Spotlight on Supply

Posted by Daniel Joseph

The discussion of supply in Brisbane is much like Bohemian Rhapsody: many know the words, but few know what they mean. Those in the media sing the same tune. Headlines like ‘Better in the bank than on Brisbane inner-city apartments’ are typical of cash for comment ‘experts’ whose research repertoire includes such gems as Parramatta being one of ‘the worst places to buy a home’! Fair comment if written now given the suburb’s recent astronomical progression up the growth curve and its exit from the opportunity phase of the growth cycle, but this was penned in 2008!

Here’s what you need to know about residential supply in Brisbane without the hyperbole of impending doom. The figure below shows the trend in the number of building approvals in Brisbane, Sydney and Melbourne over the past decade.

Dwelling Approvals – Sydney, Brisbane and Melbourne: March 2005 – December 2014

Taking current relative population and forecasted population growth into account, residential building approvals in the three capitals are largely consistent. The current higher than average approval numbers are more a symptom of the broader economic environment, driven by the two factors below, and not a diagnosis for Brisbane:

1. Interest rates are making more development feasible, thereby increasing supply

2. Renters are buying, enabled by cheap credit

With pressures on both the supply and demand side of the property market, the result is invariably an increase in supply. The silver lining is that supply makes the property market more competitive, which is a positive from an efficiency point of view. It also expands opportunities for investment. So how do we invest in a market with higher supply? Well now, more than ever, Blue Wealth’s philosophy of investing in the right asset comes to the fore.

Posted by Daniel Joseph, on 9th Jun 2015