Inner-Brisbane Apartments Report 2019
Inner-Brisbane Apartments: Oversupply vs. Undersupply
What is the true state of the Inner-Brisbane apartment market & where to from here?
The future development pipeline is a cause for concern for investors and owners alike, with fears that incorrect stock selection could compound price and cause oversupply issues, due to the increased apartment development in Brisbane since 2015.
Apartment completions increased by 83.9% from 2014 to 2015, and from 2015 to 2017 totalled nearly 15,000 apartments. There is also evidence of growth in deferred and abandoned projects within inner-city Brisbane, increasing by 23.0% from 2017 to 2018, which is a total of over 3,000 apartments.
There is a real need for property investors, home owners and developers to understand the current state of the market. PRDnationwide Research utilised a number of factors in order to assess the market conditions, including examining the sociodemographic composition and mobility history of residents in Inner-Brisbane. PRDnationwide Research also reviewed and analysed the apartment supply pipeline in regard to historical demand by bedroom count.
‘Inner-city Brisbane’ has been classified as suburbs 0-3km radially from the CBD, with global characteristics which commonly occur in inner-city residents. The characteristics were then assessed against a population living further away from the CBD, otherwise known as Middle-Brisbane (3-10km). Key notes highlighted in this report propose that Inner-Brisbane residents were more likely than their Middle-Brisbane counterparts to have moved within the past 5 years. They were also more likely to be: single; childless; younger (aged 20-39); have a lower income; be more highly educated; and renting.
PRDnationwide Research found that most inner-city Brisbane residents were mobile in their dwelling location over a 5-year period with only 25.5% residents choosing to stay in the same dwelling. It was also found that 18.6% of current inner-city Brisbane residents were living overseas 5 years ago.
Further, residents living in properties with fewer bedrooms have a tendency to move to other dwellings, whereas those living in greater number of bedrooms do not.
Analysis of the future apartment development pipeline revealed the below findings:
- There is a current estimated shortfall of up to 15,500 apartments by the end of 2023.
- There is an oversupply of 1-bedroom apartments.
- There is a growing appetite for 3 and 4-bedroom apartments, which are currently undersupplied.
- Demand for 2-bedroom apartments is well met.
PRDnationwide Research’s findings regarding who is living in inner-city Brisbane and the current supply is key information for many stakeholders.
Developers can use this information to improve their marketing campaigns to target particular sociodemographic markets and/or influence their building design process and apartment configurations. Demand has shifted to favour apartments with more bedrooms, and as such adding or purchasing 1-bedroom apartments should be treated with caution.
Investors can improve their decision making as to what to buy, as it was found that larger apartments (3 to 4-bedroom configuration) held occupants for longer periods. This suggests a more stable rental income return for investors. There is a tendency for tenants to move into newer apartment stock as it becomes available, therefore investors need to lock in tenants for longer contracts as opposed to short-term leases.
In conclusion, high levels of apartment development since 2015 in inner-city Brisbane has caused a temporary oversupply in the market. However, this trend has caused many developments to be deferred or abandoned to the point where now the market is reversing into an undersupply position. Vacancy rates have declined by -0.9% over the past 12 months (to November 2018), meaning that more inner-city Brisbane apartments are being successfully rented. That said, it is key for developers and investors to understand what type of apartments need to be built to ensure that only the correct type of apartments are planned for the future.
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