Highgate Hill, South Brisbane and South Bank, trends in Brisbane property, West End

Flurry of construction to challenge Brisbane investors in 2016

Brisbane landlords would do well to take a good look at some of the stats in this post. Our team are amongst our inner-city’s biggest fans, we believe this is a wonderful place to live, and the trend to move home from our outer suburbs is still gaining momentum. But even if you wanted to put ‘spin’ on the looming supply to our rental market, the numbers tell a not-so-pretty picture.

In 2016, unless there’s some dramatic change in demand trends, there will be enormous pressure on inner-city Brisbane rents to drop.

The strength of sales in our off-plan apartment projects has been well documented and the cranes are there for all to see. Brisbane has been a major magnet for investors from across Australia and especially our southern states, who’ve seen value and opportunity in these new buildings. It’s become near impossible to track the progress of every building, so this post explores just one area (clearly the city’s busiest), the South Brisbane/West End peninsula. This wraps up all of postcode 4101 including South Bank and Highgate Hill.

In the first half of 2016 in this inner south pocket, we estimate construction will reach completion on 1,608 new apartments. And no matter how property developers or agents report this, it’s a huge quantity. An unprecedented number. And we estimate around 1,450 of these apartments will be offered the rental market.

So let’s put this into context. In this postcode we currently have around 6,180 rental homes so it’s a potential 23% leap in supply. In just a 6 month window of time.

We know from experience the impact won’t be quite this high. A regular feature of Brisbane’s inner-city marketplace is the sale of second-hand rented apartments to owner-residents. Tenants continue to be booted from these homes in big numbers, so there’s a steady nibbling at supply. There’s also some conversion of long term rentals to the short stay market, especially in buildings within easy walking distance of the CBD in South Brisbane for example.

During the second half of 2014 we saw one of the first big waves of new apartments completing, with more than 600 offered for rent in South Brisbane alone. Yet the postcode’s rental pool grew by just 490 over this past 12 months. This was still a big growth in supply but rents held firm with the median 2 bed apartment rent rising by $10 to $520 per week, and a local 3 bed house down $20 to $560 per week.

And as local property managers we are witnessing first hand the extraordinary interest in the 4101 lifestyle from both tenants and owners. As this area gains population its amenities, home-hunters’ perceptions of safety and the local sense of community improve remarkably. In just a short couple of years we’ve seen it become so much more liveable and it’s exciting to watch up close.

The balance of 2015 should be okay, with only around 60 new rental apartments completing in postcode 4101. Even the second half of 2016 looks ‘digestible’, with approximately 400 rental apartments to be completed.

But for all the positives 2016, and especially its first half, will inevitably be a tough period for investors in this area and all inner-Brisbane suburbs. Landlords would be well-advised to prepare ahead of time, carry out small renovations or refreshing to ensure you’re competitive with these new apartments, and more than ever look after your good tenants.

The investors have made their choice. We’re about to find out just how popular our inner-city really is with our tenants.