Inner-city pads faring well

PROPERTY Residential

Sales of new apartments in Brisbane’s inner ring are at a five-year high, according to the latest Colliers International Brisbane Apartment Report for the December 2010 quarter.

The report says the 1433 transactions recorded for all of 2010 are the highest since 2005, and well above the long-term average. Those 1433 sales when compared with 795 for 2009 represented an increase of 80 per cent.
Colliers International research manager Josh Daly said activity in the new inner-Brisbane apartment market was being driven primarily by investor demand, with investors accounting for around 80 to 90 per cent of all transactions.
“Recently, owner-occupiers have been largely absent from the market due in part to expectations of flat prices in the short to medium term, higher borrowing costs and the removal of fiscal stimulus measures,” he said.
According to the report, demand continued at trend levels over the final quarter of 2010, with 339 unconditional sales. The inner north accounted for the majority of sales with 172 transactions, followed by the CBD with 94 and the inner south with 55.
Mr Daly said during 2010, transaction activity in the inner north, CBD and inner south has been more resilient due to the large supply of price-pointed affordable stock.
“With regard to supply, the number of new apartments available for sale in Inner Brisbane rose to 2228 during Q4 2010, from 1801 in the previous period, ” he said “Supply is now at the highest level it has been in over 10 years and is wel
l above previous highs observed in 2002 and 2004, which was circa 1500 apartments. “Most of the new apartments currently for sale in inner Brisbane are located in the CBD and inner north, which account for 34 per cent and 41 per cent of the total respectively. “New apartment stock in inner Brisbane is largely comprised of two and one bedroom offerings, which account for around 50 per cent and 30 per cent respectively of the total.”
Colliers International director valuation and advisory services, Troy Linnane, said the weighted average price of unconditional sales has been trending downward since late 2008.
“Despite above trend levels of demand during 2010, prices have continued to fall, although the pace of decline has eased significantly,” he said. “A continuing decrease in the weighted average sale price is reflective of the large proportion of price pointed affordable stock that transacted during 2009 and 2010.
“The weighted average price of unconditional sales for Inner Brisbane during Q4 2010 was $556,200, a moderate increase from the previous quarter.
“The market generally is strong for affordable price-pointed stock.” The report found that the unconditional sales of new apartments in Inner Brisbane during Q4 2010 were comprised largely of affordable stock, with 84 per cent of transactions involving properties less than $650K in price. More specifically, 42 per cent of the unconditional sales in the fourth quarter involved properties less than $450K in price. Mr Daly said the future remains uncertain for several projects in the supply pipeline.
“Furthermore, the timing for their release is heavily dependent on securing finance and investor commitment, both of which are closely tied to the ability of projects to achieve required levels of pre-sales,” he said.
“However, supply is currently very elevated and with a large pipeline of new projects yet to reach the market, it shows little sign of falling in the near term.
“The demand for new apartments in Inner Brisbane is currently well above trend levels and is rising, however available supply is the highest on record and will remain elevated due to the release of a large number of apartments during 2011,” Mr Daly said.
High levels of available supply would limit any significant appreciation in prices or growth in rental values in the short term.
“The interest rate outlook is likely to involve a marginal tightening of the cash rate in response to emerging inflationary pressures, which will have an impact on transaction activity and apartment prices,” he said.
“In the near term, investor returns are likely to be driven by rental income rather than capital growth.”