An estimated 52 developments in Brisbane have been indefinitely shelved, with 10,000 units being snatched from the market before they can be built, a BIS Oxford Economics report said.
The report also forecast that the downswing of the property cycle, caused by the oversupply, would continue until 2025.
BIS senior manager Angie Zigomanis said the number of deferred apartments was significant to the market.
“10,000 is not a number to sneezed at because it’s much more than a year’s supply,” he said. “It’s about five years’ previous supply taken out of the market.”
Mr Zigomanis said it signified low short-term confidence from developers.
“They were not guaranteed to go ahead anyway but because a lot of people aren’t considering it at all anymore it signifies it’s become a lot harder for developers.”
However, it’s not enough to make a significant dent in Brisbane’s oversupplied unit market. Mr Zigomanis said the oversupply should end in 2025.
“They will be filled up by 2025. About three years from now we’re going to see them start to get absorbed,” he said.
He said it was unlikely the cycle would move back into an upswing until after that.
“At the end of the day the market is eventually self correcting.”
To arrive at the estimate, BIS analysed occupier demand instead of a typical analysis of sales demand. “They’re mainly overseas students, young professionals, and the third cohort is the empty nesters.”
David Laverty, the director of local developer and property solutions company Red & Co, disagreed with Mr Zigomanis’ prediction.
He believed the market would correct itself in a shorter timeframe than BIS’s seven-year forecast.
“I think these guys are often wrong,” he said. “I think if you get a bit of population growth, the towers fill up pretty quickly.”
Red & Co helps developers find finance for their projects as one of its core functions; Mr Laverty said that business was drying up.
“Other than those businesses that are very well capitalised, you won’t see any new major projects,” he said. “They’re not interested in selling major projects in Brisbane, they’re pushing into the boutique projects and they’re much harder to sell then they were.”
Developer’s efforts to curb unit completion were restricting the stock sufficiently to turn the market around in just a few years.
“I don’t think it’s the bloodbath that people thought it was going to be 12 months ago,” Mr Laverty said. “I think it’s a good thing because the market in Brisbane is correcting itself rapidly.”
Regardless of the time frame, Brisbane’s oversupply saga wouldn’t repeat itself with the same ferocity, Mr Zigomanis said.
“You’ll see apartment construction pick up again, we’re probably unlikely to see a boom of this level again,” he said.
The 10,000 or so apartments that were approved and yet to commence could see the light of day within 10 years.
“Ideally you want to have as many as possible projects shovel ready… it can help smooth the process through the next cycle,” he said.