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Property buyers might think that south-east Qld will be the next region to boom, but forecasters have cautioned that growth may be far more moderate than anticipated.
Speaking at the BIS Shrapnel Forecasting Conference last week, the company’s managing director Robert Mellor said previous predictions that Brisbane and surrounding regions would follow in Sydney’s footsteps and see rapid property price growth may need to be adjusted.
“If you’d asked me 12 to 18 months ago I would have said Brisbane is really the next hot place to go, [but now] I would be very cautious because the population growth is probably not going to be as strong as we thought in the past and certainly there are some big risks with apartments,” he said.
Kim Hawtrey, BIS Shrapnel’s associate director – building forecasting, said Brisbane in particular was heading into serious apartment oversupply.
“Too many apartments [are being] built,” he said. “Attached dwellings have gone into dramatic oversupply.”
Mr Mellor said investors would likely find more success if they looked beyond the inner city.
“You’re probably better off buying houses out in the suburbs, where there is probably still an undersupply,” he advised.
Mr Hawtrey said demand for detached housing in the region remained “unsatisfied” but, according to Mr Mellor, even this didn't guarantee the price growth people had previously been anticipating.
“It’s not like it’s a foregone conclusion that Qld is just going to be the next place – particularly south-east Qld – to take off," Mr Mellor added.
“I think the growth is going to be modest price growth compared to what we've seen in NSW.”
Even though Brisbane appears to be undersupplied in aggregate terms, according to BIS Shrapnel’s figures, it remains at “significant risk” of oversupply, Mr Mellor said.
“They’re building about two to three times [the average] level that they were building over the last 10 to 15 years. […] While we do not deny there is a significant shift in the demand by both owner-occupiers and renters for high-density apartment living, while that shift is occurring, we don’t believe the current numbers across the country justify how much high-density construction we’re seeing – and that will result in oversupply.”
Mr Mellor questioned whether the current level of construction in south-east Qld was sustainable.
He said it was a certainty that a “downturn will be underway” in Brisbane within 12 to 18 months. He forecast the “very significant construction boom” would peak “very shortly” and predicted a median property price fall of four per cent by the early part of 2017.
Dr Hawtrey said the downturn would hit the apartment market first.
“High-density will see the correction first; [it's in] for a sharp correction in Australia and the law of diminishing returns is about to set in. Indigestion in the market is about to set in."
He added: “We believe that the record-high levels [of dwelling commencements] which we’re at are largely unsustainable. And we’re going to see that be the first sector of the market to get the correction.”