in a state of oversupply?

 

If you are interested in buying or selling property in the Brisbane CBD, speak to the team with their fingers on the pulse - call HSBP on 0419 782 133.

 

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