Apartment values in Brisbane to fall
Brisbane developers are winding back their plans for new apartments and the growing issue is expected to impact both purchase prices and rental returns.
Independent property research group Urbis has found the number of new apartments planned for the next year has halved to less than 5,000 in inner Brisbane, compared to this time last year.
Queensland University of Technology property economics expert Professor Chris Eves has predicted some major price drops in investor-style apartments.
"In some areas of Brisbane, particularly the inner fringe suburbs and the Brisbane CBD, we're probably looking at 15 to 25pc," he said.
He said the slowdown in development planning for new apartments had come too late for many developers, particularly as there had been a slowdown in foreign investors settling on their purchases.
Professor Eves said there are almost 6,000 existing apartments for sale in inner Brisbane now, compared with 1,600 at the same time in 2013, which did not include those currently under construction.
"There are a number of developers who have taken action to stop any further development. They will finish off the projects they have now, but they will not go ahead until the market oversupply has been taken up," he said.
"They're not selling the units that they thought they would and they're having to sell their land bank - that's their future development sites - just to complete the developments they're undertaking now."
The view is supported by the latest research from global banking giant Citi, which indicates there is already an apartment glut in Brisbane, particularly in the inner city.
Urbis associate director Paul Riga does not believe there is an oversupply of apartments in inner Brisbane, but acknowledged the sector had reached a crossroads.
"What we've seen is a slight decline in the level of demand, but we've also seen the level of supply start to regulate," Mr Riga said.
LJ Hooker inner Brisbane agent Des Besanko said rental prices were already slackening and the oversupply would continue to push prices down.
He said his clients renting out older apartments had to compete with new developments offering incentives like a month rent-free or a period of free internet service.
"We're finding anywhere from $5 to $20 a week reduction in the current rentals and that's happened over the last 12 months," he said.
Professor Eves said rental prices would continue to fall.
"We're seeing drops of 10 to 15pc in the inner city market, but what we aren't seeing is the hidden fall in rents, with land owners giving rent-free periods to the tenants. We aren't seeing that reflected in the face rents being quoted."