BIS Oxford Economics: Brisbane apartment glut has years to run

The oversupply of apartments in inner Brisbane may not be resolved until 2021, according to a BIS report.

An artist’s impression of R&F Property Australia’s development on the riverfront at West End in Brisbane.

The oversupply of apartments in inner Brisbane may not be resolved until 2021, despite the cancellation or deferral of 52 new projects.

A BIS Oxford Economics report shows 8300 apartments will be completed in 2017-18 — a record for apartment completions in Brisbane. And another 5000 apartments are in the pipeline for 2019, putting downward pressure on prices and rents.

BIS Oxford Economics senior manager Ange Zigomanis said normally fewer than 2000 apartments a year were built in inner Brisbane.

“We’re in a position now where rents are under pressure, prices are under pressure, off-the-plan purchasers and investors have fallen away so that’s impacting the next round of development,” Mr Zigomanis said. “But that’s not going to have an impact on supply for at least a couple of years, so that’s when we’ll start to see vacancy rates tighten and improve in the Brisbane market.”

The apartment market was so oversupplied it would probably have ramifications for the housing industry, he said.

“If you’re a potential first-home buyer and you’re renting in the city, for now you may be happy to have your landlord offer you a discount to keep you there while you try to save more of a housing deposit,” Mr Zigomanis said.

In a clear sign developers were seeing the writing on the wall, 52 projects amounting to more than 10,000 apartments had been abandoned or deferred.

Furthermore, building approvals data for February from the Australian Bureau of Statistics showed apartment projects given the go-ahead nationwide fell by 15 per cent in the month. “In theory I guess it is winding back, but there’s still one or two years of high completion before it starts to fall away,” Mr Zigomanis said.

Chinese developer R&F Property Australia yesterday detailed its plans for a 1032-apartment complex on the riverfront at West End. Seven buildings ranging from 12 to 15 storeys would accommodate the one, two and three-bedroom apartments on a 16,827sq m site with 200m of river frontage.

R&F senior development manager Rodney Chadwick said the project would take four years to get to market. “We see there is long-term demand for apartments and in particular this location,” Mr Chadwick said. One of the reasons for the delayed construction is the remediation process required on the Donkin Street site, which once housed a tar-processing plant.

Former owner Dexus sold the site to Pointcorp for $26 million in 2013, declaring the land too contaminated for residential development.

Just over two years later R&F bought the site for $82.5m with the intention of progressing an approved development application for an apartment complex.