Apartment demand to stay strong, boost flagging development pipeline, JLL says

Apartment demand to stay strong, boost flagging development pipeline, JLL says

Rising population and denser cities will underpin continued demand for apartments, even though completions are likely to drop by more than one-third over the next two years, JLL predicts.

The pullback of both local and foreign investor buyers will dampen the construction pipeline as developers hold back even on approved projects – prompting completions to fall from a peak last year of 26,617 to 17,160 next year – but the demands of a growing population of mainly local buyers in Sydney and Melbourne and a recovery in Brisbane, will limit the decline, said JLL’s Australia head of residential research Leigh Warner.

“Investors have taken a bit of heat out of that inner city market and the focus is shifting to middle ring infill product more because it’s easier to fund, reach presales and targets a buyer market that’s still active – the owner-occupiers,” Mr Warner said.

There are already signs that the housing pipeline is holding up better than expected. New dwelling approvals rose an unexpectedly high 2.6 per cent in March.

But even though approvals – a leading indicator – do not necessarily translate into new projects, sentiment was holding up more strongly than expected, said Mr Warner, author of the real estate agency’s Q1 Apartment Market Report.

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Completions of new apartments were likely to peak in Sydney this year at 8946 and slip back to 6469 next year.

“The downward pressure will only last a year or so and then we’re back into a more positive market again,” Mr Warner said. “I expect headwinds to prevail through this year and into next year, with things starting to improve by the second half of next year and into 2020. We’ll be back to a more positive market by 2020.”

In Melbourne, where unit rents and prices remained above their five-year average, the volume of new completions – which peaked last year at 10,426, the most of any city – had not dented the wider apartment market.

The Victorian capital’s pipeline of projects – including projects completed, under construction, those currently marketing as well as those with plans both approved and submitted – stood at 69,700, more than Sydney’s 43,800 and Brisbane’s 34,700, the report showed. This included the loss of more than 9000 units earmarked in applications for the city’s Fishermans Bend urban regeneration precinct, because planning minister Richard Wynne’s decision in February to freeze them made it unlikely they would be completed any time in the next five years, Mr Warner said.

Mr Wynne’s decision may actually have helped strengthen the Melbourne apartment market, Mr Warner said.

“I can see that there is potentially a confidence boost locally from pushing that back a little bit,” he said.

In Brisbane, price growth was turning flat after a period of decline and the medium-term outlook for the economy in the Queensland capital – stimulated by mixed-use projects such as Queens Wharf – would soak up some of that completing new supply, he said.

“Prices are stabilising in that secondary sales market,” Mr Warner said. “There’s still a bit of supply to complete in this cycle but we’re through the worst of it. And there is a bit more confidence starting to emerge.”

Apartment glut prompts massive discounting in Brisbane, research reveals

Apartment glut prompts massive discounting in Brisbane, research reveals

By Anna Levy

Updated

May 16, 2018 05:56:22

A recent real estate advertisement revealed what some might call the bargain of a lifetime — a northern Brisbane apartment selling for almost 40 per cent below its 2010 purchase price.

The two-bedroom unit in Chermside is what property analyst firm SQM Research call a “distressed property”— bought for $522,000 and now on the market for $315,000.

In a more buoyant market, it might be enough to attract a long list of eager buyers, but with a rental vacancy rate of 3.3 per cent in Chermside the apartment has proven far from an easy sell.

SQM Research managing director Louis Christopher said large price falls have become the new norm for Brisbane apartment owners looking to sell in a saturated market.

“We have seen some heavy discounting before, but this is probably one of the biggest ones I’ve ever actually seen,” he said.

“It’s fair to say this is not normal in the market. Nevertheless, there has been an oversupply of properties — we see it through the rental market in the Brisbane CBD where we are recording rental vacancy rates of 5 per cent.

“We are noticing the vacancies in Brisbane are still elevated in the CBD and in the inner city market, whereas in the outer regions of Brisbane, we are recording tighter vacancy rates.”

Worst could be over, expert says

Mr Christopher said homeowners and investors might see their fortunes improving in coming months, as SQM data showed vacancy rates had been falling for the past four months.

“We noted the overall Brisbane rental vacancy rate is now at 3 per cent and has actually been dropping,” he said.

“There’s a chance now that the worst may actually be over when it comes to property investors in the rental market.”

Queensland population growing steadily

Australian Bureau of Statistics (ABS) data also suggested the state was enjoying steady population growth.

Marking the birth of the 5 millionth Queenslander yesterday, Premier Annastacia Palaszczuk said the two main drivers of the population increase were migration growth, particularly from New South Wales, and from 60,000 babies being born in the past year.

“Overseas and interstate migration is up by 50,000 people in the past year, 19,000 came from interstate … more than 12,000, or 230 a week move from New South Wales to Queensland,” she said.

Mr Christopher said property oversupply was a problem mostly localised to Brisbane, with surrounding Queensland regions and other states recording much tighter vacancy rates.

ABS data also revealed the fastest and largest-growing area in Queensland in 2016-17 was Pimpama on the Gold Coast, which grew by 3,000 people.

Large growth also occurred in Jimboomba on Brisbane’s south side and in North Lakes — a suburb north of the city — which both increased by 2,100 people.

“On the Gold Coast, we’ve been recording vacancy rates well under 2 per cent and on the Sunshine Coast, the vacancy rate is once again under 2 per cent, strongly suggesting it’s been a landlord’s market in those two regions,” he said.

“When I look at the three main capital cities — Melbourne, Sydney and Brisbane — Brisbane has suffered the most in terms of an oversupply of units.

“Brisbane’s population growth rate has been falling behind Sydney and Melbourne and because of that, it hasn’t been able to absorb the surplus stock that’s been built, hence the reason why we’ve seen higher vacancy rates compared to Melbourne and Sydney.”

Topics:

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housing,

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population-and-demographics,

economic-trends,

government-and-politics,

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First posted

May 16, 2018 05:55:21

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