The Brisbane city property ‘bargain’ that’s right under our noses!
Every home buyer and investor is chasing value in this rising market (a very quickly rising market!) but there’s one type of Brisbane city property that’s not been swept up in the rush. The graph below shows they’ve been lagging. So far.
We have them for sale from just $260,000, with an easy walk to the middle of the CBD. Tenant demand for them is strong so their rental yields are often the highest we see. And their future supply in many parts of Brisbane has been made more expensive through Council’s planning laws.
One bedroom apartments are starting to look like really good buying. Forgotten in the rush. Regular readers will know we don’t use the B word in this blog, but some investors are now calling them bargains.
Dwelling prices have surged in recent weeks and growth has been notably stronger for detached houses than for apartments. Even the RBA has been talking about it: “While prices have been rising nationally, there have been important compositional differences… The closure of Australia’s international borders is expected to cause population growth in 2021 to be around 1¼ percentage points lower than previously expected and has reduced demand for inner city rental housing by international students.”
Our team has definitely witnessed noticeable price jumps in Brisbane’s 2 bed apartments. A clear sign of the shift: agents are selling ‘old stock’. The Bees Nees sales team recently sold one that had been up for sale for 447 days (yes that’s 15 months!). And we sold it for the full asking price. A price that had seemed out of reach for more than a year. We made another sale last month, close to list price, of a 316 day old listing. Again, buyers felt the market had caught up to the owner’s price expectation and made their move.
While buyer demand has definitely lifted for one bedroom apartments, the same changes haven’t been obvious. Yet.
Interestingly our rental team are witnessing very solid demand for one bedders outside of the St Lucia and CBD precincts where students dominate. So apartment returns are improving as rent increases run ahead of prices. For example this $260,000 apartment has a gross yield of 7.4%. It’s an easy walk to Queen Street Mall, is airconditioned with a leafy green outlook and has a secure carpark. And there’s more like that with prices under $350,000, looking very affordable to local and interstate investors alike, who are all enjoying big equity growth in their homes.
So what about 1 bedroom apartment supply? The 2015-2017 surge in construction added a lot of extra stock but we’d argue there’s been some changes since. BCC amended Council’s carparking requirements last year and (outside the immediate city area) developers will now spend substantially more to produce small apartments. Extra basement construction for example, means larger lots are more viable.
Scott Whiteoak is a Director of Ellivo Architects, one of Brisbane’s more high-profile apartment design firms: “Current design trends are definitely back towards larger apartments, due to increased liveability expectations and market demand. The last wave of supply saw some very modest floorplans particularly in inner-Brisbane, however the focus has returned to designing apartment buildings with better amenity and larger balconies. One bedrooms with up to 60m2 of internal space for example. It’s a return to the expectations of buyers from 10 years ago.”
It is easy to see why many of those bigger one bedders (many built 10-15 years ago) are looking like good value right now.
The widening gap between house and apartment prices is significant and the latest uptick in houses really stands out on this graph. But the trend is now a decade long. So maybe the question has to be asked: Are apartments cheap, houses expensive, or is the gap going to continue to grow?
We’d love to hear your thoughts in the comments!