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More than a third of Brisbane’s new apartment developments may not be commercially viable beyond next year, casting doubt over the government’s ambitious housing targets and the future of suburban renewal precincts.
Only 6000 new apartments are forecast to be built in the inner-Brisbane area from 2027 and 2029, significantly shy of targets set by the government’s South East Queensland Regional Plan.
While some communities have baulked at height limits in South Brisbane and suburban renewal precincts, including Stones Corner, Wynnum and Mount Gravatt, industry figures are now calling for even more lenient rules to kickstart construction in a market where the numbers do not stack up.
The latest Brisbane Apartment Snapshot, compiled by research group Urbis, shows 35 per cent of future apartment developments beyond 2027 remain at moderate to high risk of not getting off the ground within their current timeframe due to soaring construction costs, labour shortages, lengthy approval times and the difficulty of locking in builders.
“While we’ve seen a welcome uplift in apartment launches and sales, this has not flowed through to construction at the scale required,” Urbis director Paul Rigga said.
“A significant proportion of Brisbane’s apartment pipeline remains at risk.”
Executive director of the Property Council of Australia’s Queensland division Jess Caire said the post-pandemic surge in construction costs meant fewer mid-rise projects were viable.
“The average existing unit in Brisbane is now worth $831,000, meaning it is more expensive to build new supply than to purchase existing stock,” she said.
Grattan Institute housing researcher Dominic Behrens said Queensland had been hit hardest by rising construction costs, with the drain of sub-contractors and tradespeople to worsen in the lead up to the 2032 Olympic Games.
“A development isn’t going to happen unless it makes money for a developer … and what we’ve seen in the last five years is a really, really massive run up in construction costs. Queensland has seen the worst of that of anywhere in Australia,” Behrens said.
“Given the current market conditions, buildings need to go higher in order to stack up and actually get off the round.”
Don O’Rorke, chief executive of Brisbane’s Consolidated Properties, said the only feasible apartment developments were those on “super prime sites”, such as riverfront locations, designed for downsizing Baby Boomers seeking two-bedroom units with a multipurpose room.
“Construction is expensive and therefore the apartments have to be expensive, and therefore the only buyers are the wealthy Baby Boomer downsizers,” O’Rorke said.
“The rest of the market has just stopped dead in its tracks.
“It costs the same to build an apartment building on the river as it does to build three blocks back, but you’ll never get the price away from the river to justify the construction costs.”
O’Rorke called on the council to make it easier to build in suburbs with train stations.
“Indooroopilly is an example. It has a lot of those Baby Boomer downsizers and it has good access to rail and good retail amenity. It may well become classified as super prime and we’ll see projects proceed,” he said.
In South Brisbane, several major developments, including a 50-storey tower by Aria Property Group next to the Skyneedle, have been approved since the Crisafulli government relaxed height limits.
Brisbane City Council has also proposed rezoning land for high-density living and increasing height limits to 15 and 16 storeys in suburban renewal precincts such as Wynnum and Mt Gravatt.
Behrens said developers needed to build higher apartment towers to make projects feasible, even though townhouses were today’s most viable development and often preferred by buyers.
“Our position is that townhouses and terraces should be legal to build basically everywhere,” he said.
“What we would like to see is a situation where we have much more abundant housing, then that means that developers are competing on quality rather than throwing up anything and getting away with it.”
Brisbane’s population is predicted to be 1.72 million by 2046, by which time south-east Queensland will have more than 6 million residents.
Under the state government’s South East Queensland Regional Plan, 8000 attached dwellings are needed in Brisbane each year to 2031, and more than 7100 per year beyond that.
Urbis examined potential developments with more than 25 apartments in the inner-Brisbane area, including West End, South Brisbane, Cannon Hill, Bulimba, Paddington, St Lucia, Taringa, Bardon, Ascot, Hamilton, Indooroopilly, Yeronga and Annerley.
Last year, about 2550 apartments were completed in the inner-Brisbane zone. That number is expected to increase to 3000 this year, but remain well short of the 9000 apartments delivered each year in 2016 and 2017.
The Property Council is calling for the government to introduce stamp duty concessions for owner-occupiers who purchase off-the-plan apartments, reduce developer infrastructure charges and provide incentives for councils to fast-track new projects.
“Given the enormity of the supply challenge we face, delivering projects of scale is essential and every available policy and taxation lever aimed at boosting apartment delivery must be pulled,” Caire said.
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