BIS Oxford Economics is expecting Brisbane prices for off-the-plan apartments to fall up to 15 per cent in the inner-city as data from the Real Estate Institute of Queensland found Brisbane units incurred a price drop of 2.3 per cent in the last quarter.
BIS Oxford Economics managing director Robert Mellor said that there was a significant correction imminent in Australia’s residential building sector, which was anticipated to be most prominent in Brisbane.
“It was the Brisbane market that went totally over the top,” he said.
“We would see that [with] oversupply probably continuing for at least three or four years, it will take a long time to absorb.
“We see excess supply keeping prices suppressed until 2020, or perhaps even longer.”
The REIQ said there was clearly falling demand and increasing supply, with an 18.4 per cent increase in the number of listings from last May.
Chief executive officer Antonia Mercorella said that notwithstanding the record high average of $655,000 for a Brisbane house, the city was a haven of affordability compared to Melbourne and Sydney.
“Throughout the southeast corner, our growth is based on an improving value proposition, which means it is reliable, sustainable capital growth,” she said to The Australian.
Mellor said price falls of about 14 per cent in real terms were expected for Brisbane apartments until 2020, and people who paid “a premium” for off-the-plan apartments could be hit with more drastic declines of up to 15 or 20 per cent.
An estimated 11,000 apartments are under construction in inner Brisbane, with completion from now until 2022.
APRA's crackdown on investor finance, lowered investor appetite and international buyers' reduced ability to access loans have increased settlement uncertainty and industry observers expect settlement risk will rise.
Mellor said that the lack of growth in the number of house-construction starts would exacerbate a growth in house prices and a widening gap between the two sectors.
Brisbane’s average unit price fell 2.3 per cent in the last quarter to $429,000 from the $440,000 median in the first three months of the year. In the 4006 postcode area of Bowen Hills and Newstead, sales this month include a Cunningham Street unit for $650,000 that cost $715,000 in August 2013, and a two-bedroom apartment sold for $440,000, down from its transaction price of $482,000 almost five years ago.
In an effort to sell off enough apartments to allow construction to go ahead, Brisbane developer Sarcon has slashed prices by 12 per cent, and halved the upfront costs on two-bedroom units in a development at Cannon Hill, Domain reported.
The third tower of Lime Living is nearing its scheduled construction date, without enough apartments sold to commence.
Project marketers Colliers International have taken the opportunity to target first-home buyers, offering a 5 per cent upfront deposit for those looking to take their first step into the property market.