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Wednesday, 6 June 2018

Brisbane is filling up, slowly

Heading north

If you've been reading this blog for a few years you'll have enjoyed (or quite possibly not!) my tracking of the super-boom in Queensland apartment construction, and especially Brisbane construction. 

The boom is now drawing to a close as fewer projects achieve the requisite pre-sales to reach the commencement phase and the Chinese bid dissipates

At the same time, the post-resources boom decline in Queensland's population growth has long since reversed, with interstate migration from down the congested southern capitals an increasingly key driver. 

The inner-city is now quietly buzzing as the apartments fill up. 

A comfortable enough win for the Blues last night, granted, but that isn't stopping many Sydneysiders from taking the plane journey north. 

There's more to the equation than just this, since strong demand for detached housing is keeping construction activity on its toes across the Greater Brisbane area.

But the big picture is that population growth is picking up, and dwelling completions are now falling away fast, and the official figures lag by about 6 months. 

I haven't been following the My Housing Market rental data for long enough to have a firm handle on it, but it was interesting to see Brisbane unit vacancy rates dropping to 2.1 per cent in May 2018, way down from 3 per cent a year earlier. 

That puts the Brisbane unit vacancy rate well below that of Sydney, for example, with Airbnb playing a material role in soaking up the rentals.

The vacancy rate for Brisbane units is also now lower it is than for houses on this data series, with Brisbane's more dated 'weatherboard and iron' stock proving harder to rent out these days as it competes with all those shiny new apartments. 

Source: My Housing Market

Other data providers such as SQM Research have tentatively begun to report the same tightening trend. 

In some of the suburbs where construction was at its most hectic, such as Hamilton, Fortitude Valley, Toowong, South Brisbane, West End, and the CBD itself, vacancy rates have come back down from orbit, and are trending lower. 

I've been watching the local suburb of Newstead with similarly keen interest. 

A couple of years ago there were hundreds of empty apartments as the completions rolled in, but they're clearly filling up now.

The quality Mirvac developments are now 100 per cent occupied, with furniture on every balcony, but some of the, ahem, lower grade investor stock is still seeing more stubborn vacancies (some developments are sold with rental guarantees, which will be needed). 

And the trend is clear enough, with the soft indicators - traffic, cafes, bars, restaurants, Woolies, and DJs - all telling the same story: Brisbane is filling up.

Speaking of Mirvac, the developer has reportedly sold a site in the suburb previously earmarked for potentially more apartments, another indicator of the market rebalancing. 

Even on State of Origin night - when half of Queensland was at their local hotel - postcode 4006 looks pretty well occupied, although the retirement village to the right of shot is as yet incomplete.

We're also now seeing good quality family-appropriate properties rent immediately at the first open home with multiple parties showing interest, and some instances of moderate rent increases. 

There's still a way to go yet, but at the current rate of change Brisbane's vacancy rate will be tracking down towards 2 per cent by about April next year, after the seasonally weak Christmas break. 

There's also some cool new stuff coming down the pipe to draw younger renters in towards New Farm, Fortitude Valley, Teneriffe, and the CBD too, including the Howard Smith Wharves precinct in the shadow of the Story Bridge. 

Brissy is slowly but surely becoming the place to be!