APPD Market Report Article
BrisbaneFebruary 28, 2023
Leigh Warner, Senior Director - Residential Research, Australia
Demand remains for parts of the apartment market
- Brisbane was late into the general housing market slowdown, but it has caught up quickly over recent months. Despite the headwinds for the broader housing market, developers continue to report robust demand for high-end apartment stock, largely from downsizers. There has also been some investor interest due to comparatively high yields and a strong rental market.
- With the region’s population growth remaining much higher than the rest of the country, underlying demand for apartments remains robust and very low supply is likely to see an under-supply of apartments in Brisbane worsen over the next few years.
Rental vacancy is very tight and shows no signs of easing
- Inner Brisbane saw no additional major apartment project completions in 4Q22. Several projects totalling 715 apartments were expected to complete in the quarter, but settlements were pushed into 1Q23 as interruptions to construction timeframes continue to hamper developers. The level of completions will rise somewhat in 2023, but remain moderate and likely stay so over at least the next few years.
- Vacancy reached a trough of 0.7% in mid-22, but remains low despite a seasonal rise late in the year (SQM Research). Low vacancy and rental displacement now exists across the city, including in Inner Brisbane apartments. Median 2-bed apartment rents across Greater Brisbane rose 14.3% over 2022 in line with recent tight vacancy (JLL Valorem).
Sales volumes have declined considerably
- Annual sales volumes over 2022 were around 46% down on the highs of 2021. Sales volumes have now slipped below those in 2019 and 2020 (JLL Valorem). While declining apartment sales volumes reflects the slowing existing dwelling market over 2022, it also reflects the now very low level of new apartment completions in Brisbane.
- The Brisbane median unit price declined by 1.8% over the three months to December 2022. Despite recent falls, prices have still grown 6.7% over 2022 (CoreLogic). Pricing of new apartments is also rising as a result of developer cost pressures and the limited availability new stock in the market.
Outlook: Brisbane apartments to move further into under-supply
- While there are still general housing headwinds in the short term, there are also positives that should support Brisbane demand over 2023 and see it lift considerably over the medium term. These include robust population growth prospects, still solid downsizer demand and increasing investor demand due to comparatively higher returns and strong rental growth prospects.
- While the trough of new supply has passed, Brisbane apartment supply levels are likely to remain very low for at least several more years as few new projects proceed to construction. This lack of supply will only intensify competition for available stock and this should support apartment prices in the short term and see them return to robust growth over the medium term.