Property analysts say tougher times are ahead for the Brisbane apartment market, with rents predicted to fall by as much as 10% over the next 12 months.
Michael Matusik, of Matusik Property Insights, said different economic factors could lead to the drop in apartment rents. First, there’s the current unemployment rate.
Queensland’s unemployment rate surged to a two-year high in February, with the state’s seasonally adjusted jobless rate rising from 6.3% in January to 6.7% last month, according to the Australian Bureau of Statistics.
“You’ve got about five or six people applying for every job,” Matusik told the Domain Group. “Wherever you see markets with a [rental] vacancy rate of 3 per cent you see rents either stay flat or fall.”
Second, there’s the incoming glut of new apartments. With so many new rentals scheduled to enter the market, it’s highly probable investors would be forced to drop their prices to compete with cheap, brand-new, and readily available apartments in the inner-city.
“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,” Matusik said. He further stated that the drop could be as much as 10%. “It’s a worst-case scenario but it could be that much.”
Other analysts don’t think the drop will be that severe. Andrew Wilson, chief economist for the Domain Group, said a 10% fall in rents was highly unlikely. “I think we’d have to see a lot more vacancies than we have now,” he said.
Wilson did agree that current sentiment was gloomy. “There’s no doubt there’s strong downward pressure on rents in Brisbane.”
Wilson believes immigration growth will cushion the fall in rent rates. “We are seeing a pick-up in migration in South East Queensland now,” he said. “I think affordability is attracting people back [to the area].”
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