Think twice before buying that CBD unit…

Think twice before buying that CBD unit. High-rise CBD apartments used to seem like such a sure-fire investment option. Rents were huge, maintenance was low, and vacancies were rare.

But not anymore. What happened to the Brisbane apartment market? Why are owner-occupiers and investors still choosing homes and units in established suburbs over inner-city apartments?

Let’s find out!

Think twice before buying that CBD unit…

It seems that the glitz and glamour of inner-city apartments isn’t as much of a drawcard as it used to be.

Homeowners and investors are now flocking to the inner suburbs, buying up houses and units in the 5-10 kilometres around the city, while CBD high-rises go under-occupied. To put this issue in perspective, there’s actually less of a glut on the Gold Coast than there is in Brisbane. And that’s saying something.

As you’d expect, there’s a fairly good reason for this recent shift in interest. In this article, we’ll take a look at the driving forces behind this change and explain why you should probably be following suit.

1. They’re building too many apartments

Certainty and ‘sure things’ aren’t that common in real estate, but one thing that the whole industry agrees upon is the fact that there are just too many apartments being built.

According to the Brisbane City Council, 14 new apartment projects were in the planning phase at the end of 2014, which would mean 2,800 new units, bringing the oversupply up to a predicted 15,000 by next year.

If you consider that the baseline demand for inner-city apartments is 350 per year, this is a pretty crazy oversupply.

2. You don’t get that much for your money

While proximity to employment, entertainment, schools and infrastructure is a big plus, apartment buyers are inevitably going to have to sacrifice some of the lifestyle elements that only a house can offer. Think twice before buying that CBD unit.

The median house price in Brisbane is now over $600,000, but the median for units is only just lower at $500,000. While the urban appeal of the unit might give it more value to young professionals or students, there’s probably no garden, and as the owner you only control a fraction of the land.

3. New units include the developer’s mark-up

Developers aren’t charity organisations – they’re in it to make money. There’s nothing wrong with that, but for new unit buyers, this means paying an extra premium to cover the developer’s mark-up.

When buying a brand-new, off-the-plan unit, it’s likely you’re paying anywhere from 15 to 30% in mark-up. Then, when you get an independent valuation a few years later, you realise that your apartment has actually depreciated in value. Never a good feeling. Think twice before buying that CBD unit.

4. International investors can’t be relied upon

According to official numbers over the last decade or so, it’s clear that international investors are a big part of the apartment market.

This international interest is good for developers (these projects are heavily marketed overseas) but it can’t be relied upon. Just look at the resources boom.

If you’re buying off the plan and the developer can’t get the overseas investors it needs, you could be left with a non-starter, which can cause huge problems – especially if you’ve already taken out a loan and not been careful with insurance. Think twice before buying that CBD unit.

These international investors are also contributing to the oversupply in another way; because they can’t sell to other international investors, each time they want to offload a property, they can only do so with a reduced pool of Aussie buyers.

5. There’s a deficit of detached houses

You can’t argue with market forces: people want what people want.

In Brisbane, while a huge 15,000 apartments are going unoccupied, detached houses are more than 20,000 in deficit.

Hard numbers don’t lie: even if every single hopeful house dweller decided to instead go into a unit, there’d still be demand for more houses. Think twice before buying that CBD unit.

6. Inner-suburb houses boast the highest growth predictions

If inner-city apartments aren’t the best choice, then what is?

Well, according to the experts, houses in the inner suburbs.

Whether you’re looking for a new home or an investment opportunity, it looks like houses within 5-10km of the CBD are the way to go.

Improved transport, infrastructure and population growth are raising demand in well-situated suburbs (like our very own Everton Park), and land prices are on the increase.

We’d suggest looking in these areas for your new home or next investment – and if you need any extra information or want to be pointed in the right direction for further research and reading, get in touch with the team at Hicks Real Estate today!

Hicks Real Estate team is available to call today on: 07 3355 6845.