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A tsunami of Brisbane apartments only means one thing

Property experts estimate Brisbane is facing the introduction of as many as 32,000 new units to the market, with few ways to combat the continued downward pressure on prices.  queensland brisbane city water sky QLD map state capital australia

That was the opening line of a recent article in Domain – With 32,000 more apartments on the way for Brisbane, there’s no way to soften the blow

When I was rung by the journalist for my opinion I liken it to a tsunami coming our way – a flood of of new high rise apartments that would only lead to falling rents and values in that sector of the Brisbane property market.

Recently the RBA highlighted weak conditions in Brisbane’s apartment market, where an increase in supply has resulted in falling prices and no growth in rents.

Research from Urbis suggests more than 6,400 apartments in major developments were due for settlement this year in Brisbane’s inner city, prompting concerns of falling valuations.

How could we prevent this?

Here’s my answer to that question when it was posed by Domain: 

investor-enquiry-form

Metropole Property Strategists chief executive Michael Yardney said the genie was out of the bottle, and Brisbane developers, investors, and homeowners simply had to weather the storm.

“What can we do to prevent it? The answer is nothing,” he said.

“The problem is there are many vested interest involved with large amounts of money involved with long time-frames, these projects were started two or three years ago or sometimes even longer.

“It’s now too far into the process to say speed it up.

Or delay it, because there’s extra holding and finance and interest costs.”

That storm, or “tsunami” as Mr Yardney has taken to calling it, will take the form of falling values and widespread settlement issues.

“There’s a tsunami of settlement issues coming,” he said. 

“[The apartments] won’t be worth what [buyers] paid for and they won’t get any capital growth for five to six years.” Brisbane City CBD, Queensland, Australia

Even banks were taking a step back from getting involved in Brisbane high rise apartment buildings, Mr Yardney said.

“Currently the banks are worried and concern so there’s a whole lot of blacklists. Banks are only lending to a small percentage in these buildings,” he said. “They only want 15 to 20 per cent exposure in each building. So what’s going to happen is you’ll have difficulty getting finance.”

Domain Group chief economist Andrew Wilson Dr Wilson said this attitude from lenders and the banking regulator APRA was exacerbating the issue.

“Even if you want to buy a unit in Brisbane you can’t get a competitive interest rate or you can’t get a loan at all,” he said.

“So how is the market going to adjust if the banks aren’t lending? It doesn’t help the Brisbane market that lenders won’t lend.”

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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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