There's a popular perception that investing in bricks and mortar is a one-way bet, but that hasn't been the case for many Australian home owners, with Brisbane unit values are lower now than a decade ago.
- Couple bought Brisbane apartment for $432k in 2011, sold it for $430k this year
- Analyst says New Farm is a highly desirable suburb, but Brisbane market has seen negative growth over last decade
- Over the next two years Brisbane will have added about 20 per cent more apartments
Lisa Foley and her husband bought their first home in the sought-after, inner-city suburb of New Farm in 2011.
It's an older-style, two-bedroom, one-bathroom brick unit in a complex of about 40, but the location — on one of the suburb's best, leafiest streets — was hard to beat.
However, when it came time to sell that unit earlier this year, the full force of Brisbane's apartment downturn hit home.
The couple bought the apartment for $432,000, and it was initially listed in the high-$400,000 range.
But, after months on the market, the asking price was slashed to the mid-$400,000s. It was finally sold for $430,000.
Ms Foley said, when they moved in to their first home, the idea that it would sit on the market for three-and-a-half months and sell at a loss just six years later was unfathomable.
"We knew it was an older-style unit," she said.
"We did invest some money in it before we sold it, so we put some new carpets in, we repainted, we did a little bit of work to the kitchen and bathroom.
"So we did put money in as well, but we thought we would be safe because it was on Moray Street in New Farm."
The homeowners aren't the only ones surprised by losing money in such a popular neighbourhood.
When they applied for a business loan, their bank put a much higher valuation on the apartment.
"We had it valued by our bank this year, when we were purchasing the business, before we did any work to it, they valued it at $460,000," Ms Foley said.
"I guess I was always under the impression that a bank valuation was a more conservative valuation as well, so we thought on the basis of that valuation that we would get a little bit more than that."
Tim Lawless, the head of research at property analysis firm CoreLogic, was also a bit bewildered.
"It is surprising — New Farm is a really highly desirable suburb," he told ABC News.
"It's inner-city, it doesn't have anywhere near the supply concerns that you'd find in say a Fortitude Valley or a South Brisbane or West End."But when you look at the overall Brisbane market place we've seen negative growth over the past decade."
Mr Lawless said the woes for Brisbane apartment owners are nothing new.
"The last 10 years we've actually seen house values rise by about 22 per cent across Brisbane, but unit values are actually lower than what they were way back in 2007," he said.
"In fact they've been down by about 3.3 per cent over the past decade."
Things can only get ... worse
But he said things are set to get worse, not better, over the next two years, because Brisbane will have added about 20 per cent more apartments than currently exist in that time.
"It's never been this high and, in fact, it's about double the long-term average at the moment," he added.
That is exactly what Lisa Foley thought when considering the lowball offer."The feedback that we got was that it was going to get worse, so we should sell now," she said.
Ms Foley is convinced that Brisbane's apartment construction boom crippled the sale of her first home.
"I'm no expert but I'd have to think that was the biggest problem for us," she said.
Retaining her New Farm property as a rental investment wasn't a viable option either because high vacancy rates mean tenants are currently calling the shots.
"There were so many other new apartments going up offering things like a month's free rent or, I heard of one, they were giving a $1,000 credit card to new tenants coming in, so that was a concern for us."
Surely this is just a Brisbane problem?
Given that overbuilding is the key problem, many analysts argue that price falls will be restricted to areas such as inner-Brisbane, where development has seen a massive peak.
Tim Lawless is certainly of the view that over-development is far more of a problem in Brisbane than in Melbourne or Sydney.
"Melbourne's actually seeing a larger raw number of units, but that city's well along a densification path and the uplift in total stock is only about 15 per cent [versus 21 per cent in Brisbane]," he said.
"Then you've got Sydney, where there's about 95,000 units about to come online in the next two years, but that's only a 12 per cent uplift in stock."
Unlike Brisbane, in the last few years those cities have also benefited from stronger population growth and flourishing state economies which have helped to shore up demand for new high-density residential developments.
"Over the past five years, about 75 per cent of Australian jobs have been created across New South Wales and Victoria, only about 15 per cent of national jobs are being created in Queensland," Mr Lawless added.
But there are signs of softness in the seemingly invincible Sydney market — figures from Domain showed the first quarterly price fall in almost two years, with house prices off 1.9 per cent and unit prices down 0.8 per cent.
The resource-reliant capitals of Perth and Darwin have already seen far larger declines — unit prices in WA's capital are off 7.7 per cent over the past year, while Darwin units are more than 30 per cent cheaper than a year ago.
Melbourne, Canberra and Hobart are still on the up, but given the levels of development underway and planned, any drop-off in population growth could see the booms unwind.
Tim Lawless believes there are early signs of improving jobs growth in Queensland and the severe housing affordability constraints in Sydney could help resurrect the Brisbane unit market, but he warned it will take some time.
"The typical house value in Sydney is just over $1 million — it's $1.74 million — whereas in Brisbane it's just over $500,000," he observed.
"So you can understand why people in Sydney will be cashing out of that marketplace and moving towards south-east Queensland."
But if people start leaving Sydney and Melbourne because they have become too expensive, then the price falls seen in places like Brisbane could gradually spread.