Surging tenant demand for Brisbane apartments, falling interest rates and rising rents are luring investors back to the market.
A SURPRISE surge in tenant demand for apartments combined with falling interest rates and rising rents looks set to lure property investors back to the Brisbane market after years in the doldrums.
The apartment rental squeeze is getting so tight some agents are now advising prospective tenants to submit applications before they have even inspected properties — or risk missing out.
At the same time rents are on the rise due to a combination of interstate migration, steady economic growth and a decline in new apartments coming to market.
A new report from independent consultancy Urbis has found tenant demand for new inner Brisbane apartments jumped in the first quarter of this year.
The survey revealed a vacancy rate of just 1.6 per cent across 22 apartment projects in inner Brisbane — tightening 0.6 per cent from the previous quarter.
The rebound in the rental market after years of apartment oversupply has even surprised experts, who say the level of demand is greater than expected.
Place Advisory director Lachlan Walker said it was a good time for investors to be researching the market and looking to buy.
“I’m surprised the rental market has recovered so fast, and even more surprised supply’s dried up so fast,” Mr Walker said.
“That’s the one thing that’s held Brisbane back these last three to four years — the high level of supply — but that is quickly disappearing.
“I think we’re in for a supply shortage over the next six to nine months … that’s why we’re seeing some rental growth and vacancy rates starting to drop.”
It comes at a time when borrowing money has never been cheaper, with interest rates being cut to an all-time low of 1 per cent this week.
Independent real estate group Position Property has a vacancy rate of less than 1 per cent on its 800 rental properties in the Brisbane region.
Position Property director Richard Lawrence said property managers in some areas were advising people to submit rental applications without waiting until they had seen the home.
“We are seeing a general tightening in the rental market across the board, including in locations previously reported as having excess new apartment stock available,” Mr Lawrence said.
“This is the case both in inner city locations such as South Brisbane and Newstead, and out to middle ring suburbs such as Chermside on Brisbane’s north side and Upper Mount Gravatt on the south side.”
Mr Lawrence said the situation was likely to intensify in the months ahead given the expected fall in the number of new apartment projects starting construction, leading to a reduction in availability of high quality apartments.
“Anyone currently renting should seriously consider purchasing a new apartment if they can afford it as they will likely be paying higher rents within the next 12 months,” he said.
“Similarly, local investors who may have been sitting on the sidelines can now buy with greater confidence knowing that there is an abundance of tenants available for the right property and rental yields are strengthening.”
The pipeline of new infrastructure coming to inner Brisbane, including Brisbane Metro, Queens Wharf and the proposed South Bank redevelopment, is encouraging new buyers to choose new apartments over established houses.
A new luxury apartment and townhouse development at Newstead, Newstead Series, has put up the no vacancy sign with leasing agent Jones Lang LaSalle reporting a waiting list of people seeking one and two bedroom apartments.
There is a waiting list for the luxury Newstead development, Lucent Gasworks, and in South Brisbane, the first stage of Pradella’s SkyNeedle Apartments also has a zero vacancy rate and a waiting list of prospective tenants.
“I believe we have reached a real turning point where the Brisbane property market is returning to normal supply and demand conditions,” Mr Lawrence said.
“Smart investors who purchase apartments in places where couples, young families and downsizers want to live will reap the rewards in terms of achieving higher rents, good quality tenants and low vacancy rates.
“New arrivals from interstate who might normally opt to rent for a few months to get a feel for their new city would also be well advised to consider buying instead to avoid the tougher rental market conditions ahead.”
Urbis property economics and research director Paul Riga also said interstate migration had played a part in the increase in demand for rentals.
“Anecdotal feedback from participants indicated that inquiries from interstate remained solid, and certainly up from the same time last year,” he said.
“Apartments provide these tenants the flexibility of being able to settle into employment and get to know the city and it’s different precincts.”
Sentinel Sells Brisbane Industrial Site for $17m
Sentinel Property Group has offloaded another Brisbane site, this time an industrial facility 11 kilometres east of the Brisbane CBD in Hemmant for $17 million.
Centuria Capital snapped up the partially tenanted property in Brisbane’s east through Blue Commercial managing director Gary O’Shea.
The site, which comprises 47,951sq m of general industrial zoned land and features an 11,785 warehouse and 1,240sq m of office space, is located within the Trade Coast Precinct at 46-68 Gosport Street.
Sentinel’s Industrial Trust purchased the property for $16 million in 2012.
Sentinel’s divestment follows on from its recent sale of the Citilink Business Centre at Bowen Hills for $76 million to Prime Super.
The group also purchased the Makerston House office building in Brisbane CBD’s legal precinct for $103 million from investment management company Challenger.
Along with the Brisbane transactions Sentinel managing director Warren Ebert said the group, established by Ebert in 2010, has been active in regional Queensland.
“Particularly in Mackay where our portfolio is approaching $100 million,” Ebert said.
“Mackay has been an important regional market in the national growth and success of Sentinel over the past decade and the company has tremendous confidence in the region’s economic future, particularly with the opening up of the Galilee Basin with Adani’s Carmichael coal and rail project finally approved.”
Melbourne Top Investment Choice for Chinese Buyers
Chinese buyer enquiries for residential property in Australia has recorded two consecutive quarters of year-on-year growth for the first time since 2016, with Melbourne still the most popularAustralian city.
Australia has been losing Chinese buyer interest to other parts of the world due to increased taxes and banking restrictions.
But Australia’s hefty state foreign buyer taxes have been counterbalanced by its weakening dollar according to the latest Juwai.com report, which has seen it drop around 11 per cent of its value against the Chinese Yuan since mid-2018.
Juwai.com CEO Carrie Law says she expects Chinese buying to remain flat in 2019, with forecasts it could start to grow again inline Australia’s property market recovery.
“Chinese buyers make 83 per cent more enquiries about acquiring Melbourne property than they do Sydney,” Law said.
Brisbane has the second fastest rate of Chinese buyer growth. Law said Brisbane recorded 30.8 per cent more Chinese buyer enquiries in 2018.
“Brisbane is becoming a real alternative for the two traditional gateway cities of Melbourne and Sydney.
“The fastest growing cities, in terms of Chinese buyer interest, are Hobart, Brisbane, and Canberra.”
Melbourne receives 43.8 per cent of Chinese buying enquiries in Australia, Sydney 23.9 per cent, Brisbane 10.1 per cent, Perth and Adelaide 6.1 per cent, the Gold Coast 3.7 per cent, Canberra 3.6 per cent, and Hobart 2.6 per cent.
Weak Aussie dollar boosts buyer interest
Despite the tougher state foreign buyer taxes, Australian’s weakening dollar means it now costs less to secure real estate.
“A buyer holding Yuan today needs the equivalent of $88,800 less in funds compared to 2017 to purchase an $800,000 dwelling,” Law said.
“The plummeting Australian dollar, which has lost 11.1 per cent of its value against the Chinese Yuan since July 2018… [That] compares to the 8 per cent rate of the highest foreign buyer taxes, which are in New South Wales and Victoria.”
Law says Chinese demand is driven largely by growing wealth, a desire to store assets ‘safely’ overseas, education, travel, commercial ties, immigration and high-net-worth immigration, along with environment and lifestyle.
“Eighty-three per cent of Chinese consumers cite education as their reason for immigration, 69 per cent cite environment, 57 per cent cite food safety, and 28 per cent cite asset security.”
Australia’s Most Expensive Capital City to Rent a House Might Surprise You
When it comes to the nation’s most expensive capital city to rent a house, Sydney takes second place in what may come as a surprise to some, with Canberra crowned as Australia’s most expensive capital.
While Domain’s rental report shows Canberra remains as the nation’s most expensive capital to rent a house, it also shows it’s more expensive to rent a house in Hobart than Melbourne.
The latest report, which covers the median rental price for houses and units across the country, shows Melbourne house rents remained unchanged over the year at $430 per week, while unit rents increased 2.4 per cent over the year.
Taking in the unit market, despite Sydney’s price falls of almost 5 per cent over the year the harbour city is still the most expensive capital city to rent a unit.
Strong construction of new housing has weighed on rents in Sydney, and also contributed to the vacancy rate increasing to 3.2 per cent in June, up from 2.4 per cent one year ago, Domain’s Economist Trent Wiltshere says.
House rents fell by 3.6 per cent over the year to $530 per week.
While unit rents dropped by 0.9 per cent in the quarter and 4.5 per cent over the year.
“Rents held up the best on the Central Coast and on Sydney’s north shore, but fell in other Sydney regions,” the Domain report notes.
While largely thanks to the significant property price falls over the past few years, Sydney’s rental yields have risen slightly.
Melbourne’s strong population growth since 2013, averaging an annual 2.6 per cent, has seen ongoing rental demand.
House rents grew fastest in the Mornington Peninsula and in Melbourne’s inner-south, but were unchanged in Melbourne’s eastern suburb, for the past year.
Melbourne’s unit rents have increased by 2.4 per cent over the year.
While rent on a typical unit has increased 14 per cent over the past five years to $420, despite the city’s apartment construction boom during this time.
Melbourne’s house rents have also increased 13 per cent during this period.
Domain says unit rentals have held steady in recent years, despite the large supply of new Brisbane apartments.
“House rents were steady in most parts of Brisbane over the past 12-months, but unit rents increased 6 per cent in the inner city.”
Unit rents also increased by 2 per cent on the Gold Coast and the Sunshine Coast.
And while rental prices for houses across Greater Brisbanerecorded falls in the June quarter, rental prices have remained unchanged year-on-year.
Brisbane’s rental vacancy rate fell from 2.6 per cent to 2.2 per cent over the past year, a sign of a strengthening rental market, Wiltshere says.
House rents in Adelaide dropped 1 per cent in the June quarter, but have recorded an increase of 2.7 per cent over the year.
Adelaide’s unit rentals have increased by 1.7 per cent over the year, with the typical unit renting for around $305 a week, this makes Adelaide the cheapest across all capitals.
Hobart remains the fourth most expensive city to rent a house behind Canberra and Sydney, according to Domain’s report.
Canberra house rents dropped 3.5 per cent in the June quarter, but are unchanged over the year at $550 per week. Unit rents increased by 4.4 per cent over the year, sitting at $470.
Canberra unit rents have increased a staggering 18 per cent over the past three years, despite an apartment construction boom.
And Darwin rents for houses have now dropped from the 2014 highs of $700 a week to $490. Darwin units have dropped over the past five years from $570 to $385, reflecting declining demand as the city’s population decreases.
Perth remains the most affordable capital city to rent a house in Australia at $365 a week. Rental prices for both Perth houses (up 4.3 per cent) and units (up 3.3 per cent) have increased over the past year.
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