Inner city apartment supply: What's next for rents?
The cranes on the skyline tell a story. Brisbane’s inner suburbs have a growing number of apartment buildings under construction and sales have been strong. Developers like to talk of interest from owner-occupiers but off-plan sales have always been dominated by investors and these new inner-Brisbane high-rises are no different.
So with a number nearing completion the question we’re being asked more often: “What happens next with rents?”
We understand population growth and migration are lower than historical averages but we’d argue there’s still a rising demand for apartments and our rental team continue to witness this first hand. New supply’s generally been steady – Brisbane’s inner-city has just under 34,000 rental homes and that’s up only 832 in the past 12 months. These new towers are so visible to us all – they stand out and it’s easy to assume there’s too many being built, while simple demand continues to grow.
But for these new apartment landlords in the South Brisbane area, the next few months are not looking particularly pretty. This is one location, one example where a number of new buildings are likely to come online in a short space of time – the second half of 2014. We keep a close eye on our neighbourhood and the graph below has the details: more than 600 apartments in a 600m radius likely to be offered to the rental market in coming weeks. That’ll take some time to digest and the builders will be racing to beat the usual Christmas rental slow-down.
(Interestingly there’s a couple of South Brisbane projects in early construction but it’s likely 2015 will be a much quieter year for completion of new projects in this area).
If you’re a landlord with a potential vacancy coming up soon there’s ways to lessen the impact. For example many off-plan sales now package in full furnishings. The estimated rents are usually a good chunk higher for only a small expense (and higher tax deductions) so they help the sales campaigns. Unfurnished property retains the highest demand from tenants so if your investment’s furnished but no longer sparkling fresh, this might be the time to make a Salvos donation.
If your apartment’s ready for a coat of paint and new carpets this might be the time to do it. For a cost equivalent to around 6 weeks rent you’ll likely have a deductable expense and that freshen up always appeals to tenants – it’s an enticing aroma for home-hunters!
We’ll stand by our comments that tenant demand is strong in Brisbane’s inner-city. The lifestyle continues to grow in appeal and residents move to the area in big numbers. But there’s limits to everything and there’s likely to be a noticeable blip in at least this one inner-city rental marketplace in 2014. Landlords would be well-served to keep a close eye on their own neighbourhoods and plan their lease expiries and renovations carefully.
We’d love to hear your comments