Free rent and internet to lure tenants in over-crowded Brisbane CBD: QUT economist

Free rent and internet to lure tenants in over-crowded Brisbane CBD: QUT economist
Free rent and internet to lure tenants in over-crowded Brisbane CBD: QUT economist

Landlords offering free rent, internet on new apartments in Brisbane’s CBD is not just an indication that it’s a tenant’s market, but that it is near saturation as well, says a QUT property economist.

Tenants are calling the shots in the Brisbane CBD and inner ring suburb rental market, according to QUT economist Dr Lyndall Bryant. Of the 500 properties listed in the past six months in sought-after West End, the average days to rent was 39 days.

“That’s five-and-a-half weeks of your apartment sitting empty, so landlords might as well offer a month’s free rent on a six-month lease since it’s likely to be empty anyway,” Dr Bryant said.

“The average rental in West End is $400 a week, which means that with a four-week, rent-free period, tenants, in effect, can get the equivalent of their bond back for free.

They could conceivably move into a new apartment every six months and save two months’ rent every year.

“If this is happening in West End which has great amenity – close to the river, the city and a cosmopolitan hub - what these figures are showing us is that the market is reaching saturation.”

Dr Bryant said demand for near-city apartment living came from three groups: students, young professionals and empty nesters.

With 10,000 new apartments currently under construction, it was unclear where fresh demand for these units would come from, except possibly from international students because of the falling Australian dollar.

"In addition to the 10,000 near-city apartments under construction, inner ring Brisbane has another 15,000 apartments approved and another 15,000 waiting approval.

“If all these properties go ahead there will be an apartment oversupply and it’ll be a tenants’ market for the foreseeable future.  When landlords aren’t getting returns on their investment, they sell up and property values fall.

“Brisbane has shown good investment returns in recent years but incentives such as free rent and internet indicate we are approaching saturation.

“This isn’t good for the market. Any new developments should look very closely at their value proposition until the demand fundamentals shift."

 Dr Bryant said commercial vacancies were at an all-time high.

"Brisbane office market vacancies have blown out to 15 per cent as the mining boom has contracted," she said.

"This has meant there are fewer white collar workers looking for shorter term accommodation who could take up tenancies in near-city apartments."

Dr Bryant said a further complication was recent changes by the Australian Prudential Regulation Authority (APRA) and Australian Securities and Investment Commission (ASIC) that had been effective in putting the brakes on property investment lending. 

"In an effort to cool the overheated property market down south, APRA has required the banks to actively discourage higher risk mortgage lending for property investors. That is, interest only loans, high loan to value ratio loans, and loans with very long terms.

“It’s one thing to create high-density, inner city living but not everyone wants to live in an apartment and so it’s important to maintain choice in housing types. 

“With the inner city apartment market reaching saturation, it’s time to shift the policy focus to other segments of the market such as affordable greenfield and “grey field” development."

QUT is one of five Australian universities that have come together to form the Australian Technology Network of Universities.

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Brisbane Rentals

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