Post a Comment On: Brisbane Apartment

Will there be an oversupply of apartments in Brisbane?  In certain geographic areas, and for certain styles of apartments, I think that the answer will be yes.  Some clear reasons for oversupply include:
extremely high level of construction of high rise apartments in some areas, many with a large number of small apartments low population growth apartments targeted at investors, not owner occupiers, so a more limited market segment of buyers and renters apartments being constructed in second and third tier areas. However, I don't think that all the apartments currently "in progress" will actually be built.  This includes apartment projects that have good pre-sales and where "construction has started".  This is because: some developers are unable to obtain the level of finance needed to commence the project construction costs have increased dramatically, especially for union built projects, and so the project is no longer viable, even if the project is sold out simply because the site has been cleared, and some work has started, does not mean the that project is underway -- it may never be built. the number and percentage of presales in a development is often overstated by the developer in advertising and market surveys, and so the developer will not in fact be able to obtain finance at all. So I think that the level of oversupply may be overstated.  There will still be oversupply, just not as bad as some people are predicting.
There are other risks in the high-rise apartment market: off-the-plan buyers may have trouble settling, because valuations may be lower than contract price, because banks are not lending to offshore buyers, and because banks are requiring a higher cash contribution. rents are likely to fall, which means that valuations will fall some projects are overpriced, and it is likely that after settlement sales prices will be less than  the contract price some constructions companies are in financial difficulties, and so are cutting corners -- the end product many be different, and lower quality, to what is expected by the buyer many buildings are being built close to other buildings, impacting light, view and ventilation foreign buyers may evaporate. The question in my mind is whether this will impact the high quality buildings in good locations that have large apartments with good aspect?