There has been much said in recent times about the huge number of approvals for new apartment projects in Brisbane and how this will cause a significant over supply in the market. We have been cautioning for sometime that this would not occur, as Developers naturally didn’t bring projects to market due to the slowing market conditions coupled with the Banks tightening of lending criteria. It seems that we were correct in the assessment according to the NAB Quarterly Australian Commercial Property Survey Q3 2016 which was released today.
In this survey, which was completed by 240 property professionals, only 18% of residential property developers were expecting to start work on their projects in 18 months time. The figure was higher for the next 6 months, at 34%, which would reflect that a number of these projects already have momentum and it is probably too difficult to stop the development process on these projects.
So if these figures are correct, what would the Brisbane apartment pipeline look like in 18 months?
RP Date Core Logic has asserted that as many as 81,696 apartments would be delivered into the Brisbane market over the next 2 years. If only 18% of these apartments were in fact brought to market as this survey suggests, this would amount to only 14,700 apartments coming to market over the next 2 years rather than the 81,000 odd that has been bandied around.
This is still a significant pipeline and represents a number of years supply at current sales rates, but it is a far cry from huge over supply concerns that many researchers have been happy to spruik.
As we outlined in our recent CommSec State of the States Report – What does it mean for Brisbane property?, there are a number of positive factors that are slowly working on the Brisbane property market to rejuvenate it, and we expect to see a significant fall in the future pipeline of new projects coming to the market, coupled with a slow ramp up in sales, which collectively will help to push the Brisbane apartment market along at a much stronger rate.
ABS – Building Approvals, Australia, Sep 2016