2015 has been one the most considerable years on record for the volume of off-the-plan sales in Inner Brisbane. Following a record breaking three month period at the end of 2014, consecutive quarters through 2015 saw sales volumes upheld across the Brisbane market, portraying the strong underlying demand for opportunities in the Brisbane market.

Market Predictions

These levels of sales have been driven by a market which has remained very affordable when compared to the Southern East Coast capitals and the more established apartment markets of Sydney and Melbourne. Brisbane is today 100% more affordable than Sydney for apartments on a like for like basis – offering significant buying potential for the interstate investor.

2016 Predictions

2016 will in our opinion be a very interesting year for the Brisbane residential market, and in particular the off the plan space. We are expecting a substantial pipeline of ‘potential’ projects to enter the marketplace, which when totalled could offer more alternatives for a purchaser to buy than ever before. Despite this, we expect absorption rates to remain high. We also do expect to see an even greater range of apartments available for sale – from the very affordable to the super high end.

The investment market will become even more competitive through 2016, with focus first and foremost upon the more premium investment stock. Incentives for purchasers in this space are expected to become more competitive throughout 2016 as projects compete for their share of the investment buyers purse.

The following are Place Advisory’s Top 5 market predictions for 2016.

Competition

2016 will be the most competitive off the plan project market since the 2001-2003 boom period. The 61 current projects which have and are recording unconditional sales on a quarterly basis, will be joined by an expected 25 to 30 projects in the first 6 months. Within this mix, there will be experienced developers selling in Brisbane for the first time, and advice will need to be sought out, given and taken strategically. What works in Sydney and Melbourne will not necessarily work in Brisbane. Design, price, marketing and local buy in have been proven to be categorically different.

Rental Market

This is certainly the space to watch. With a number of major projects settling through 2016, substantial supply entering the market, the rental market will be put under further pressure. Positively we are of the opinion that we don’t expect vacancy rates to expand substantially. Undoubtedly yields will contract further, however this will be more recognisable in the secondary apartment market as renters seek out newer buildings in premium locations first and foremost. Overall, 4% returns will become the new normal.

Price Growth

We do not expect to see substantial price growth for off the plan projects in 2016 – subdued by the market as projects compete for investment buyers. We do however expect to see a number of high end projects enter the market chasing the owner occupier market. This will undoubtedly result in higher weighted average prices recorded in quarters where these are released.

Local Buyers vs Asia

A very topical issue for the Australian market currently. Brisbane has historically only seen a small percentage of the international market in Australia, however offshore campaigns and education combined with our substantially more affordable real estate is slowly changing this. In most projects, international purchasers will only total between 15% and 25% due to residential lending constraints, however they are competing for better stock within projects with the local market. Challenge for the local buyer will be to make decisions quickly where historically they have had the grace of time.

Market Squeeze

Construction price rises were noticeable across the industry through the second half of 2015. When this is combined with the higher prices paid for land the past 12 months and a market which has seen limited price growth (and not expected to see substantial change the coming 12 months), there will be a profit margin squeeze recognised by the developer. Adding increased competition and buyers seeking favourable purchasing terms will see pressure increased on the ability for some to deliver product. A major issue we expect to see within our market during 2016. There will be successes and failures in 2016.