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Brisbane New Apartments Insight Summary (Q3 2023)

Core Content Overview

This report provides an analysis of the new apartment market in Greater Brisbane, focusing on developer activity, construction costs, price performance, and rental market trends. It highlights the relative attractiveness of Brisbane for investment due to its value proposition, low vacancy rates, and population growth.

Developer Activity

• High-density residential site purchases: The share of Greater Brisbane residential development sites purchased for high-density development reached 94.3% in the year to June 2023, up from 53.6% five years earlier and 68.7% a year ago.
• Building approvals: The number of apartments approved for construction in Greater Brisbane decreased by 4.1% between June 2022 and June 2023, with 7,546 apartments approved.
• Developer appetite: Developer activity remains significantly lower than the 10,637 apartments approved in the same period five years ago.

Cost of Construction

• The cost of construction in Greater Brisbane increased by 7.8% in the year to June 2023.
• Standard finish apartments: Estimated at $2,780–$3,335/sqm (plus GST) in 2022.
• Prestige finish apartments: Estimated at $4,025–$4,725/sqm in 2022.

Established Apartments Performance

• Sales volume: Declined by 2.3% in the June 2023 quarter to 3,476 apartments, and by 30.1% annually.
• Days on market: Increased to 52 days in the June 2023 quarter from 58 days one quarter earlier.
• Capital values: Rose by 5.5% over the year to June 2023, with a median value of $478,500.

Rental Market

• Gross rental yields: Increased by 15 bps to 5.66% in the June 2023 quarter.
• Rents: Rose by 6.0% in the June 2023 quarter and 17.8% over the past year, with a median rent of $530 per week.
• Vacancy rates: Total residential rental vacancy in Greater Brisbane was 1.0% at the end of June 2023, with:
  • Inner Suburbs: 1.1%
  • Middle Suburbs: 1.0%
  • Outer Suburbs: 1.1%

New Apartments Performance

• Total new apartment pipeline: Modest, with 19,900 new apartments built in the five years to June 2023, and a forecast of 2,100 over the next three years.
• Price performance:
  • New apartment prices: Ranged from $5,000–$16,500/sqm in June 2023, with an indicative rate of $9,800/sqm.
  • Annual price change: 3.2%.
  • Quarterly price change: 1.0% in June 2023.
  • Forecast:
    • End of 2023: 4%
    • 2024: 4%
    • 2025: 3%

Regional Analysis

Prime Regions (Inner Brisbane, Inner South, Inner West)

• Site sales volume: Increased by 69% annually.
• Site price change: 2.9% over the year to June 2023.
• New apartment price change: 5.3% annually.
• Forecast:
  • End of 2023: 6%
  • 2024: 5%
  • 2025: 4%

Inner Suburbs

• Site sales volume: Rose by 125% annually.
• Site price change: 3.4% over the year to June 2023.
• New apartment price change: 2.8% annually.
• Forecast:
  • End of 2023: 3%
  • 2024: 2%
  • 2025: 1%

Middle Suburbs

• Site sales volume: Declined by 76% annually.
• Site price change: 10.5% over the year to June 2023.
• New apartment price change: 0% annually.
• Forecast:
  • End of 2023: 1%
  • 2024: 1%
  • 2025: 1%

Outer Suburbs

• Site sales volume: Declined by 45% annually.
• Site price change: 0% over the year to June 2023.
• New apartment price change: 10.0% annually.
• Forecast:
  • End of 2023: 7%
  • 2024: 3%
  • 2025: 1%

Key Trends

• Investor interest: Brisbane’s new apartments are a compelling investment option for those priced out of eastern coastal markets due to relative value, yield, and low vacancy.
• Supply constraints: Limited new apartment supply in prime regions has driven price growth.
• Construction cost rise: A 7.8% increase in construction costs has impacted project economics.
• Rental demand: Strong rental demand and low vacancy rates support apartment values.
• Forecast stability: New apartment prices are expected to grow modestly over the next few years, with a slight decline in supply.

Summary Table

Conclusion

Brisbane’s new apartment market shows resilience and strong investor appeal, particularly in inner and prime regions, due to low vacancy, strong rental demand, and limited supply. While construction costs have risen, the market remains attractive for investors seeking returns in a growing city with favorable economic conditions. The forecast suggests continued modest price growth and a gradual increase in supply over the next few years.