A surge in apartment construction in Brisbane puts the city on track to pick up to an average 2700 completions a year by 2015-16, a new report by research firm BIS Shrapnel says.
With more than 4000 apartments in inner Brisbane under construction already due for completion by 2015-16, as many as 3000 more are likely to achieve presales hurdles and proceed to completion during the period as off-the-plan sales rise, says BIS Shrapnel.
Caution is needed, however, as this level of increase would push the average level of completions well over the previous peak of 2250 apartments inner Brisbane posted in 2005-6, the research company says.
“The conditions are there for further strengthening of off-the-plan sales in the Brisbane market, with both domestic and interstate investors expected to be coming in larger numbers than they have been in recent years,” report author Angie Zigomanis told The Australian Financial Review. “The risk there is that if the exuberance gets too much you end up with oversupply at the end of the cycle.”
While growth is coming on in areas that weren’t historically residential, such as Woolloongabba and South Brisbane, the biggest supply potential is in the city’s north-eastern area around Bowen Hills and Fortitude Valley, and this poses a risk, Mr Zigomanis said. “People might get too carried away there,” he said.
In addition, CBD planning laws permit large structures – such as 50-storey towers with 500 apartments each – to be built in the city centre, and even a few of these could boost supply greatly, he said.
A boom-and-bust situation is not guaranteed, however. In the 2000s, many apartments were converted to serviced apartments to meet, in part, the needs of Brisbane’s tight hotel market, and this could happen again.
“As landlords become more competitive and drop rents, it could well be the inner city, being the prime location for people, may start to draw residents from adjoining suburbs as well,” Mr Zigomanis said. “So you see a softness in rents, but don’t necessarily see a blowout as you start attracting people from other areas.”