3 November 2017
Dear Owner
Re: The Brisbane Property Market
As you no doubt have heard, there is some controversy surrounding the Brisbane property market. Brisbane city and some suburbs have an oversupply of units and townhouses, and I would like to address some of the issues – in particular, the widely reported surplus of apartments.
Australia’s population is increasing, and whilst Brisbane likely only required 25,000 – 30,000 units in total, over the last three years about 42,000 units have been built. While latest reports from various sources state that Queensland’s population will increase by two million people over the next ten years (400,000 in Brisbane alone – requiring a serious number of properties in the not-too-distant future) that unfortunately does not solve the immediate problem of the current surplus, which amongst other things, potentially leaves investors with higher rental vacancy rates.
When we have properties vacant, Partnership Property’s strategy is to go at the situation hard. We open all properties at least once a week (on Saturday as this is the most convenient day for tenants to attend inspections), whilst other properties are available to view by appointment every weekday. During the daily opens we require that the potential tenant call us to confirm their attendance at the inspection at least an hour before the scheduled open, otherwise we do not show the property. This is stated in the advert; it is imperative we manage our time optimally for the benefit of all concerned.
Our Senior Property Manager Alison is available to provide advice and recommend the best way to market the property and find a successful tenant. The marketplace is thoroughly researched before we make a recommendation; we do not request you pay for more advertising; nor do we recommend you reduce rent without careful consideration, as it affects your – and our – financial return. However, with reference to the current market, it goes without saying that is in our client’s best interests to temporarily accept a slightly reduced rental return rather than experience higher vacancy rates – at least until the rental market corrects in approximately 12-18 months, which it will.
As mentioned, the current market is oversupplied, and finding an appropriate tenant in this climate is extremely competitive and time consuming. Quite often we approve tenants following hours of paperwork, however they pull out at the last second as they have suddenly found a cheaper property to rent. I can assure you we leave no stone unturned in finding you a quality tenant for your property, and once found, we make sure the property is maintained to the highest standard possible – a fact which not all tenants appreciate due to their concerns for their privacy. This necessarily brings me to Body Corporate organisations; there are many disputes with these companies – for example, just trying to keep communal areas clean is a constant problem. The foyer is the first and last area both buyers and tenants are exposed to, and the memory is lasting.If the communal areas are maintained and building maintenance in general is kept up to date, clearly the value of your property will remain stronger. I find where Owners are on the Body Corporate Committee, they are usually able to exert a positive influence in this area, and I do recommend if possible you exercise this option to have your voice heard in the management of your asset.
You may be concerned that your property values have fallen through the floor; however, whilst apartment values are currently not increasing, I can reassure you that they are not, and will not, fall through the floor. I say this with certainty due to the widely anticipated correction in the Brisbane market. Over the last three years, the amount of construction has undoubtedly been superfluous to our current needs – every green-fill site within 12 km of the CBD has been developed. However, the good news is that lenders have now put the brakes on construction finance – developers currently need to demonstrate that they can pay out the complete construction costs from pre-sales (or their own pockets), otherwise the banks will not lend them money. This will allow the market to self-regulate in due course.
Houses prices have not slowed; they have steadily increased, and they are becoming more expensive, with the result that land (development sites) are also becoming extremely expensive. Developers are now telling me that in the current climate with today’s figures, they cannot make unit developments work. If they do purchase a site, the product will need to be worth a lot more than today’s sales prices. This tells me that if units are no longer being built, there can be only one result; older stock will increase in value and prices in Brisbane and South-East Queensland will start to rise. In addition, there is currently over 40 billion dollars being spent on private and public infrastructure in the Brisbane area – this will create plenty of jobs to keep the economy bubbling along.
Therefore, I believe that while the Brisbane apartment market may be currently lagging, there is plenty of solid evidence from economists to suggest that South East Queensland is at the beginning of an economic growth phase, and I would personally like to reassure you that this will secure the future of your asset and investment in the Brisbane area in the years to come.
Please feel free to make contact if you have any concerns, or would like to discuss any of the above.
Kind Regards
Robert Fuller
Principal and MD of Partnership Property
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Posted 7 November
Partnership Property is a boutique Brisbane Real Estate/Investment Property agency. We are happy to work with local, interstate, or overseas buyers, and we guarantee you will receive sound, honest, independent advice and information on the Brisbane property market. A large part of our clientele comprises our repeat investors, who readily entrust us with the privilege of managing successive property purchases.