MARKET REPORT: BRISBANE

Depending on who you listen to, the Brisbane market is either still growing strong or about to experience a slow down.

And like most reports, the truth is most likely to be somewhere between.

Property experts have noted that the apartment approvals might have hit their peak following a record number of building approvals in previous years.

According to Lord Mayor Graham Quirk, the 2015-2016 financial year saw 1000 more applications assessed compared to the previous year.

Australia is in the middle of an apartment building boom and the number of apartments built in Brisbane leaping 30% over 2012 figures with 30,000 apartments approved between 2012 and 2015.

Many of these investors are from New South Wales who are looking for a better return on investment than their state can currently offer.

Sydneysiders are the most active interstate investors in the Sunshine State, with its popularity surging as the harbour city’s four-year property boom wanes, figures provided by Australia’s biggest landlord insurer Terri Scheer show.

The figures, which cover those who hold a policy with the insurer, includes about 20,000 NSW landlords in addition to those in other states. The most common location for their Queensland investment properties is likely to be the Brisbane area.

But all good things have to come to an end, as the market judges the balance between demand and oversupply. According to the BIS Shrapnel’s Building in Australia 2016-2031 report, released at the beginning of August, a 50% decline in apartment commencements expected over the next four years.

The same report estimates that Queensland’s dwelling approvals will drop by 12% in the current financial year.

New apartment construction has been booming – particularly in inner Brisbane – and the apartment sector is expected to move into oversupply.

However, some price growth is expected for houses because it is relatively affordable and is in undersupply.

And, according to Domain’s chief economist Dr Andrew Wilson, this may be part of a growing disconnect between house prices and unit prices, which might cause investors to reconsider strategy.

The house and apartment markets have disengaged from each other, and you’d have to say on current trends this equal [price gap] record is on track to be broken,” Dr Wilson said.

“This sort of disconnection between markets is not usual, as they generally work in tandem.”

Year-on-year house prices have grown 4.3 per cent, while units are down 3.2 per cent. Apartments are now at their lowest prices since March 2013.

Still, the best prospects for house price growth over the next three years are Brisbane and Hobart, where the median is predicted to rise 7 per cent by June 2019. By contrast, the median unit price in Brisbane is forecast to fall by 6 per cent.

Fears of a glut in Brisbane office space appears to have been overblown with leasing activity in the Brisbane CBD office market growing nearly 30 percent in the 12 months to June 2016, and the CBD now comprises around 2.27 million square metres of lettable space, according to Savills research.

Savills’ CBD Office Market Briefing for the second quarter of 2016 has identified 117,437 square metres of leasing activity (> 500 sq m) in the Brisbane CBD in the 12 months to June 2016, up 27 per cent from a year earlier but down on the five year average (123,357 square metres). The majority of these leases (nearly 60 per cent of space leased) were in the Uptown precinct.

The Brisbane CBD office leasing market looks to have turned a corner with 2016 showing encouraging signs of improved tenant demand. Competitive rents and incentive packages on offer are continuing to attract smaller businesses from the fringe and suburban precincts of metropolitan Brisbane.