The commencement of a number of ground-breaking infrastructure initiatives for Brisbane’s CBD has seen its population grow 1.95% over the last five years with increasing growth forecast. With more and more people seeing value in the Sunshine State, coupled with a slowing supply of inner city apartments, has resulted in a decrease in vacancy rates in the river city.
According to reports from Urbis, the Brisbane vacancy rate has tightened from the previous quarter and REIQ has recorded a 4 percent drop in vacancy rates for the total inner Brisbane rental market over the same period.
“The combination of a slowdown in new rental stock hitting the market, as well as solid demand drivers such as population and infrastructure investment will continue to result in a tight market,” said Urbis director of property economics and research Paul Riga.
“Considering both our in-house data and the total market data provided by the REIQ, the rental market in inner Brisbane is looking healthy.” He said.
Following the past years of heavy construction and investor oriented projects in the inner city, we are seeing developers respond to market changes by downsizing the scale of projects, creating more boutique offerings with unique services and inclusions.
“Demand for quality projects certainly outweighs supply with a number of these projects registering growth in rental rates over the current quarter,” Riga said.
With financial institutions loosening their lending constraints, we should see the investor purchaser number start to rise, particularly with yields and rental rates strengthening and economic drivers remaining stable. This is in line with the recent RBA rate cut and the premise that savings will be passed on to borrowers.
Despite the well reported oversupply of Brisbane’s apartment market, the outlook is positive compared to NSW and Victoria. More than 24,000 residents migrated to Queensland over the 12 months to September 2018 which has contributed to the increase in demand for inner city rentals. Comparatively, New South Wales lost 22,100 residents who migrated to other states. This can be due to the world class infrastructure projects underway for the Inner City and an increase in employment opportunity, liveability and overall sentiment for Brisbane.
Optimistically, one-bedroom apartments have continued to remain popular with renters. Urbis found that one-bedroom, one-car space apartments had the highest average number of rental applications per apartment with the inner south and CBD recording higher rents on average. This is good news for investors as the one-bedroom market was considered to be hit the hardest in late 2016 and while its recovery was uncertain, we can predict growth moving forward.
Overall improvements are expected for the Brisbane apartment market with residential sale price and rental yields forecast to grow in the year ahead as market activity increases.
For more information on the infrastructure investments that will drive Brisbane’s population and economic growth, check out my latest article on Brisbane’s tourism buzz!