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Brisbane’s apartment development market has turned a corner – even as Sydney and Melbourne remain subdued – with the number of new units in the process of being built jumping 71 per cent this year, new figures from PRDnationwide show.
The total supply of apartments in the Brisbane city council area classed as “proceeding'” will jump 70pc to 19,694 – accounting for three-quarters of the total pipeline – from 11,533 in 2019 as investors return to a market that still offers lower prices than Melbourne and Sydney and one in which vacancy rate has fallen, figures compiled by the Colliers-owned real estate agency show.
While the signs are positive, the city is still struggling to throw off its hangover from the last development boom. The figures collated by PRDnationwide from data provider Cordell, the Australian Bureau of Statistics and its own agents show the city still has more than 6800 units – a quarter of the total apartment pipeline – listed as deferred or abandoned.
But PRDnationwide chief economist Asti Mardiasmo said SQM Research figures showing the residential vacancy rate had tightened to 2.4 per cent from above 4 per cent in early 2017 indicated the worst was past for the Queensland capital.
“Vacancy rates are falling and people are becoming more and more positive about that,” Dr Mardiasmo said. “We are definitely getting more renters through the door and all our investment properties are becoming absorbed quite quickly.”
Any uptick in home building in the three eastern states – which collectively accounted for 107,000 of the 120,000 pipeline of “proceeding” apartments nationally – would be good news for a slowing economy.
The greater-than-expected retreat of housing construction in the June quarter, which declined at its fastest pace in 19 years, triggered economists to cut their expectations for second-quarter GDP due out this week. Separate figures showed new approvals of apartments, townhouses and semi-detached dwellings dropped almost 20 per cent in July from June.
The higher share of deferred or abandoned units in Brisbane than in Sydney or Melbourne was in part a legacy of projects that were abandoned 12 months ago, when developers froze projects as a consequence of the city’s very weak market. Where they had not been permanently abandoned, there was a chance these projects could resume if conditions such as financing for off-the-plan apartments improved, she said.
“It is possible they could be picked up again,” Dr Mardisasmo said.
In contrast to Brisbane, PRDnationwide’s Strata Development Pipeline – Capital City Metro Areas 2019 report also shows the development pipelines in Melbourne and Sydney are shrinking to more sustainable levels.
Sydney’s number of “proceeding” apartments will slip 4.3 per cent to nearly 49,828 from 52,070 last year, while deferred and abandoned apartment numbers will slip to 6259 from 7375.
“There is a legacy from the slowdown in the Sydney market,” Dr Mardiasmo said.
“But it’s Sydney returning back to the strong market it once was and being more sustainable with the amount of supply coming in to make sure they are being absorbed.”
Melbourne has taken the biggest hit, with a 10pc fall in apartment numbers going ahead this year to 37,688 from 42,031. Deferred and abandoned projects in the Victorian capital were likely to slip from 9644 last year to 9399 this year and the two moderate declines were a sign of the market self-regulating, Dr Mardiasmo said.
“There is cautiousness the apartment market isn’t in oversupply in Melbourne either,” she said.
JLL’s Apartment Market Report in May showed the Brisbane market, which led the country into and out of the cycle, had troughed, with apartment values and rents stabilising. Even so, “numerous” developments had ceased marketing and were awaiting relaunch, JLL said.
Source: Financial Review