Forget houses, it’s time for QLD units to shine as affordability bites, interest rates rise

Rising interest rates, soaring rents and affordability pressures are tipped to force buyers back into Queensland’s apartment market after years of houses being king.

Rising interest rates, soaring rents and affordability pressures are tipped to force buyers back into Queensland’s apartment market after years of houses being king.

The gap between house and unit prices in Brisbane is now the widest in at least two decades, but demand for units is surging and industry experts believe the return of investors driven by the rental crisis will push up apartment prices.

New data from PropTrack reveals demand from investors for units in Woolloongabba has jumped a whopping 248 per cent compared to a year ago, with the suburbs of Wynnum, Chermside and South Brisbane also recording a huge uptick in inquiries year-on-year.

A two-bedroom unit in this building at 807/62 Logan Rd, Woolloongabba, is for sale.

Investors are also actively looking to buy units in the exotic locations of Hamilton Island and Cannonvale in the Whitsundays.

PropTrack senior economist Eleanor Creagh said demand for houses outshone units during the pandemic as people opted for more space, but now demand for units was bouncing back.

In March, inquiries for houses and land slipped compared to a year ago, but the volume of unit inquiry is 16.6 per cent higher year-on-year, according to the data.

PropTrack senior economist Eleanor Creagh. Picture: Dylan Robinson.

“With the return of overseas migration and universities resuming in-person classes, investors are eyeing up the opportunity to purchase a unit,” Ms Creagh said.

Colliers Queensland residential director Andrew Roubicek said the price difference between houses and apartments in Brisbane had reached 49 per cent — the greatest differential in two decades.

Mr Roubicek believes the city’s apartment market is in for a significant price increase in the second half of 2022.

This two-bedroom unit at 905/440 Hamilton Rd, Chermside, has just been listed for sale.

He said the economic impact of interest rate increases would further impact housing affordability, forcing buyers back into the apartment market.

“Buyers may see better value in the established apartment market in the short-term, as opposed to buying new off-the-plan,” Mr Roubicek said.

“However, this will be a short-lived alternative as supply dries up and investors take advantage of rental vacancy rates.

The view from a two-bedroom unit at 8/82 Bay Tce, Wynnum, which is for sale.

“We expect surge in demand from investors as the rental vacancy rates continue to fall to less than one per cent and rental yields approach five per cent.

“This increase in demand will have a significant impact on the second-hand apartment pushing

up prices reflecting the price of a new apartment.”

Kollosche agent Harry Kakavos, who sells prestige real estate on the Gold Coast, said skyrocketing building costs would also drive up apartment prices.

“How else is it going to stack up for a developer?” Mr Kakavos said.

This two-bedroom unit at 206/16 Resort Dr, Hamilton Island, is on the market for $1.05m.

“There’s certainly a very strong trend towards what I call the ‘lock and leave’ apartment.

“There’s strong sector of the market that prefers prestige apartments they can lock and leave and travel, and they find more security in having an apartment than a house.”

Hotspotting director Terry Ryder said units would start to become “a very attractive option” given the price gap between units and houses.

“I think we’ll see more demand coming to apartments as the desired choice because of affordability, although there are plenty of places where apartments have had exceptional growth in median prices,” Mr Ryder said.

“100 per cent of Brisbane suburbs have had house price growth in the past 12 months and 93 per cent of suburbs with apartment markets have also grown.”