Significant oversupply risks continue to build in the Brisbane inner city unit market.

The Inner Brisbane Apartment (IBA) market has experienced a surge in demand for off–the–plan apartments since 2013/14, according to research by economic forecaster BIS Shrapnel.

In the latest edition of its Inner Brisbane Apartments Market Brief, BIS Shrapnel predicts that the surge will result in record new apartment supply in 2014/15, with completions set to escalate further in 2015/16 and 2016/17.

In particular, development in Inner Brisbane has been dominated by large scale and high rise development in the CBD/Spring Hill, Inner East, Inner North, West End, Toowong, Woolloongabba and Hamilton.

Inner Brisbane Apartment Area completions are on track to surpass their record level in 2014/15, increasing to 3,610 apartments in 2015/16 and peaking at 4,040 apartments in 2016/17 the report said.

Based on an average occupancy of 2.5 persons that transalates to 9,025 additaional rooms in 2015/15 and 10,100 additional rooms in 2016/17. Given that Brisbane's inner city population growth has historically averaged around 5,000 per annum that is a potential oversupply of 9,125 rooms over the next two years. In other words almost 2 years of over supply assuming no further units are built. 

If this plays out then our expectations would see a significant spike in vacancy levels and reductions in rent for both new and existing stock in followed by a fall in prices.

Our concern is many of these developments are being marketed to overseas and interstate buyers who do not have a full understanding of the market.