According to most recent figures from the ABS, the Brisbane City local government area should experience population growth of approximately 21,493 in 2014 at the current growth rate.
According to information from a leading property development data provider, there will be 5,823 new attached dwellings supplied to the Brisbane local government area in 2014. This does not factor in detached dwellings as they are concentrated in the outer ring of Brisbane.
Property analysts, economists and observers who have highlighted concerns of supply within the inner-Brisbane apartment market have conceded particular points:
- The fear of oversupply is based on development approvals or incomplete property at various stages that can be years off actual project completion if they complete at all.
- There was a dearth in construction activity of years past which resulted in an undersupply.
As recently as 2011 and 2012, inner Brisbane had a significant undersupply in the rental market with vacancy rates coming in below 2 per cent (3 per cent is considered ‘equilibrium’). We also know that inner Brisbane is very ‘reactive’ to new supply, which is beneficial for new property coming onto the rental market.
Assessing supply and demand in property is a delicate task. The ‘product’ being analysed here is not as straightforward as the price and quantity of iPhones. Every market operates differently and every dwelling within those markets operates differently.
What is clear is that 50 per cent of Queensland productivity now comes from Brisbane. Mining growth has slowed, health care and retail employment are growing stronger, and professional services are becoming significant players in the labour market.
These growth professions are focused in central business districts. In fact, 60 per cent of Australian economic activity comes from 0.1 per cent of Australia’s surface area and inner Brisbane is a significant contributor to this.
What the above means is that although construction activity is noticeable in places like inner Brisbane, this is simply a function of the property cycle that we are familiar with. Oversupply sentiment gives astute investors the opportunity to access competitively priced property rather than paying excessive premiums in an undersupplied market.
There is a noticeable change in the proportion of multi-dwelling approvals against detached house approvals in Queensland over the last 30 years. This is reflective of the economic and demographic shifts listed above.
While the low interest rate environment continues, we can expect that there will continue to be a national sentiment of oversupply. With these record low rates, some interesting things are occurring; investment loans are at all-time high proportions and foreigners are ‘parking’ their money in our property.
Oversupply is the word of the year. The obverse is undersupply. If you were investing in a market with undersupply, you are likely paying a significant premium and neglecting the opportunity for long-term performance, particularly if an oversupply comes through in the next cycle.
What to do:
Don’t pay a premium in a boom market and make the vendor rich rather than yourself
Do select a point-of-difference property that will perform into the long term