Inner-Brisbane apartment construction is booming, with an unprecedented amount of stock aimed at Brisbane property investors about to hit the market at the risk of creating an oversupply in some areas.
Analysts expect about 5500 new apartments have or will become ready for sale in Brisbane in the second half of this year. It follows a record-breaking year for off-the-plan apartment sales in Brisbane in 2013.
A report by social and economic market research firm Urbis said up to 45 projects could be added to the Brisbane market in the second half of this year. It predicted a levelling out of releases and greater competition from September onwards.
The groundswell of Brisbane developments has led to a cautionary note from market analysts.
The report warns the volume of apartment stock coming onto the Brisbane market is unlikely to be absorbed in some areas and will cause a build-up of stock through 2015.
Developers say completions will be staggered over several years. Rising constructions costs and peak prices for development sites may prevent some projects getting off the ground.
The explosion of apartment construction in Brisbane has been fuelled by low interest rates and years of undersupply of housing stock. While there are opportunities in the Brisbane property market, property investors need to wary of high-rise developments says Portfolio Management Services’ managing director Jock Bing.
“In most cases these properties are sold to investors, as few buyers actually want to live in them themselves, and for good reason,” Mr Bing said.
“Noise issues, extreme density of living, small floor plans, inability to improve or add value, compromised design and, of course, no scarcity or rarity factor. To me, that also means they do not make good investments.”
Portfolio has instead focused its Brisbane property investment strategy on established houses close to the Brisbane CBD. It is a property investment model Portfolio has successfully used to make some of the best residential property investments of the past 40 years.
Portfolio Management Services property acquisitions adviser David Powell said Brisbane presented an interesting opportunity for property investors. Prices fell 25-30 per cent in a 24-month period including the 2011 Brisbane floods and 2012 Queensland election; they had since recovered to levels typically seen 3-4 years ago.
“Prices are coming off a very low base – there is a lot more room for growth compared with some areas,” Mr Powell said. “It’s a good place at the moment to be.”
Ironically the perfect storm of property undersupply and low interest rates has increased the level of difficulty for investors, who need to look harder for well-priced investment property.
“It’s all good and well to identify a suburb, but then you have to identify the good streets in that suburb, and then whether a specific house will make a good investment,” Mr Powell said.
“That’s true of anywhere at the moment and in Brisbane it’s even more so. You can’t just throw a blanket over an area and say everything there is good. There’s a lot of good stuff and a lot of bad stuff.”
Everything from rising vendor expectations to insurance issues arising from Brisbane floods made market research crucial for anyone in the Brisbane property investment market.
“Investors need to be very picky about what they buy,” Mr Powell said. “Our clients pay us to do that research and find property that will make a successful long-term investment for them.”
To find out more about how Portfolio Management Services can help you achieve your property investment goals in the Brisbane market, call today on 9621 1044.