Figures recently released by Corelogic indicate a slight drop in Apartment values across Brisbane falling 1.4% in the past 12 months. I believe this is just the tip of the iceberg of what is to come when you consider there are around 49,000 DA Approved apartments currently in the Pipe line for the Brisbane market. Although it is unlikely that all of these projects will proceed to construction phase, based on the number of approved dwellings we could potentially see an increase of 25% in unit and apartment stock in the next 2 years.
What does this mean? I believe it paints a picture of oversupply in the unit and apartment market which will subdue the capital growth and rental yields of not only new apartments but established aswell. We are already seeing prolonged vacancy of available apartments which in turn is causing some investors to second guest their decision to purchase a unit or Apartment.
Some investors are currently looking at their options to step out of the unit / apartment market and move into an established house market which is showing stronger capital growth potential. Although property owners who already hold apartments in this market have a tough decision, either sell now in a softening market or buckle up for the ride over the next few years.
So what should investors do if they want to ride out the storm?
One of the key things investors should do is lock in their tenants on longer leases to avoid potential vacancy, consider 12-18 months as opposed to 6 month leases, and it goes without saying don’t let tenants fall into periodic (month to month).
Another thing that investors should consider is keep your unit or apartment looking fresh, consider undertaking an internal repaint, and carpet replacement to ensure the property is appealing to tenants.
We could see a soft market in the unit space for a few years so gear up for it now.