Relief on the horizon after Brisbane’s ‘disaster’ apartment boom

Housing construction in Brisbane's suburbs is set to ramp up by next year after the city's apartment boom "disaster" sent investors running for the hills.

The BIS Oxford Economics property forecast predicts construction will bottom out this year before a surge in works "in the order of 60 per cent" in the second half of 2020.

A dip in population growth coupled with the over-supply of apartments had battered Brisbane's buyer confidence and slowed construction over the past three years.Credit: Jim Malo

The apartment boom, which saw renters incentivised to sign leases with free iPads, weeks' worth of free rent and gym memberships, crippled the market and drove building activity down about 15 per cent, BIS managing director Robert Mellor said.

“It was a disaster; anybody who bought up there suffered a significant correction in price," he said.

“You are not going to get the overseas investors suddenly piling back into Brisbane. They will have been burnt off by the excess supply that developed in the West End area and other parts of inner Brisbane.

“Queensland is coming out of a period of weakness of overall building activity over the last three years."

Mr Mellor said a dip in population growth coupled with the oversupply of apartments had battered Brisbane's buyer confidence and slowed construction.

“Queensland has not performed population wise since about 2010," Mr Mellor said.

“I have been forecasting in the building industry for nearly 40 years and for most of that time Queensland has always been one of the fastest growing markets, population wise.

“While it is still a solid growth rate, probably just under 1.6 per cent, activity hasn’t been strong enough to soak up the amount of dwellings constructed, particularly in Brisbane."

But the industry was primed for recovery, with a construction surge on the way for the city's outskirts, Mr Mellor said, predicting suburban Brisbane's biggest building boom in 10 years.

"It is going to be good days for Brisbane and more owner-occupied driven than a massive investor boom," he said.

“I suspect first home buyers have been sitting on the sidelines. They will slowly get back into the market, encouraged by low interest rates."

But the relief would not be immediate.

Mr Mellor predicted the market would not swing up until mid-2020, when a suite of stimulus measures were expected to flow through to new dwelling construction, "facilitating credit availability, reducing barriers to entry and boosting confidence".

"These measures include lower housing interest rates with a further rate cut expected in December quarter 2019, the removal of the seven per cent mortgage serviceability floor by Australian Prudential Regulation Authority, and the federal government’s first home buyer deposit scheme," the report found.

Another BIS Oxford Economics report, released earlier this month, predicted Brisbane’s median house price would jump 20 per cent by 2022, far beyond any other capital city in the same period, including Sydney at 6 per cent and Melbourne at 7 per cent.

The median house price was expected to increase from $552,000 to $665,000 in Brisbane.