The bolshy Tim Gurner is sitting on a Brisbane bomb:
More than 100 apartments in a high-profile inner-city Brisbane development are yet to settle amid warnings it is “crunch time” for developers in the Queensland capital.
Some 20 per cent of the first tower of property developer Gurner’s 520-unit FV development are yet to settle, although the company maintains sales-to-date have allowed the $180 million in debt linked the project to be repaid in full.
The planned $600m twin tower development in the Brisbane apartment hotspot of Fortitude Valley is being closely watched as an indication of health for the local market, considered by many — including the Reserve Bank — to be oversupplied.
More than 6400 apartments in major developments were due for settlement this year in Brisbane’s inner city, according to research from Urbis, prompting concerns of falling valuations.
The central bank last week highlighted weak conditions in Brisbane’s apartment market, where an increase in supply has resulted in falling prices and no growth in rents.
Recent data on Brisbane’s housing market suggests that momentum has stalled from already sluggish levels amid an oversupply in apartment construction.
Last week’s September quarter results from Domain (formerly Australian Property Monitors) revealed that while Brisbane houses have recovered to their March-2008 level in real inflation-adjusted terms, prices dipped 0.6% in the September quarter:
Meanwhile, Brisbane units & apartment values have fallen heavily, down 3.9% in the September quarter in real inflation-adjusted terms and by 8.0% over the year, to be 15.6% below their September 2009 peak.
Meanwhile QLD’s annual mortgage lodgements and transactions have started to fall, according to State Government data:
Turning to Brisbane’s rental market, house rents have recorded zero growth since December 2013, whereas Brisbane unit rents have fallen by $5 per week since December 2012, according to Domain:
The reason for the sluggish growth in both Brisbane dwelling prices and rents is largely due to the large oversupply that has developed, especially in the apartment space:
This has pushed Brisbane’s rental vacancy rate to 3.2% – a full 1.0% above the national average:
As noted by CoreLogic last month, greater Brisbane unit supply is projected to grow by 20% over the next two years, with 39,420 apartments and townhouses hitting the market, including 15,650 over the next 12 months alone.
Digesting this torrent of apartments has also become increasingly difficult thanks to the banks’ tightening of lending standards to apartment buyers.
Thus, you should probably steer clear of the oversupplied unit & apartment market, as well as be prepared for sluggish growth in the detached house market.
