Overdevelopment

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There is no oversupply of apartments in Brisbane’s CBD and the debate is inappropriate, according to prominent Queensland developer Don O’Rorke.
Brisbane’s central business district will settle just three apartment projects this year:  666 units in 2017 at Sunland’s $240 million Abian, AMP Capital/Billbergia’s $900 million Skytower and its own $200 million Spire tower, according to O’Rorke in an article in The Australian. 
However, lenders and the central bank have a different view. NAB has blacklisted Brisbane CBD as a high-risk postcode for mortgages and even the Reserve Bank of Australia has expressed concerns about an apartment glut in Brisbane’s inner-city locations. 
The RBA said as recently as February that “the combination of increased supply and lower population growth had already depressed rents and apartment prices in Perth and, increasingly, Brisbane”. 
Even in October 2016, the RBA had noted there was a danger that apartment buyers will default on off the plan purchases because of falling ­prices along with the difficulty of obtaining ­finance.
“These risks appear greatest in inner-city Brisbane and Melbourne, where the new supply is largest relative to the existing dwelling stock,” it had said.
But the Consolidated Properties executive chairman was of a different view, saying the city centre represents 10 percent of inner Brisbane’s supply this year.
An additional 810 units will settle in 2018, including Sam Chong’s Mary Lane tower and later stages of the 1,138-unit Skytower, which dominates the city supply.
“The market will be crying out for new product in 2019,” he said. “We certainly don’t see any oversupply issues in the CBD,” he was cited as saying by The Australian.
O’Rorke said there were no new residential projects starting construction in the CBD and the first stage of Destination Brisbane Consortium’s Queen’s Wharf $3 billion development — which is expected to include a residential tower — would not be complete until 2021.
He said the vast majority of the current developments were already pre-sold and there remained strong demand for new product.
“There is simply no point in tracking mooted projects because we know that virtually none of them will proceed, due to the constraints in current funding,” he said. “
The only certain fact is that the four buildings under construction in the Brisbane CBD will be the only additions to the existing market stock in the coming years and 1,812 apartments, by any measure, is a small number.”
According to the Real Estate Institute of Queensland, rents have fallen from $590 a week across Spring Hill and Brisbane City in 2015, to $538 in December 2016, but vacancies remain low.
O’Rorke said the market dynamics were shifting.
Record approvals were in place in 2016, but have scaled back dramatically this year. Of the 24,000 units approved for development, it is expected only two-thirds will be built. 
Industry figures show 3,015 apartments will settle in 2017 across 22 projects in inner southern Brisbane, while 2,727 units will reach completion in 14 developments in the inner north.
In 2018, there are an expected 288 settlements in the south and 790 in the north. Queen’s Wharf is expected to bring an additional 2,000 units to the market, but the major casino-resort project has until 2035 to complete.
O’Rorke said Brisbane was a fragmented market where buyers or tenants who wished to live in the CBD would not be enticed into other areas, where there may be more stock.
Meanwhile, Sunland’s Abian development, which will be completed by mid-year, has recorded resales at a 20 percent and 30 percent premium to the off-the-plan purchase price.
At an average price of more than $1.6 million, the development sold out in 2015, but has had resales with up to 30 percent higher.
Colliers International’s residential director Andrew Scriven said Brisbane’s city centre had not settled any new developments for the past three years and recent resales suggested the market was strong.
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