Is there are two tier market in Brisbane for apartments? Are Brisbane owners, investors and renters looking for one kind of apartment, but developers are building another kind of apartment for foreign investors? Some commentators have said that there will be an oversupply of apartments in Brisbane. For a certain kind of apartment, that may be correct. But for what Brisbanites want, there may be an undersupply.
Take Bowen Hills for example. It is close to the city, but has very few local amenities. It was a light industrial area, and with highways cutting through it. It is not inner city, and too far to walk to downtown or the Valley. There are no parks or restaurants or river views. There are number of large apartment buildings being constructed in that area, with small one and two bed apartments. A lot of the sales and marketing is targeted at foreign investors, particularly the Chinese. But do locals want to live in these apartments? They are very small, and the buildings are very dense. There are very few owner occupiers in these buildings.
Some examples are Madison Heights (286 apartments) and Chelsea (195 apartments). It appears that it is taking a long time to rent out or re-rent the apartments in these buildings. Rents are being reduced, for example, to $485 for a two bedroom apartment. I suspect that the rental market is saying that, for the location and facilities, you can do much better elsewhere, so the apartments are renting only if rents are very competitive.
On the other hand, river front apartments in Brisbane city, apartments in New Farm, and "normal" residential locations such as Indooroopilly (where very few new apartments have been added to the market in the past five years), appear to be selling well and renting quickly. These apartments are often much larger (130 sqm compared to 75 sqm for a 2 bedroom apartment, for example), have a better location, have more owner occupiers, and there is not an oversupply.
I also wonder what rents and returns the investors in the new apartment buildings have been promised, and what they are actually receiving, and for how long the apartment sits empty not generating rent?
Will the rents hold up when it comes renewal time in six months or a year? Will tenants stay on or move out? The Chelsea is an example of a building that appears to have a number of apartments for rent; it completed in 2012, and received bad press at the time. (An advertisement below from last year for Urban Edge at Kelvin Grove, settled last year, where apartments will be coming up for renewal about now. Kelvin Grove is a much better location than Bowen Hills in my view.)