Colliers International
’s latest apartment report focuses on the broadening demand scenario across the Inner Brisbane precincts as in addition to the drivers that have led to a nine year high in unconditional sales.
The market saw the number of unconditional sales rise to 540 across 41 surveyed projects during the first quarter of 2013, the strongest result since September 2004.
While a large proportion of these sales can be attributed to a small number of projects, transaction volumes across many projects experienced some uplift on previous periods.
The release of eight new projects aided the lift in unconditional sales, contributing approximately 250 between them to the total transaction volume.
For the first time since 2008 the Inner North was not accountable for the majority of sales recorded in a single quarter.
The Inner South made up just under half of all sales (46%) followed by the Inner North (32%), Inner West (16%), Inner East (4%) and the CBD (2%).
From an economic perspective, national housing finance commitments have shown signs of responding to the easing monetary policy cycle over the past 12 months with the cumulative effect of 125 basis points worth of interest rate reductions improving lending conditions for borrowers.
First home buyers were reportedly largely absent from the new apartment market even though they are incentivised further with the $15,000 State Government grant still applicable to those purchasing a new dwelling. The effectiveness of this affordability measure is questionable as the number of buyers from that segment has declined in Queensland.
With inflation remaining in the Reserve Bank’s target range of 2-3% and economic growth likely to be below trend, the RBA has stated that “there could be scope to ease policy further should that be necessary to support demand”. Considering the lag between interest rate reductions and improvements to housing finance, we could expect to see continued growth in the number of total commitments in response to the cash rate reductions in October and December 2012 and most recently May 2013.
Looking forward, Colliers International Research estimates there is in the order of 3,000-3,500 apartments that may be released for sale over the next 12 months, just under one third of which are either currently in pre-release or expected onto the market in the June quarter.
Sales activity is expected to remain firm due to a range of factors; most notable are the improving borrowing environment and higher quality of stock coming online. While the focus of new development in Inner Brisbane has not shifted away entirely from the Inner North, acquisition and planning activity has seen an increase over the previous 12 months across the Inner South, particularly West End, Woolloongabba and Dutton Park. An increase in activity in the latter two suburbs is a result of geographic flow over from the already active West End and South Brisbane.
Firm population growth and significant infrastructure investment have been identified as key drivers for investment in the Inner South by developers and apartment purchasers.
Investors are expected to maintain their position as the most active market participants with apartments delivering stable income returns compared to other asset classes, depreciation benefits and the ability to hold property in a Self-Managed Super Fund (SMSF).
