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Brisbane apartment oversupply: Rents predicted to fall 10% this year



Property analysts have given their most dire warning for the Brisbane apartment market yet, predicting rents could fall as much as 10 per cent in the next 12 months.

Michael Matusik from Matusik Property Insights made the call: “It has the potential to ‘get out of hand’, I guess you could say,” he said.

Mr Matusik cited a number of different economic factors for the potentially significant drop in apartment rents. “There’s a pretty persistent unemployment rate,” he said. “You’ve got about five or six people applying for every job.”

“And wherever you see markets with a [rental] vacancy rate of 3 per cent you see rents either stay flat or fall.”

This coupled with the rising supply of rentals in Brisbane, meant investors would be forced to drop their prices to compete with cheap, new and readily available apartments in inner city Brisbane.

“The person who’s got the second hand unit or the house in the inner middle ring suburb, they have to drop the rent to attract tenants,” Mr Matusik said.

Mr Matusik said investors needed to prepare for the fall to be as much as 10 per cent. “It’s a worse case scenario but it could be that much,” he said.

But Domain Group chief economist Andrew Wilson said a 10 per cent fall in rents was unlikely.

“I think we’d have to see a lot more vacancies than we have now,” he said.

He conceded current sentiment was gloomy. “There’s no doubt there’s strong downward pressure on rents in Brisbane,” he said.

“We’re releasing our rent report next week and it will show a fall in rents in Brisbane.”

Dr Wilson thought 10 per cent would be an extreme drop and said immigration growth would slow the fall. “We are seeing a pick up in migration in South East Queensland now,” he said.

“I think affordability is attracting people back.”

Michael Yardney from Metropole was largely on-board with Mr Matusik’s prediction. “I think it is very likely there will be a significant fall in income and minimal capital growth for five to 10 years,” he said. “I never thought that inner city or off the plan apartments have made good long term investments.”

Mr Yardney said the relative conformity among off-the-plan apartments meant their biggest selling point was the fact they were brand new. “Each big building is built out by an even larger tower, so there is no real scarcity.”

He also was concerned a lot of the apartments wouldn’t sell well with owner occupiers if investors weren’t interested. “What I’m getting at is there’s more stock but there’s a lot of the wrong stock, it’s not how most of us want to live,” Mr Yardney said.

To avoid empty rentals, Mr Yardney said landlords should reassess their expectations of income. “Investors will have to prepare for longer vacancies initially and less cash flow over the term of their investment,” he said.

Mr Matusik said many people in the industry were in denial about the potential effects of the apartment oversupply. “A lot of owners and investors with older stock don’t understand we need to meet the market and roll with the punches.”

“The market will sort itself out.”

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Property Management

Asking rents for houses remain flat for Brisbane over December quarter: Domain Group



Asking rents for houses remain flat for Brisbane over December quarter: Domain Group
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Property Management

Queensland property chiefs warn rise in land tax will hurt more than the rich



Brisbane Tax News

NEW Queensland Treasurer Jackie Trad has defended the Government’s planned “Robin Hood” property tax ahead of her first Budget update tomorrow.

Ms Trad dismissed claims from the Property Council that the planned 2.5 percent land tax on properties worth more than $10 million would hurt jobs growth and property values.

“This is a very modest increase… we think it’s fair that those that can pay a little bit more, do pay a little bit more,” Ms Trad said.

Overnight, The Sunday Mail quoted property chiefs as warning Premier Annastacia Palaszczuk’s last-gasp election tax grab would destroy jobs and wipe more than $41 billion from land values in Queensland.

A 2.5 percent extra slug on owners of land worth more than $10 million was part of a suite of tax measures in Labor’s final campaign announcement, two days before last month’s state election win.

The Premier compared herself to Robin Hood, targeting only the richest.

But the Property Council says ordinary Queenslanders will pay the price, with a risk to employment and businesses forced to pass on the cost to consumers.

The land tax measure will be included in the Mid Year Fiscal and Economic Review to be presented tomorrow by Ms Trad, who was handed the role of treasurer in last week’s Cabinet reshuffle.

It is expected to raise an additional $227 million for the state’s coffers.

“The inconvenient truth for the Government is the vast majority of properties that will have to wear this tax are commercial, retail, industrial and tourism properties,’’ Property Council Queensland executive director Chris Mountford said.

It would inevitably flow on to tenants.

“We heard all through the election campaign that business cost pressures are particularly acute because of price increases like electricity … making it tougher for businesses to employ people. Now Queensland businesses will need to add land tax to their list of concerns before they think about hiring staff.”

Economist Nick Behrens said the amount raised through land tax had risen faster than any other tax in Queensland in the past decade – up 10percentnt, compared to the 66 percent Australian average.

The new measures mean only South Australia and Western Australia will have a higher rate. That will make it harder to lure businesses to set up in the Sunshine State.

“We’re in a race to attract and retain investment. Now we’re putting lead in our saddlebags that will impede our ability to compete,” Mr Behrens said.

Ms Trad said the extra land tax would apply only to the wealthiest 850 payers of land tax.

“It does not include farms, and it does not impact on the family home. The land tax ensures that those who are benefiting most from our growing economy and rising land values make a fair contribution to frontline services in Queensland.”

Ms Trad defended the Palaszczuk Government’s employment performance, saying 143,400 jobs were created in the first term of office.

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