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.”
Brisbane rents: Landlords in ‘rosier position’ as unit oversupply eases
Brisbane rents are creeping up and the proportion of vacant homes is inching down, as the city’s rental market recovers from years of oversupply, experts say.
Asking rents for units rose 1.3 per cent to a median $380 a week over the past year, the latest figures from the Domain Rental Report for the September quarter show.
House rents also edged up 1.3 per cent to a median $405 over the same time period, according to the report released on Thursday.
The combined vacancy rate fell 0.1 percentage points to 2.2 per cent during the September quarter.
It comes after a wave of new apartments were built in Brisbane’s inner city in recent years, with the extra supply keeping a lid on rents.
Domain research analyst Eliza Owen said the market was now in good health, despite appearing to be near-stagnant.
Median weekly asking rents for units
|REGION||SEP-19||JUN-19||SEP-18||QOQ % ∆||YOY % ∆|
|Brisbane – City wide||$380||$380||$375||0.0%||1.3%|
|Brisbane – East||$405||$405||$400||0.0%||1.3%|
|Brisbane – North||$370||$365||$363||1.4%||2.1%|
|Brisbane – South||$385||$380||$375||1.3%||2.7%|
|Brisbane – West||$400||$415||$390||-3.6%||2.6%|
|Brisbane Inner City||$420||$425||$410||-1.2%||2.4%|
|Moreton Bay – North||$315||$315||$310||0.0%||1.6%|
|Moreton Bay – South||$340||$335||$335||1.5%||1.5%|
For units, the stability was a positive story compared to oversupply-induced market weakness a few years back, Ms Owen said.
“There’s been a lot of fear about over-development but in the building space there’s been tightening of dwelling completions,” she said. “They’ve come down sharply and are returning to long-run average levels.”
Rents were now trending up and vacancy rates down, she said.
“The picture for south-east Queensland in terms of rental returns is pretty good, it’s also one of the most affordable rental markets for houses.”
Ms Owen said interstate migration, mostly from Sydney, was a major factor in keeping the rental market balanced.
“The tightening of the rental market is off the back of strong population growth and a very affordable lifestyle, and this is reflected in the rental vacancy rate which is down to 2.2 per cent from 2.6 in the previous year,” she said.
Investec Lists Fortitude Valley Office Tower
The newly-listed Investec Australia Property Fund will divest its 11-storey Fortitude Valley office building with an expected price north of $90 million as it moves to recycle capital.
Fresh off the heels of its fully underwritten institutional placement and purchase of three industrial properties in the Northern Territory, Western Australia and South Australia for $84 million last month, Investec has motioned to sell its Brisbane, 757 Ann Street, tower.
Investec purchasted the Nettleton Tribe-designed tower for 68.5 million after it was completed in 2014.
Comprising 9,422sq m of office space with a weighted average lease expiry of approximately five years, the A-grade building, anchored by technology company Asea Brown Boveri, is 100 per cent leased.
Cushman & Wakefield’s Mike Walsh and Peter Court are managing the international expression of interest campaign, to kick off mid-October, with expectations it will generate strong interest from domestic and off-shore institutions, funds and syndication groups.
“The entire commercial component of the asset is structured on a net lease basis, providing smooth, predictable cash flow for investors,” Court said.
Sales over the first half of the year surpassed the total volume of sales over 2018—reaching $1.2 billion, according to Colliers research, with Australian institutional investors dominating the lion share of transactions.
Commercial assets currently on the market include Perth-based investor RG Property’s 410 Queen Street in Brisbane’s ‘golden triangle’.
Recent Brisbane assets changing hands include the sale of the Jubilee Place Office development at nearby 470 St Pauls Terrace to a real estate fund managed by Credit Suisse, Malaysian-backed HCK’s 116 Adelaide street for $30 million, and QIC’s Q&A Centre at 141 Queen Street and 140 Elizabeth Street which sold to Taiwanese developer Shayher Group.
As for development plans in the Fortitude Valley precinct, Sydney fund manager Millinium Capital in August announced plans for a new university campus and 30-storey tower that would comprise student accomodation, co-living and co-working space at 240 Brunswick Street and 11 Overells Lane.
Australian property management startup raises $3.5 million, expands to Brisbane
Australian proptech startup :Different has announced it raised $3.5 million in its latest funding round to continue its national expansion.
The fund raising coincides with the company’s launch into Brisbane today.
:Different is a full-service property management startup where property owners pay a fixed fee of $100 per month instead of a percentage based on the rental price of the property.
The appeal of :Different is their tech base which automates the everyday tasks of a property manager.
:Different’s owner app provides 24/7 access to documents like lease agreements, statements, and maintenance requests, while the tenant app helps streamline requests and fast track communications.
Over the last 12 months, :Different’s customer base has grown five folds with more than $700 million worth of properties now under management across New South Wales and Victoria, while its team has quadrupled to 32.
The latest funding round supports :Different’s ambitions to expand into new markets, further enhance its tech platform and continue to build its team of expert property managers, said Mina Radhakrishnan, Co-Founder at :Different.
“We’ve already had huge success since launching in Sydney and Melbourne, and we’re thrilled to offer the same great offering to Queenslanders,” Radhakrishnan said.
“We have big growth ambitions for :Different. This latest funding round will help us continue to rebuild property management in Australia and beyond.”
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