APPD Market Report Article

Brisbane

December 1, 2021

4.3%

AUD 480

Rents
Rising

Investors start joining the housing rebound

  • Off-the-plan apartment demand has remained much more muted than the existing sales market. However, investor demand has lifted over recent months as investors are lured in by a combination of rapidly growing prices, improvements in the rental market and the record low interest rates.
  • Despite transactions dropping to around 1,800 in 2Q20, quarterly sales volumes (new and existing) have increased 132% to more than 4,175 sales in 2Q21 (CoreLogic). Demand was supported by strong net interstate migration and investor demand from the southern states, which should be further boosted in 2022 as international borders open.

New apartment supply levels stabilise

  • Brisbane’s inner city apartment supply pipeline has fallen sharply since peaking in 2016. Just 313 apartments completed over the first half of 2021. There remains around 1,600 under construction and due for completion by the end of the year, which would make annual completions slightly more than 2020, but still around 73% below 2016 peak levels.
  • Rental vacancy across Greater Brisbane was 2.2% in 3Q21, which rose marginally in the quarter but is still well below the 3.7% recorded in 3Q20, at the height of the pandemic. More recent evidence also suggests that vacancy is continuing to tighten across Brisbane.

Dwelling prices (including apartments) continue to surge

  • Brisbane’s apartment price growth gained momentum into 2021 with prices rising 2.7% over the three months to July to be 7.0% higher in annual terms (CoreLogic), while more recent evidence suggests that this has continued to gain momentum since. Rental yields fell moderately (-12 bps) over the year to 2Q21 to average 4.9%. This is largely due to downward pressure on rents at the onset of COVID-19.
  • Increased interstate migration and demand has seen two-bed inner ring unit rents rise by 6.4% (AUD 30) over the year to September 2021 (REIQ). One and three-bed units also grew by 6.9% and 8.1%, respectively.

Outlook: Momentum likely to build over the next year

  • The Brisbane apartment market now has a lot of tailwinds behind it that should see its recovery gain pace quickly over the next few years. Demand prospects are buoyed by an improving local economic outlook, increasing interstate migration, and over the medium term, by a strong recovery in overseas migration.
  • This increase in demand will be met with further reductions in new supply in the short term and only a moderate rise in completions over the medium term. This is likely to see the market swing quickly towards undersupply. This pressure is already evident in an improving rental market, but rental growth is likely to build further as vacancy falls to low levels.

Note: Brisbane Residential refers to Inner Brisbane apartments. Pricing data sourced from CoreLogic. Vacancy data sourced from REIQ. Rental data sourced from The Queensland Rental Tenancy Authority.

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