RBA Raised a Flag on Brisbane Apartments

I got this emailed to me today (Knowledge Source)
extract below. Can not copy link

This is not good. I personally believe that this will impact on the property market performance in general as market sentiment be a big one.

RBA singled out the Brisbane apartment market in their latest Financial Stability Review (FSR).
RBA raised concerns regarding the prospect of settlement risk and how this will impact on big developers.

The construction of new apartments and other higher-density housing has increased substantially over recent years, reaching historically high levels. In 2016, higher-density dwellings accounted for around half of all residential building approvals (Graph 2.6).





Brisbane the overall increase in the supply of apartments in inner to middle-ring suburbs is much larger than that of Sydney and Melbourne as a share of the current stock, and population growth in Queensland has slowed in recent years.

This large number of new apartments recently completed and currently under construction raises the risk of localised pockets of oversupply. Apartment prices have fallen in Brisbane…

Brisbane has been pumping out the high-rises like there’s no tomorrow. Not only that, there’s plenty still left in the pipeline, with large surges of supply coming through til late 2018.

If we’re already at a stage where over-supply is putting downward pressure on prices, where will be in 18 months?

They key swing factor here is interstate migration, with net population outflows out of Queensland making things all the worse lately.


MTR

 

John Gian (the author) has been warning on these for a while now. His argument seems sound.

Driving around Brisbane I can see no reason whatsoever to disagree. I get the same feeling I used to get driving through Darwin City in 2010...."this won't end well .."

Would be delighted to be wrong though...

 

Same as I got the same feeling in Perth city... still have oversupply and they are still building them

 

Recently released ABS data to December 2016; commencements, under construction, and completions.

Following the Sept qtr you can see that developers have responded sharply to genuine oversupply fears, but they are not so scared about NSW and VIC. QLD is at the very start of feeling its additional completions.

I think Melbourne is in good shape, but I am also worried for NSW who is still a good way off peak completions.

WA had 28,000 completions in 2016, that looks like it will be under 20,000 in 2017 and depending how things go, maybe 2018 as well. Under-build could very likely be on the way.

 

Sorry to jump on the wagon here and maybe not so relevant but will this effect the house market to the same level in Brisbane? I am trying to decide whether or not to sell or keep and rent our PPOR. worrying times for Brissy?

 

Brisbane has had apartment oversupply for some time now, it is also a local Brisbane suburb issue in some area across Brisbane. Agents are offering 2,3 & 4 weeks free rent to secure tenants. Buyers be aware do your homework before buying.

 

Just be extremely wary of buying apartments in Brisbane.

 

They're STILL building em in Perth??! Yikes!

 

Yep

 

Outer areas of Perth seem to be hell bent on overbuilding also, markets in a glut but still they build and develop new areas. I don't see the numbers of newcomers coming in though

 

There are lots of markets within Brisbane.. depending on the area and type of house i.e. entry level or high end, may affect current demand. I'm finding demand to be still strong where I'm looking (Wilston/Grange/Ashgrove/Bardon) $600-800k for owner occupiers.

 

Masses of apartments still under construction in inner city Bris.

Annual net interstate migration is at least rising into QLD, though...now at its strongest level since 2009.

 

Interesting post. However I can't see how the apartment glut will affect the detached housing market? Completely two different products.

 

Brisbane was always a risky investment due to its employment whether it was apartment or otherwise.

People just love to create imaginary clocks and the such to say Brisbane is the next boom and hype-up an otherwise under performing market. If Perth property was down there was no reason what so ever for Brisbane to go up

 

Isn't QLD receiving the highest number of interstate migrants

But the think is that many brisbane suburbs are recording strong growth.

 

Yes, but based on Sept 2016 data that's still only 3,402 people/quarter out of 17,145 state increase. NSW received 24,329 international arrivals for a total population growth of 30,919 that same quarter.

Interstate migrants are also more likely to defect back to their home state than international migrants back to their home country. Just look at WA. The only international migrants who are an exception to that are New Zealanders, who make up a notable portion of QLD international migration.

 

If this was the case why is it not a boom state today?

 

And I would expect an accelerated level of interstate migration (and maybe international as well but not nearly as strong as interstate). The reason I say this is because jobs have increased (non mining professional services type jobs). There are reports from recruitment companies that say this. I have seen it on the ground myself.
Will be interesting because Sydney and Melbourne are still.strong with respect to these kind if jobs, so how much interstate and international migration will be an interesting yo see..could rather be migration from Cairns, Townsville etc into Brisbane instead.. Not sure.
As expected, most of this is concentrated more in and around the cbd.
In any case e, this I think will put some pressure for housing to increase. Perhaps ex oversupplied cbd apts though. I'd expect most ex oversupplied well connected to cbd to do well-better than last 12 months.

 

I really think Brisbane time will come. Check out the graph. The Gap with Sydney is highest ever. It's just ridiculously large.

 

All that matters is markets tightening and not enough stock to meet demand, if you see this then jump in