Brisbane rental yields are sliding and oversupply is to blame
By
Jim Malo
October 16, 2017
A high concentration of inner-city apartments has caused a chain reaction in the Brisbane rental market, leading to rental yields for detached houses falling more than seven per cent in the past year.
Stagnant rents and vacancy rates for the Greater Brisbane region hide a more serious problem — investors are now making less returns because of a slow uptake in apartment supply and a correction to the market could be more than a year away.
“There’s no doubt with the increased supply we’re seeing downward pressure on rents,” Domain Group’s chief economist Dr Andrew Wilson said.
Commenting on the latest Domain State of the Market Report, buyer’s agent and property pundit Pete Wargent said the blame did not fall solely on the private or public sectors.
“It was a confluence of factors; the city plan allowed a lot of new apartments to be built and for a certain amount of time the city council was happier to approve borderline cases but I know now it’s harder for them to get approved,” Mr Wargent said.
“The other thing was Chinese buyers, which was a trend that came out of nowhere. I think developers became more confident they could sell apartments to anyone.”
Construction mainly focused on Brisbane’s centre and that was now the area with highest vacancy rates, PRD Nationwide’s Dr Diaswati Mardiasmo said.
“The vacancy rate for the postcode 4006 is about 5.2 per cent,” she said. “Put it this way, I live in Acacia Ridge, which is 4110 and the rate there is 2.9 per cent.
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“There might be lower vacancy rates in your suburb but [Greater Brisbane’s rate] stayed stagnant because it’s levelled out.”
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June 2016: $350
Adelaide
Over the past 12 months, house and unit yields had fallen 7.1 per cent and 1.2 per cent respectively. The yields (4.5 per cent for houses, 4.86 for units) were still higher than Sydney or Melbourne but were continuing to trend downward.
Rents themselves had fallen too; $400 for houses and $370 for units, flat year-on-year for houses but down 1.3 per cent for units.
Haesley Cush, of Living Here and Ray White, said competition between landlords to set out flashy and new apartments from each other drove down prices of the new builds.
“If you release 200 units at the same time with very little difference between them, the first one that’s going to rent will be the cheapest one.”
Mr Wargent said he was surprised by the lengths property managers and landlords would go to secure a lease.
“A lot of new dwellings are offering free rent and even $1000 cash back which is extremely unusual.”
Those measures were not just impacting units, he said: “That’s had a knock-on effect for the detached housing market as well, more young people are choosing new apartments over older post war homes and Queenslanders.”
Things aren’t as dire as they seem for investors, because low interest rates had provided some relief from the sliding yields, which were partially falling because price rises were outpacing rent rises, particularly for houses.
For now, rents in Brisbane would continue to be “soft” for at least another 12 months, Mr Wargent said.
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Allhomes acknowledges the Ngunnawal people, traditional custodians of the lands where Allhomes is situated. We wish to acknowledge and respect their continuing culture and the contribution they make to the life of Canberra and the region. We also acknowledge all other First Nations Peoples on whose lands we work.
"With open hearts and minds, together we grow." artwork by David Williams of Gilimbaa.