We’re seeing a much stronger development market in Brisbane this year, with quality property in quality locations selling at record prices.
Brisbane really reached its peak when the city hosted the G20 in November 2014. At the time, the proportion of offshore buyers for development properties was sitting at around 30%, although now this rate has come back down to the more typical 20%. As interstate and overseas buyers automatically have to pay higher prices, it makes sense that the majority of the market is made up of local buyers.
Is there an oversupply in the Brisbane market?
We don't believe there is oversupply in the traditional sense. When given the choice to move to a brand new space closer to the city, closer to work and close to public transport, most people will choose to move. What this will create is a ripple effect as the population will start to move closer and closer to town, and it's the older dwellings in outer locations which will suffer as a result (as opposed to the city apartments).
Funding and government
In Melbourne, the government has been focused on rolling out consistency of supply to ensure housing is affordable. In Sydney, the government has looked to sell off infrastructure, providing them with capital to invest in further infrastructure and growth for the city. In Brisbane, whilst the government has been focused on planning, they have not been as directly involved, instead opting to leave it to the market to determine supply and demand, and letting councils decide what to approve.
In addition, direct results of APRA’s changing guidelines in 2016 and 2017 has tightened the market up, which means either people won’t proceed with residential projects or they will be forced to find alternative sources of funding.
Residential development trends
The residential development industry adapts to wherever the demand is, and the shift over the last couple of years has been to townhouse, detached house and duplex projects in the suburbs.
We're also noticing a difference in the construction choices after initial council approvals. Just because the council will allow a particular height on a site, does not mean that using the full height is the best strategy to take. We are increasingly seeing ‘undercooked’ developments (with less height or different usage, particularly in suburban areas) being more profitable than pouring a lot of concrete, requiring many presales and not necessarily making a lot of money.
Developers are leaning towards large infill underdeveloped sites in popular locations, with the biggest owners of such sites usually governments, churches and not for profit groups.
Where is the market heading?
Another trend in the Brisbane development market has been a definite shift towards more mixed-use rather than residential development. Initially, as apartment feasibilities dropped away and were not as profitable, projects in hotels and student accommodation came to the forefront. As that market grew satisfied, aged care and retirement projects became popular, and now childcare and mixed-use projects are popular and considered most profitable.
The reason we’re seeing a shift of residential developers moving to other forms of development is to do with return on investments. Increasingly, developers are starting to look for a recurrent income in childcare, hotels or some other investment return that allows them to fund their developments in the future.
Within the inner CBD ring, there has been a specific shift in the types of projects being planned. With projects approved for a certain height, scale or gross floor area that may have initially been planned for apartments, hotels or student accommodation, an increasing trend is that these projects are instead being constructed for office accommodation because those feasibilities are looking more profitable in the current market. The trend towards more office accommodation is expected to continue in the Brisbane inner CBD.
Forecast over the next 6 – 12 months
The development market in Brisbane is currently displaying characteristics of Spring, rather than the previous years of Winter. We’re witnessing a healthy rate of enquiry and offers, and in particular an influx of early offers to campaigns. This indicates that not only are buyers eager to get in ahead of the competition on properties but they are expecting prices to rise so want to get in early to ensure the best value for money.
The Brisbane property market also prospers from a strong Sydney and Melbourne market, as it appears like good value in comparison to these more expensive cities. Therefore strength in these interstate markets will also have positive consequences for Brisbane, enticing interstate or offshore developers to venture into Queensland.
Hear from Savills Robert Dunne as he discusses the Brisbane development site market with Development Ready's Robert Langton: