Brisbane locals have become used to a skyline dotted with construction cranes, however these are fast disappearing as recent building activity figures point towards a severe contraction in Brisbane’s new apartment supply.
While this is a trend which broadly applies across the country, the extent of the decline is most pronounced in Brisbane, according to the latest release of the Rider Levett Bucknall (RLB) Residential Crane Index.
The RLB index, which measures building activity by counting the number of fixed cranes in capital city skylines, recorded a 10% decline across the country as compared to the previous quarter’s results. RLB also reported that Brisbane experienced the largest net decline of cranes overall, with 18 fewer residential cranes compared to the previous quarter, representing a substantial 30% drop over a 3-month period.
One of the key factors contributing to this slowdown has been major banks and other lenders introducing increased restrictions on developer finance, such as requiring higher pre-sales targets for new developments and higher developer equity contributions. This has resulted in far fewer projects progressing from planning and marketing into construction.
According to the Q4 2017 edition of the Urbis Apartment Essentials report, major projects due for a 2018 launch within the Inner Brisbane area only equate to a total of 1,101 new apartments. This is a significant shortfall from the estimated demand which currently sits at approximately 4,800 dwellings per annum.
Brisbane apartments construction activity vs demand
Source: JLL & Urbis
As the below map highlights, these new 2018 projects are also widely dispersed across Brisbane, spanning 6 suburbs, and given the different sizes of the projects, they will also complete at different times in the future.
Brisbane residential property developments due for launch in 2018
|4||Q2, 2018||South Brisbane||261|
|5||Q2, 2018||Fortitude Valley||246|
|6||Q2, 2018||Kangaroo Point||200|
|7||Q3, 2018||South Brisbane||103|
In a March 2018 report on the Brisbane Apartment Market, JLL Research cited the sharp decline in apartment supply as one of eight reasons for investors to be optimistic about the Brisbane market in the next few years. Other reasons the report cited include:
- Queensland’s strengthening economy, with Deloitte Access Economics forecasting an average of 3.8% growth per annum over the next 5 years
- increased infrastructure spending which will support economic recovery, require housing for construction workers and promote Brisbane’s overall liveability/attractiveness
- population growth to increase further, driven by interstate migration and relative affordability of Brisbane compared to other east coast cities
- a lifestyle shift to higher-density living, as more people choose to live in apartments than ever before.
JLL analysts conclude that due to these factors, Brisbane is likely to move into undersupply in the next few years:
“There is a strong local macroeconomic story and an improving Queensland economy and regional population growth will drive stronger underlying demand growth. At the same time, supply levels are falling, particularly apartment construction levels. As such, we expect Brisbane to move quite quickly over the next few years into a position of under-supply.
“As such, we believe that the outlook for apartments is positive, and particularly well-located and higher quality product with usable and differentiated amenity.”
Ironfish National Apartments Manager, William Mitchell agrees with the JLL analysis.
“We travel to Brisbane regularly and have seen firsthand the drop off in construction cranes in the city. The number of projects proceeding to construction has declined sharply and as the JLL report points out, there are a lot of factors working together at the moment that makes the Brisbane property market one to watch closely in the next few years.”
Looking for more information about the Brisbane residential property market? Download our latest quarterly report or view our Brisbane market outlook video below.