Brisbane rental yields surge ahead of southern capitals

Apartments in Brisbane are continuing to achieve significantly higher yields than those in Sydney and Melbourne, with Consolidated Properties reporting it has tenanted all available apartments in its newly-completed inner city Spire development at an average yield topping five per cent.

The result includes 27 furnished apartments in the $200 million residential building - one of only two towers to be recently completed in the heart of Brisbane City - that Consolidated Properties has rented at yields of 5.6 per cent and above. 

According to Urbis director Paul Riga, yields across inner Brisbane remain high at an average of 4.5 per cent, with Sydney and Melbourne trailing at 3.8 and 4 per cent respectively. 

Mr Riga said solid yields were supported by high absorption of quality rental stock, with recent research showing the forecast future pipeline of inner Brisbane apartments was shrinking,  boding well for the strength of the rental market in the short to medium term.

"Perceptions of an oversupply in the inner city are really off target - demand has remained  solid and the market is normalising in terms of the future development pipeline," he said.

"Our latest Inner Brisbane Apartment Rental Review shows the new apartment vacancy rate is just 2.8 per cent. 

"Although there were a record number of apartment settlements in 2017, vacancy rates have not jumped through the roof as predicted by some, and we expect rental demand will remain solid as the number of new apartment approvals has dropped significantly from a high of about 11,000 in 2015.

"Most of this stock has now been completed and occupied, and we saw just 3,141 new approvals in 2017 - which is only slightly higher than the approximately 2,000 approvals in 2011 and 2012, at the bottom of the market."

Consolidated Properties executive chairman Don O'Rorke (below) said Spire's outpacing of inner Brisbane's average yield - in itself already the highest among eastern seaboard capitals - showed that quality buildings well located in the Brisbane CBD continued to perform strongly.

He said all apartments available for lease in Spire that were under Consolidated Properties’ management had been tenanted following completion in September (2017) of the landmark building, situated on Queen Street in the heart of the city.  In total, Spire features 340 one and two bedroom apartments.

"There has been a lot of talk of an oversupply in the Brisbane apartment market - but quite simply put, you don't achieve yields of the level we have in an oversupplied market and in fact, they point more towards an undersupply," he said.

"We had a waiting list of prospective tenants before the building was even completed and, in many cases, investors had several choices of who to lease their apartment to.  We actually still have a waiting list of prospective tenants keen to lease any more apartments that become available in the building.

"What we are seeing is strong demand for apartments that are well located and, certainly, the CBD location of Spire - and its high level of connectivity - was a significant factor, as was the high build quality and the exclusive resident amenities."

O'Rorke said the 'crowning jewel' of the Spire building, designed by award-winning John Wardle Architects, was its rooftop which included Brisbane's highest pool, dining and entertaining zones and a 20-seat cinema.

"We invested significantly in creating a building that would become a true landmark and place to call home, and the rooftop facilities is an important aspect of that," he said.

"Here, residents can take in the Story Bridge, Brisbane River and Kangaroo Point Cliffs from the infinity edge pool - there are very few places in Brisbane where you can do that."

The grand hotel-like lobby will feature restaurant Spice Den - the second to open under restaurateurs Scott Wilson in conjunction with partners, whose first Spice Den at Casuarina in northern New South Wales has become a local institution.

O'Rorke said Spire had appealed to investors and owner-occupiers, with more than $190 million of sales achieved, making Spire Brisbane's fastest-selling project upon release. 

"Both investors and owner-occupiers have been looking at all the strong fundamentals underpinning the Brisbane market, such as employment growth and high levels of migration," he said.

"At the same time, the average price of apartments in Brisbane remains significantly more affordable than Sydney and Melbourne, and the yields significantly higher.

"When you consider a two bedroom apartment in Spire is priced from $630,000 to $750,000 and rents for $780 per week - in comparison to a Barangaroo apartment in Sydney which costs $3 million to $3.5 million and rents for only $1800 per week - it makes a lot of sense."