BRISBANE APARTMENT PIPELINE SET TO SURGE

BRISBANE'S apartment market will surge to 20,000 properties from 2016 to 2018 - the largest amount the city has seen during a short period of time, according to JLL.

The property firm's Brisbane Apartment Market Indicators Report shows that of the estimated 19,800 apartments under construction or being marketed in inner city precincts, 13,600 are expected to be completed by 2017.

JLL head of residential development valuations Troy Linnane says interstate purchasers are dominating the market, accounting for more than half of sales.

He says foreign purchasers account for 25 per cent and local purchasers 22 per cent of off-the-plan apartment sales.

"The Brisbane apartment market has continued to flourish off the back of strong investor demand, as interstate and foreign investors seek to take advantage of the lower price point and higher yields Brisbane currently has to offer compared to capitals like Melbourne and Sydney," Linnane says.

JLL director of residential research Rupa Ganguli says demand for residential products will remain steady across all inner city precincts.

He says the investor market will moderate over the next 12 to 18 months, with a large number of new apartments entering the rental market during 2016 and 2017.

"Sydney and Melbourne have witnessed an increase in high density living and Brisbane is following suit," Ganguli says.

"For the 2015 financial year, apartments made up over 45 per cent of all approvals to build new private sector dwelling, which was a record high.

"A combination of low interest rates, improving market confidence and relatively affordable price points, particularly for investor buyers, have led to housing prices reaching a historical high in Brisbane.

"In the owner-occupier market, this has provided home-owners with an ideal opportunity to sell their existing dwellings and make a successful transition into a new smaller residence."

The JLL report says the upcoming supply may increase vacancy and a drop in investment yields for generic apartment stock.

"Although gross rental yields have tightened in the Brisbane apartment market, they have remained above Sydney and Melbourne since 2011 and are still quite strong and provide positive cash flow on current lending rates," Ganguli says.

"This can be explained by the large volume of capital available for investment within the property market and the low returns available from other investment options.

"Foreign investors see Australian property as an ideal asset for wealth preservation due to low sovereign risk and secure ownership rights. Brisbane is starting to attract their interest with 16 development sits purchased since 2014."