Exactly how strong is the Brisbane residential unit market?

Exactly how strong is the Brisbane residential unit market?
December 4, 2019 Gerald Bogart

There has recently been a great deal of talk about the prospect of multi- dwelling residential property values to increase over the next 3 years in the greater Brisbane area.

There has been suggestions and estimates of a possible 10 to 15 % increase depending on the source.

Their forecasting is based on the fact that the abolition of negative gearing or changes to capital gains taxation is off the radar, for now.

Furthermore, interest rates are now on a downward trend, and lending criteria’s have been relaxed.

Additionally, the city itself is coming into its own right, as there are impressive entertainment and transport projects taking place in the CBD, such as the Queens Wharf Casino project, estimated to be a $3 billion project, and the Cross-River Rail tunnel with a new underground railway line and stations estimated to be a $5.4 billion project.

Furthermore, several other projects like a Brisbane live entertainment venue are waiting to be approved.

Demographic wise, the signs are also positive. The greater Brisbane population growth over the last 8 years ranged between 30,000 and 140,000 annually and has been one of the pacesetters for population growth in Australia for two decades. The population of greater Brisbane is expected to grow to 3.18 million by 2031 with Brisbane leading the way as one of the fastest-growing capital cities in the country (Source: Queensland Government Statistician’s Office, Queensland Regional Profiles).

All this positive news is fuelling a growing optimism that now is the time for Brisbane’s residential unit market to shine.

For a reality check, Its worth having a closer look whether these factors are really feeding into an improving multi-dwelling residential market? For this we need to address the fundamentals of both the supply and demand sides of the equation for multiple dwellings in the greater Brisbane area.

On the supply side, our research revealed that there are 1,681 multiple dwelling projects with a development approval, of which 236 projects are being deferred, and 601 have either just recently been completed or are under construction, equating to a supply of some 19,032 units in the greater Brisbane area.

Sales numbers of multiple dwellings, including secondary sales, in the same area are however decreasing from 9,235 sales over the year to October 2018 to 7,059 sales in the year to October 2019, with only 2,960 sales over the last 6 months.

There seems to be a mismatch in supply and demand.

And the growing expectation for increasing values for residential units in the greater Brisbane area appears to be too optimistic.

The question arises – why are sales decreasing after all this stimulus mentioned earlier? Could there be forces at work like one of the three C’s of Credit, being Capacity, ie. the ability to service a loan? Is this the weak link in the chain?

There are certainly signs that there is job growth but the Chamber of Commerce and Industry Queensland (CCIQ)’s analysis of the job creation figures for Queensland shows a private sector in decline over the past five years and industries largely representative of public sector employment have produced over 56% of total jobs ‘created’ in the state over the same period.

Queensland continues to have the country’s second-highest jobless rate in the nation behind Tasmania.

Furthermore, in September 2019 the Sunshine State officially became the bankruptcy capital of Australia on both a raw data and per capita basis on an analysis of data from the Australian Financial Security Authority (AFSA).

Perhaps a note of caution is warranted about the current …exuberance? I wasn’t going to use the “irrational” adjective, however tempting.