Pockets of Brisbane’s inner city apartment market have been labelled “no-go zones” as more evidence mounts that oversupply is taking its toll on the area.
Released late last week, Place Projects’ June Quarter Inner Brisbane Apartment report revealed that just 464 off-plan-plan apartment sales were recorded in the three month period, the lowest total since the December 2012 quarter.
The June quarter total for sales was 44% lower than the 828 recorded over the March quarter, while the weighted average sale price of $586,315 in the three months to June was 3% lower than the previous quarter.
Figures earlier this month from the Real Estate Institute of Queensland revealed the rental market for apartments in the inner Brisbane market is weakening compared to the rest of the city.
While the Place Project report claims the slowdown over the June quarter was driven by factors such as the federal election, changes to foreign buyer stamp duty arrangements and investor lending constraints, Brisbane based buyers’ agent Wendy Russell said the market in certain areas is struggling with the amount of new stock on offer.
“In my opinion there’s definitely some no-go zones you really need to stay away from. Places like Fortitude Valley and Newstead are ones where there is really some oversupply and it’s starting to impact their neighbouring suburbs as well,” Russell told Australian Broker's sister publication, Your Investment Property.
“[Oversupply] is definitely affecting the apartment market in those areas and we’ve definitely seen a slowdown in buyers looking at those areas. The prices seem to be coming down now as well,” she told Your Investment Property.
While the available apartment stock in Brisbane’s inner ring, which measures five kilometres out from the CBD, matches the price range of many investors, Russell said investors need to take a further step out from the city to find properties that are going to perform well.
“Any investors that come to me with a budget around that $450,000 to $600,000 I’m keeping out of those areas and the neighbouring suburbs as well because it’s starting to have a bit of a flow on effect,” she told Your Investment Property.
“Areas like Morningside, Hawthorne I think still have room to grow and then there are others like Churinga which has the university and students looking for accommodation. They’re all in the 10 kilometre ring, but they aren’t neighbouring those suburbs that are really hit by the oversupply.”
According to the Place report, the current slowdown will mean future projects in the inner Brisbane apartment market are of a higher quality as “those who are not full time developers and industry professionals defer until the next property cycle,” but Russell believes even best available properties will not be immune to current market conditions.
“When you have a situation of oversupply like this you want to be looking for the properties that have a point of difference.
“Things like an oversized courtyard or a ground floor apartment are ones to look for or even the older ‘80s style apartments because they typically have a larger footprint and offer some renovation potential.
“If there’s a scarcity factor to your property then that’s going to help you maybe stay immune from what’s happening with all the new projects, but in saying that I think the perception in the market is still going to impact them at the moment.”
While there may be a negative perception with in inner Brisbane, Russell said investors, particularly those from outside Queensland, shouldn’t let that colour their view of the entire city.
“There’s a lot of talk around and lot in the media that is basically red flagging all of Brisbane, but really that’s not the case.
“The Brisbane market is still doing really well and I think it will continue to do well, but it’s just about being mindful of the particular inner city pockets that have been affected by oversupply.”
