Why Brisbane rents will rise in 2022 (by heaps)
We don’t usually make bold predictions about the Brisbane real estate market. There’s already enough self-proclaimed “property gurus” foretelling wonderous times ahead for landlords and all property owners.
But for the first time in more than a decade our inner-suburbs have just had 3 consecutive quarters of rent increases, so momentum is building. And there’s some really obvious factors in play for both rental demand and supply, that can only lead to Brisbane rents making a steep climb in 2022.
Here’s what we know:
Queensland’s interstate migration has spiked during COVID with huge numbers from Victoria and NSW already moving here. The last border closure was felt with immediate impact by our agency’s leasing team – tenants planning to move here cancelled their inspections and postponed their shift. So as we bring down the “great wall of Cooloongatta” these lockdown-weary southerners will again be flowing into our rental open homes. There’ll be an immediate catch up in December and January – and then we can only speculate about the interstate and overseas migration that could follow as 2022 rolls on. To us, it seems inevitable the arrival numbers and pursuit of our lifestyle will grow.
In pre-COVID times we had upwards of 70,000 international students living in our inner-city, soaking up huge quantities of rental apartments. While it will no doubt take time for their numbers to again flourish, they’re coming back. In 2020 Brisbane also had large numbers of apartments added to our rental supply as short-stay tourists and corporate travelers vacated. With reopened borders these apartments will again be withdrawn from the permanent tenant market and put back into serviced apartment/hotel supply. The CBD and St Lucia and their immediate surrounds will see these changes first.
Over the past 12 months many Brisbane tenants have become first home owners, taking advantage of affordable Brisbane prices and attractive borrowing conditions and incentives. This is now changing with the latest APRA changes to debt servicing assessment hitting this buyer group hardest, and many homes are now priced out of their reach. Many would-be buyers will unfortunately remain as deposit-saving tenants.
Despite the impact of COVID Brisbane rents have just recorded one of their strongest growth years on record. Inner-city rents rose 6% and our rental pool shrank. Before students, interstate migrants and travelers could return, we have already seen a market firmly on the up. Brisbane’s vacancy rate is at near record lows and our rental supply will only look weaker as 2022 progresses.
There’s very limited supply of new dwellings on the horizon, especially in our inner city. Gun-shy from the (remarkably short-lived) oversupply of projects in 2015 to 2018, developers have been caught flat-footed by this new surge in demand. Many pivoted to larger apartments in recent years, focused on the owner-occupier market and ignoring the more affordable investor/rental sector. No-one predicted such a quick return of tenant demand.
Some new projects are underway. But the long lead times for apartment buildings – upwards of 2 years – means they can only add to our supply in any meaningful numbers from 2023 onwards.
One other change we’ve seen in 2021 – property managers are again learning how to negotiate an increase to Brisbane rents for tenants staying on with lease renewals. In 2011 a 2 bed apartment in our inner city rented for a median $470/week and a year ago we were back to that same mark. It’s only this year returned to $500. Landlords, keen to retain tenants in tougher markets, have had to make do with minimal increases to rents and many of their untrained agents have not sought, or known how to gain, improved rents. In 2022 a rising market will take all/most tenancies with it.
Queensland has new tenancy legislation and it’s not popular with landlords. While the vast majority will adapt and stick it out, many say these new erosions of property ownership rights are the final straw, and they’ll be selling up. It’s the best sales market for them since 2007. Investors have a choice where they put their money and with a significant shift toward tenants’ rights, we will lose landlords and rental homes at a time the market can least afford to.
And there’s one final risk to the supply of rental homes in early 2022: New smoke alarms laws kick in from January 1st and any property without the upgraded, interconnected alarms cannot be offered for rent. Existing tenancies can’t be extended with a new term and landlords face a fine for breaching these requirements. One of the large smoke alarm companies estimates some 25% of Queensland rental homes remain non-compliant – with just 7 weeks to go!
We can’t remember a time in Brisbane when there’s been such a strong and sharp rise in tenant demand, with such a low base of vacancies, and no foreseeable increase to rental housing supply. Supply will improve but it will take some time.
In the meantime many landlords are being rewarded for their long patience.