Brisbane's inner city apartment market will crash in 2016, due to oversupply driven by belief in inexhaustible international demand.
Professor Eves' top tips for investors:
- Look for a house or a unit - where strong domestic demand exists, not international demand.
- Look at middle inner and outer inner fringe units.
- Don't buy off the plan.
- Look for suburbs with good schools, transport and city access.
The crash will hurt major developers, off-the-plan buyers and some banks but deliver a bonanza for renters and buyers, says QUT property economist Professor Chris Eves.
He said the glut in Brisbane CBD, South Brisbane and West End apartments would peak in 2016, causing prices to drop dramatically.
"The prevailing view is that the Asian market will continue to buy but, as we've seen with the resources sector - that is not guaranteed to last," Professor Eves said.
"The apartments are marketed overseas and many people in China want to buy them. But it's a big assumption that that will continue. In a government-controlled economy, the government could say 'no more money out of the country'.
"We never learn. The Gold Coast apartment building boom in the 90s relied on an endless demand from Japanese buyers but when Japan's economy crashed, developers were left with empty stock and it took years to recover.
"Two or three years ago you could buy a Gold Coast waterfront, two-or three bedroom unit for less than a two-bedroom unit in Brisbane."
Professor Eves said development approvals in local papers had been increasing over the past few months.
"There are over eight or 10 each week. Part-time developers who build six units here or there are likely to weather the crash better than the big companies who are building 100 unit blocks.
"Investors should remember that tenants aren't in inexhaustible supply either. When a property sits unoccupied it deteriorates just as fast as when it is occupied. We can already see a lot of dark windows at night in inner city apartment blocks.
"Apartments that are on the market now will be sold but the crash will come next year when the big projects proposed or just started now come on line.
"It's the property mentality that bases decisions on today's market. They speak to all agents who say they cannot get enough units and then they all go and build a glut.
"People who buy a unit in the CBD for $600,000 now off the plan will find when it comes to settle they may have to settle for a market value as low as $400k in an oversupply situation, as has occurred in markets on the Gold and Sunshine coasts.
"It's a two-tier market. Overseas buyers can buy a new unit for $560,000, while a similar one that is four or five years old is selling in the local market for $300,000 in the same area so the new $560k overseas-owned unit will have to be priced back down to that local tier for a resale."
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Professor Chris Eves
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