Larry Schlesinger | 16 September 2012

Brisbane units market heading into downswing on property clock due to too many off-the-plan projects: Michael Yardney

Brisbane units market heading into downswing on property clock due to too many off-the-plan projects: Michael Yardney

The Brisbane inner-city apartment market is heading into a downswing due to the large numbers of off-the-plan projects currently being marketed in the Brisbane CBD and surrounding suburbs, according to property investment adviser Michael Yardney.

Yardney, the director of Metropole Property Investment Strategists, places the Brisbane unit market at two o'clock on the property clock – 12 o’clock indicates the property market has peaked while 3pm indicates the market is in a downswing.

He has Sydney houses (six o’clock) nearing the bottom of the cycle, but units entering a recovery period (seven o’clock).

The Melbourne property market is  assessed as having further to fall, with both houses and units at five o’clock.

  • At 12 o’clock the market is at its peak (demand exceeds supply)
  • At 3 o’clock the downswing has set in (an evenly supplied market)
  • By 6 o’clock it has bottomed out (an oversupplied market).
  • At 9 o’clock the market is rebounding (supply tightening)

Yardney expects there to be an oversupply of inner-CBD and near-CBD apartments in Brisbane for the next few years, causing prices to fall slightly.

Most recent data put out by the Real Estate Institute of Queensland has unit and townhouse prices in Brisbane up 3.8% over the June quarter to a median of $402,500 – but down 1.5% year-on-year.

Yardney says many of the Brisbane projects being currently marketed will remain unsold and this oversupply of properties will put downward pressure on prices and rentals.

“Many of the apartments that have been sold off the plan are coming on stream in the next few years and have been purchased by investors.

“Some will have difficulty getting finance and settling their purchase. Others will be disappointed to see the end value of their properties is less than their purchase price,” he says.

Yardney assesses the Brisbane detached house market to be between four o’clock and five o’clock – still in a downturn but on the way to bottoming out.

“House prices have dropped for the last two years in Brisbane.

“Brisbane buyers are lacking confidence to re-enter the market and are sitting on the sidelines waiting for signs that the market has bottomed before they make a purchase. Many were waiting for the resources boom to reignite their property market, but recent negative media has again dampened confidence,” says Yardney.

According to Yardney there are signs that the inner and middle-ring Brisbane home market is picking up, with more buyers returning and many properties now selling under a multi-offer scenario.

“Brisbane is entering the stabilisation phase of its property cycle, but prices are unlikely to start rising until 2013.”

These are Yardney's assessments of Sydney and Melbourne houses and unit markets on the property clock:

Sydney houses – six o’clock (bottom of the market)

“Different segments of the market are at different stages of the property cycle,” says Yardney.

“The top end of the market is at four o’clock, with early signs of a demand for more expensive properties, especially in the eastern and lower north shore properties.

“There is increasing confidence, translating into more demand for properties in the middle and lower end of the market, which is approaching six o’clock.”

Sydney units – seven o’clock (start of an upswing)

Yardney sees still strong demand from owner-occupiers for units but a shortage of available “good” stock relative to demand, especially in inner west, which is going through gentrification.

“Apartments in Sydney’s eastern, beachside suburbs and lower north shore suburbs are also performing well. However, buyers are being very selective and avoiding properties that are overpriced or apartments in secondary locations.

“Strong rental demand, a shortage of rental properties, tightening vacancies and rising rents means investors will also vie for the same apartments as owner-occupiers, underpinning prices.

“The market for well-located apartments is likely remains strong throughout spring and this will be helped if interest rates fall once more as expected.”

Melbourne houses – five o’clock (in a downswing)

“After falling in value over the first quarter of the year, the Melbourne housing market has been a bit of a surprise, performing better than many expected which prices rising around 3% over the last quarter clawing back half of their losses. Different segments of the market are at different stages of the property cycle,” says Yardney.

“The top end of the market is at four o’clock, with an oversupply of property relative to the reduced demand for luxury property,” says Yardney

He says there is more demand for properties in the inner- and middle-ring Melbourne suburbs that priced between $500,000 and $900,000.

“Builders and developers have got ahead of themselves, and there is a substantial oversupply of newly built house and land packages in the outer suburbs, which will create a downward pressure on property values in these locations and for properties in the first-home buyer category in general.”

Melbourne units – five o’clock (in a downswing)

“With over 40 new projects under construction there is an oversupply of inner-city /CBD apartments. This is occurring at a time when there is less demand from the demographic of tenants that rent in the CBD. This will put downward pressure on prices and rentals,’ says Yardney.

“Many of the apartments that have been sold off the plan are coming on stream in the next few years and have been purchased by investors. Some will have difficulty getting finance and settling their purchase. Others will be disappointed to see the end value of their properties is less than their purchase price."

As with the outlook for Brisbane inner city and CBD units, Yardney expects there will be an oversupply of inner-CBD and near-CBD apartments in Melbourne for a few years, causing prices to fall slightly

“However established apartments with an element of scarcity, for example Art Deco features, are still selling well, as there is limited supply in relation to the current demand for these types of properties,” says Yardney.