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EVERY second new apartment sold in Brisbane in the past year is now worth less than what it changed hands for, but developers and owner-occupiers have not lost confidence in the city’s unit market.
More than 1300 new projects are set to be completed over the next two years and strong sales are being recorded for high quality apartments, according to a new report.
The latest Settlement Risk report from property researcher, CoreLogic, reveals that since mid-2017, more than 50 per cent of off-the-plan apartments in Brisbane have settled with a valuation lower than their original contract price.
But industry players say “the worst is over” and the appetite for high-end apartments, an increase in interstate migration, low prices and generally higher than average rental yields should support a further recovery in the Brisbane apartment market.
Projects like ‘The Standard’ by Aria Property Group in South Brisbane are almost sold out, with 234 of the 268 apartments sold in six weeks and only 15 remaining for sale.
Other major projects underway include 1,141 units in ‘Sky Tower’ in Mary Street, which had five off-the-plan sales in the September quarter, according to Place Estate Agents.
And Stage 1 and 2 of the Brisbane One Towers in South Brisbane, which will comprise 608 units, along with the 84-storey ‘The One’ tower.
New supply due to come online in the next two years will be concentrated in the inner city precincts of the CBD, Fortitude Valley, Bowen Hills, Newstead, Hamilton, Holland Park and Yeronga, but also Forest Lake, Redcliffe and Wynnum-Manly.
CoreLogic national research director Tim Lawless said the construction cycle for new apartments in Brisbane peaked about two years ago, which had given the market time to absorb excess stock.
Mr Lawless said increased interstate migration to southeast Queensland had also helped.
“I think the worst is behind the new apartment market in Brisbane,” Mr Lawless said.
“We’ll see a better performance for new apartment stock geared toward the owner-occupier market.
“I think apartments that have a more concentrated focus on investors, particularly foreign investors, will probably find their markets are a bit smaller than what they used to be and potential purchasers might find it harder to obtain finance.”
Mr Lawless said off-the-plan unit buyers who were confronted with a valuation lower than the contract price may need to top up their deposits in order to meet the lender’s loan-to-valuation ratio requirements.
A new report from Place further cements views the Brisbane apartment market is recovering, with the average sale price of a unit in the city during the September quarter rising 17 per cent to $790,489 — driven by owner-occupier demand for high quality apartments.
Place residential research director Lachlan Walker said the inner Brisbane apartment market continued to be affected by tight lending conditions, but buyer demand — particularly from owner-occupiers — was steadily absorbing available stock.
Aria Property Group design manager Simon White said the owner-occupier market was “very strong”, particularly downsizers.
“The majority of resales have been to owner occupiers, with average price growth over the 69 Aria unit resales since 2015 being $74,000/unit,” Mr White said.
“The local downsizer market is very strong, particularly in inner urban areas such as South Brisbane and Kangaroo Point, where people want to be close to everything, but also don’t want to have a backyard to maintain.”
But RiskWise Property Research CEO Doron Peleg warned the risks associated with buying off-the-plan units would become even greater if changes to negative gearing and capital gains tax were implemented if Labor won the next federal election.
Mr Peleg said there would be reduced demand to buy rental properties due to the creation of primary and secondary markets, and that would cause new home prices to fall in many regions.