Well on our way into the new year, the much talked about imminent Brisbane apartment market crash has still failed to materialise. As market participants in Brisbane’s property sector across development, sales, rentals and finance, our view remains that things aren’t as bad as the overly bearish news stories portray for the following reasons:
- Approvals over the last 18 months have dramatically declined in SE Queensland. This will give the market time to absorb stock from projects currently under construction, remembering that the last few years of unprecedented building has filled the gap created by very little residential construction in the years following the GFC.
- We have seen a shift in buyer profiles away from foreign investors in light of regulatory changes in 2017. More and more asset rich Sydney based investors are looking to Brisbane for investment bargains, where they can nab an apartment or townhouse for a fraction of Sydney prices and obtain much better yields.
- First home buyers are beginning to return to the market in droves (their highest level since 2012) thanks to attractive government and developer incentives on offer.
Across the Brisbane market, developers with higher quality projects and in proximity to good amenity are still experiencing strong sales results with many projects (including our own) selling out.
Red and Co thinks the biggest trend to watch this year in the Brisbane apartment market will be settlements by some of the city’s biggest apartment builders. Large players such as Metro locally, and Meriton in Sydney, are having to become increasingly crafty to ensure their projects settle. Strategies such as vendor finance have been extensively used to bridge the gap where buyers, particularly from overseas, are now unable to obtain conventional finance to settle their apartment purchase. The question is, what is going to happen when these loans mature, and buyers must refinance with conventional lenders?
Added to this, when developer provided rental guarantees expire, in high density areas, some blocks may fall victim to a period of higher vacancy rates.
Over the past 18 months, Red and Co’s development mantra has been to execute a number of medium sized projects in well serviced areas, which isolates risk and ensures strong fundamentals for sales and rentals with no settlement risk. The vacancy rate in our rental portfolio consistently sits at approximately 1%.
If you want to speak to a dedicated team that knows the lending, development and rentals market, please don’t hesitate to contact us on 1300 88 73 28 for a chat.