As restrictions begin to ease, the Brisbane property market has begun to work its way towards recovery, with the rental market showing the first signs of improvement.
The COVID-19 outbreak has led to imbalance levels of supply and demand across a number of rental markets in Queensland over the last six months, particularly in the Brisbane CBD, where rental vacancies peaked at 14 per cent last June 2020.
Economic consequences disproportionately affected those most likely to rent in Brisbane’s CBD – young, inner-suburban workers, international students and new migrants. Further, the ban on international tourism and the significantly reduced domestic travel increased supply as short-term rentals are now being offered on the long-term rental market.
However, it’s not all doom and gloom, particularly as Brisbane CBD has started to show the first signs of improvement, according to Real Estate Institute of Queensland’s (REIQ) chief executive Antonia Mercorella.
Over the last four months, vacancies shifted downward from the market’s peak of 14 per cent to 8.8 per cent. With supplies in the pipeline currently at 5,431 units, a 5.9 per cent increase on current stock levels, experts believe that there really aren’t any high immediate risks of oversupply.
“Apartment prices and rental growth have been very subdued, particularly in a flat sector of the market to date. However, COVID-19 has increased the risk as there are no fewer high-rise apartments on the market but a much smaller pool of investors for the moment,” she highlighted.
“We don’t expect this to last too long as Brisbane isn’t an overvalued market like other capital cities. And when conditions begin to normalise there’s likely to be a spike in demand, partly be driven by offshore investors taking advantage of the Australian dollar which has recently shown some signs of weakening.”
In the second quarter of COVID-19, Brisbane’s mean average vacancy dropped -0.6 per cent to 1.4 per cent on the back of a better-than-expected demand. Drilling down into the numbers, research showed that Brisbane’s inner city districts experienced further falls in vacancies by a mean average of 0.2 per cent to 3.7 per cent, one of only major markets to be above the tight rental threshold.
Ultimately, Brisbane continues to prove that it’s remained fairly buoyant throughout the pandemic and continues to be ranked as the most affordable capital city in Australia, Ms Mercorella said.
Brisbane’s outer localities also saw falls in rental vacancies overall (-0.6 per cent to 1.7 per cent).
Ipswich and Logan showed the biggest reduction in rental stock, with a 0.7 per cent dip to 1.2 per cent and 1.5 per cent, respectively, while the Beenleigh Corridor has fallen consistently every month since December, 2019 from 3.2 per cent to 0.9 per cent.
Moreton Bay recorded the lowest vacancy rate over the quarter, falling 0.5 per cent to 0.9 per cent.
Meanwhile, in the west of Brisbane, vacancy rates fell dramatically across the Lockyer Valley (dropping from 3.2 per cent to 0.6 per cent), with a similar trend in Toowoomba, recording a -0.6 per cent decrease to a 0.6 per cent vacancy rate.
“For the first quarter results of 2020, I suggested that vacancy rates provided an optimistic start to the year and that further quarters would reveal more about the true impact of COVID-19 on the Queensland rental market. Nobody could have predicted the extreme conditions our rental market is currently facing,” Ms Mercorella concluded.
“Of particular concern for the future is the high incidence of affordability problems amongst low-income and older renters – cohorts that are projected to increase in the next two decades as a result of the effects of those currently excluded from home ownership – ongoing access constraints to this tenure, and a declining relative share of social rental housing.”