Brisbane apartment market heats up as more buyers choose apartments over houses: Terry Ryder

Brisbane’s inner-city apartment market is having its best time in almost a decade.  

Two research reports confirm that sales in the March quarter were the highest since September 2004, boosted by the release of six new projects.  

Reports from Place Advisory and Colliers International tell similar stories and not only of a rising tide of buyers for CBD and near-city units.

Among the many messages hidden within these reports are these:-  

• More and more buyers are choosing apartments.

• Small units are popular.

• A market recovery is well under way in Brisbane.

• Sales volumes rise first, and prices follow later.

• Government grants to first-time buyers don’t work.

• Brisbane has a much healthier unit market than does Melbourne.

The report by Place Advisory’s Lachlan Walker records 625 off-the-plan sales in inner Brisbane in the March quarter – double the number in the December 2012 quarter, 40% up on the same quarter last year and the best result since the 2004 boom. The quarter’s sales of new units totalled $324 million.  

Walker says the results must be analysed with caution – and it would be helpful if more commentators and writers acknowledged that one good period doesn’t make a trend, rather than placing undue significance on a single research result (RP Data spreads misinformation by publishing monthly price data, usually before the month is even finished).  

“This substantial increase in sales could be a quarterly aberration, resulting from a significant number of new and successful project releases,” he says. “We do not foresee this level of transactions to be a consistent result moving forward – but rather an indicator that there is significant market depth and demand for apartments in Brisbane.”  

The results do, however, reflect the growing preference among buyers for apartments over houses. The market share of apartments nationwide has risen from 30% of new dwellings four years ago to almost 40% this year.  

They also suggest growing popularity of small apartments. The sales in the March quarter included 49% one-bedrooms apartments and 48% two-bedders. “Historically, consumers have always had an inherent preference for two-bedroom apartments,” Walker says. “However, sentiment and price has driven demand and sales for one-bedroom stock in recent years.”  

The most active price point is the $350,000 to $450,000 sector, representing 37% of all deals.  

This makes nonsense of banks’ traditional dislike for financing small unit purchases.  

The market is displaying the usual pattern in which sales volumes rise first and prices react later. While the number of unit sales is up markedly, the weighted average price ($518,000) is just 2% higher than a year ago. I would expect price rises to follow later in the year.  

Colliers’ report indicates there are about 2,300 units for sale in the Brisbane inner-city market, with another 3,000 or so to be released in the next 12 months. This suggests Brisbane is in a much healthier position than Melbourne where, according to analysts Charter Keck Cramer, around 19,000 new apartments are under construction in 180 inner-city projects, with another 16,000 being actively marketed.  

The Colliers report also questions the effectiveness of the state government grant for first-home buyers (but only for those buying a new dwelling). “The number of buyers from the first-home-buyer segment has declined in Queensland,” it says. “The number of first-home buyers approved for finance has been declining each month since October 2012, when the grant first came into effect.  

“In contrast, non-first home buyer loan approvals have increased 31%.”  

Terry Ryder is the founder of hotspotting.com.au