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Brisbane Market Risks a Property Oversupply… Or Does It?

August 13, 2015

You could be forgiven for being slightly confused about the state of housing supply in Brisbane.

On one hand, many experts are warning that a glut of inner city apartments are set to crush rents in the Brisbane CBD and deflate investment returns.

But on the other, industry insiders are claiming that Queensland housing is well under-supplied overall, with Housing Industry Association (HIA) figures suggesting the state needs another 10,000 more dwellings constructed per year.

According to HIA research, dwelling construction has averaged around 30,500 per year in Queensland over the last five years – but it requires at least 40,000 new homes annually to keep up with demand.

“The truth is that not enough houses are being built and every year, the pent-up demand for housing grows,” says Real Estate Institute of Queensland CEO Antonia Mercorella.

While that may be true for Queensland in general, that’s not quite the case in Brisbane’s inner city.

Almost $2 billion worth of apartment projects are set to flood Brisbane’s property market over the next 18 to 24 months, including the $232 million Coorparoo Square; the $175 million Icon Milton; the $120 million Toowong Tower; and the 10-level, 130-apartment luxury complex Topaz Residences in Bowen Hills.

With foreign investors – particularly from Asia – demonstrating a strong appetite for Brisbane units, this could increase the number of rentals available, which could have serious ramifications for surging property values in Australia.

Rents may fall, and values will follow

Property commentator Terry Ryder, founder of hotspotting.com.au, warns that an oversupply of apartment stock could make it difficult for landlords to find tenants, unless they “severely cut rent – and that is going to have an impact on the overall market.”

“When rent is cut, values fall,” he says, “and that will impact existing local property investors and homeowners in the Brisbane inner city area.”

This potential issue of oversupply is less likely to affect property owners with freestanding family homes in the suburbs, such as Zaki Ameer.

Ameer has picked up several properties in Logan, Ipswich, Bundamba and Goodna over the last few years, with plans to add further properties in the Sunshine State’s capital to his portfolio.

“Each of the suburbs I invest in are similar in terms of demographics to the western suburbs of Sydney, and future growth is predicted to be similar to western Sydney, however, they have yet to experience that strong growth,” Ameer says.

“Yet to have an upward swing”

Ameer invests only in Brisbane suburbs that are located in non-flood prone areas, and looks for strong infrastructure in each suburb to underpin its growth prospects.

“I conduct research into the infrastructure investments of the suburb, including roads and public transport options.

It’s also helpful if big corporations such as McDonalds or Bunnings Warehouse are open or planning to open in the area, as it shows that larger businesses believe in the future growth of the area,” he explains.

“I also note the migration movement of people to the surrounding areas.”

With his hometown of Sydney becoming increasingly unaffordable, Ameer will continue to invest in the Brisbane market, he adds.

“It’s still yet to have an upward swing and it’s only on the rise now, while Sydney is at its peak,” Ameer says.

The information in this article is general information only and does not constitute financial advice. This does not take into account your personal circumstances and accordingly you should seek independent financial advice before taking any action, or refraining from taking any action in reliance on any information contained in this article.

Find properties for sale in Brisbane and properties for rent in Brisbane on Soho.com.au. And read up on how the Soho app is breaking new ground.

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