Brisbane new apartment market well balanced but Gold Coast still struggling to find buyers: Midwood Report

The outlook for the new Brisbane apartments market remains healthy with supply and demand evenly matched, but the Gold Coast market continues to struggle with sales of new apartments still at post-GFC lows, according to the latest Midwood Report.

Unconditional sales of new Brisbane units increased from 74 in the November quarter 2011 to 186 in the February 2012 quarter.

Stock levels have declined to 1,446 from a peak of 1,683 in May last year, which equates to two-and-a-half years’ worth of supply at current sales rates.

Investors have been spurred on by rising rental returns, with one-bedroom inner-Brisbane flats registering rental growth over the past 12 months of 9% to a median of $300 per week, with a smaller 4% increase in two-bedroom flats ($380).

Midwood Report author Bill Morris says the Brisbane market has been characterised by a sustained level of sales over the past two years, averaging 200 sales per quarter

Brisbane remains the fastest-growing state capital, with current growth rate of 2% per annum and is also experiencing an influx of employees in the inner city, with both trends being driven by the Queensland resources boom.

The strongest-selling project was David Devine’s Metro Property Madison Heights development in Bowen Hills, which clocked up 57 sales with prices ranging from $350,000 for a one-bedroom apartment to $434,000 to $556,000 for a two-bedroom apartment. Madison Heights features 296 apartments, with 200 sold since launch of the project in March 2011.

There were also 15 sales at Metro Property’s The Chelsea development also in Bowen Hills, with 190 out of 195 apartments now sold in the project. Prices range from $355,000 for a one-bedroom apartment to $546,000 for a two-bedroom apartment, and there were 20 sales recorded for Brooklyn on Brookes in Fortitude Valley, Metro’s joint development with Indian-based developer Pearls.

The other strong performer was Meriton’s 81-storey Infinity Tower, currently under construction, with 34 sales recorded and prices ranging from $470,000 for a one-bedroom apartment to $650,000 for a two-bedroom unit. To date 123 out of the 287 apartments in the tower have been sold.

Meriton’s other high-rise Brisbane project the 74-storey Soleil registered no unconditional sales over the quarter. It has sold 216 of the 414 apartments marketed to date with prices ranging from $347,000 for a one-bedroom apartment to $806,000 for a three-bedroom apartment with two car spaces.

In comparison the Gold Coast managed continued to struggle to attract buyers. with just 52 sales recorded over the February quarter, half of these for units in Southport Central 3 on Lawson Street in Southport, currently in the hands of administrators.

“Sales are being sustained almost entirely by mortgagee sales,” says Morris, who adds that the Gold Coast market is showing “no signs of improving”.

While stock on market has reduced from 723 to 500 over the past 12 months due to no new projects in the pipeline, the slow rate of sales means that there is still two years of stock available.

The Midwood report notes that quarterly sales have averaged just 60 since the start of the GFC in 2008.

In the year to February 2008, before the onset of the GFC, the Gold Coast averaged around 25 new unit sales per week, equating to a total of just under 1,200 over the 12 month to February 2008.

According to Morris, most of the stock of new apartments (351 out of 500) is priced above $600,000, which explains the flat sales volumes. 

He says there is demand for lower-priced units, as demonstrated by Meriton’s Brighton on Broadwater and Southport Central, where most of the apartments are priced below $600,000. 

“The market demand for larger three- and four-bedroom apartments has been constrained by lenders, who are wary of price softening at the upper end of the price range. Future development sites such as the City Planners/ Lotte group site on Ferney Avenue and the Aussie Blue site opposite should aim to satisfy the demand for smaller, more affordable high rise units,” he says.