We have collected data on the Brisbane rental market including vacancy rates, median rents and yields in order to paint that picture.
12 Month Brisbane Rental Market Overview – Tight Vacancy, Absorption of New Stock, Varied Levels of Success
Overall, performance has been varied, particularly in terms of rent achieved (which will be discussed in detail below). Vacancy across the inner city is still relatively tight – the REIQ reported a vacancy rate of 3.3% for the September 2015 quarter, a slight softening on the previous quarter but still an undoubtedly tight market (it equates to properties being vacant for less than two weeks out of the year).
Further, the days of investors achieving 6% yields in Brisbane are well behind us. The CoreLogic Quarterly Rental Review shows that yields have softened to 4.5% for the September 2015 quarter. This means that in 2016, landlords will need to have realistic expectations in order to retain tenants. Read below for an overview of how the market has performed over the past 12 months and an overview of what to expect in 2016.
One Bedroom Market
One bedroom apartment rentals equated to 36% of all new bonds issued during the most recent quarter ending September 2015.
– The CBD is the most expensive place to rent a one bedroom apartment, registering a median rent of $420 per week. This figure has remained unchanged over the past 12 months.
– The Inner Eastern suburbs registered the highest increase in median rent over the 12 months to September 2015– increasing by 2.5% to settle at $331 per week. This growth was driven largely by the strong performance of the 4171 postcode which includes the suburbs of Bulimba, Balmoral and Hawthorne. The median rent for a one bedroom apartment in this area increase by 14% over the past 12 months to settle at $400 per week. This is the most expensive postcode in the Inner East to rent a one bedroom apartment, primarily due to the premium nature of stock in the area and the desirability of the suburbs.
– Brisbane’s Inner South registered an increase of 0.8%, whilst the Inner West and Inner North recorded softening’s of 2.4% and 1.8% for the 12 month period.
Two Bedroom Market
– The majority of new bonds recorded during the September 2015 quarter (56%) were for two bedroom apartments.
– Again, the CBD is the most expensive place to rent a two bedroom apartment. The median rent for the September 2015 quarter was $580 per week. The next most expensive region to rent a two bedroom apartment was the Inner North, with a median rent of $433 per week.
– The region that experienced the highest increase in median rent over the 12 months to September 2015 was the Inner West. The median rent for a two bedroom apartment in this region increased by 2.3% to settle at $413. The Inner North and Inner East each recorded median rent increases of 1.6% and 1.1% over the same period, whilst the CBD and Inner South saw their median rental values soften by 1.7% and 0.4% respectively.
Three Bedroom Market
– Three bedroom rentals represent a relatively small proportion of the Brisbane market – just 8% of all new bonds.
– Brisbane’s Inner West and the CBD both saw significant growth in this market segment, each recording median rental increases of 8.7% and 4.8% respectively over the 12 months to September 2015. The high performance of the Inner West was primarily driven by strong median rental growth in the 4068 and 4066 postcodes (16% and 13% respectively over the 12 month period). These postcodes include the suburbs such as Indooroopilly and Toowong. It is likely that demand for larger apartments in these suburbs that neighbour UQ is strong, particularly given the influx of international students to Brisbane and the shortage of dedicated student accommodation (this is discussed in more detail below).
What To Watch In 2016
1) Flight to Quality and Increased Competition From New Stock
Renters are fickle creatures and in 2016 they will be spoiled for choice. Hundreds of brand new apartments will become available across the inner city. These apartments will impress friends, come with a brand new microwave and be five minutes closer to that trendy café with the organic nachos that you just have to try. For property owners looking to succeed in this market and minimise vacancy, quality is important. Well appointed, well located apartments will always be in demand. For those who own older apartments, competition will be fierce from brand new buildings. Several recently completed buildings in Inner Brisbane are offering incentives to renters – four weeks free rent, six months free internet and more. Owners to go into 2016 with realistic expectations about the yields they will achieve and look to minimize vacancy in their investments.
2) Student Accommodation
Although student accommodation is a specialty market, it is appropriate to talk about it in this report, particularly when discussing trends in 2016. Predict that student accommodation will be a sector that experiences growth this year. Education is one of Brisbane’s major export markets and the number of international students in our city is predicted to increase dramatically (for more detailed information, see our migration report, which breaks down the numbers of student arrivals over time). In spite of this, student accommodation accounts for just 5% of all tenancies in Brisbane. Throughout 2015 there were a number of development applications submitted for dedicated student accommodation buildings and this is a trend that is expected to continue. Research prepared by Jones Lang LaSalle shows that there is demand for an extra 23,970 beds for international students in Brisbane. The report notes that if all of the existing development pipeline for student accommodation in Brisbane is delivered, there will still be an excess demand for more than 15,000 beds. Watch this space in 2016.