Friday, March 13 2015
The Brisbane market has been on a steady albeit modest recovery since 2012 but their are significant risks emerging which could see substantial losses for some.
I saw the below article last week and it has me pretty concerned about over-supply in the Brisbane unit market. Many of these units are being built in inner city suburbs like the Valley, South Bank, and West End. Sure these areas are artractive from a lifestyle perspective but these areas are already heavily saturated with units that have achieved limited price growth over an extended period and in many cases have seen declining prices.
They are also markets that have demonstrated fairly sluggish rental growth.
Given that many of these projects are being realsed at the same time it is likely they will completed and settle around the same time. The potential impact of thousands of units coming onto the market at once is a sharp decline in values and increased vacancy levels.
This means for people purchasing off the plan they may find that the unit they purchased values for less than the contract price. And for those looking for it to be an investment there could be extended periods of vacancy or reduced rents achieved.
Since this article was released I have seen the announcement of several more projects and off the plan sales.
How it plays out only time will tell but I would be exercising a fair degree of caution and if I did proceed would have in place a substantial buffer to fund any devaluations on the property.
Remember once you sign an off the plan contract it is unconditional which means you have to settle of lose your deposit.
Brisbane’s off the plan apartment market is smashing all previous records within a three month period with a staggering 1621 unconditional sales taking place.
Apartments sold during this quarter revealed a weighted sale price increasing to $551,558 from a recorded $545, 478 during the three month period to September 2014, a figure which remains relatively unchanged.
An apartment “boom” was evident with a total of 12 new projects released during the December 2014 quarter, spanning a colossal 2760 new apartments – more apartments in a single quarter than during the entire 2013 calendar year.
The report identified that the most unconditional sales of the December 2014 quarter arose from the inner-northern Brisbane off the plan apartment market, which included 620 unconditional transactions with a weighted average price of $481,774, representing 38 per cent of all sales during the period.