Purpose-Built Student Accommodation (PBSA) in Brisbane: Supply vs. Demand
International and domestic student numbers in Brisbane continue to rise, but PBSA supply has failed to keep pace. There are 7,118 student beds under construction, development approved or waiting to be approved - second in the country behind Melbourne – however construction delays are growing due to rising costs and labour shortages. Instead, students are turning to the already tight private rental market.
Land Lease Communities (LLCs): An Affordable Housing Solution
Land lease communities are gaining traction as a viable housing solution, particularly for retirees and downsizers seeking affordability and community living. Unlike traditional homeownership, residents purchase their home but lease the land from the operator, avoiding stamp duty and often benefiting from lower living costs.
Demand for LLCs is growing in Brisbane’s outskirts as baby boomers downsize. However, the rising cost of land, labour shortages, and inflation-driven construction expenses are making it harder for developers to keep prices at an accessible level. Additionally, supply constraints mean waiting lists for new homes are lengthening. With the massive scale of these communities, builders can afford tighter margins due to increased housing numbers and by providing set build options that already fit the construction constraints.
This $12 billion sector is the fastest-growing downsizing solution in the country and, if trends follow those seen in the U.S., these communities may evolve to serve both downsizers and offer more affordable options for first-time buyers and families.
Build-to-Sell (BTS) Challenges in Brisbane's Housing Market
Brisbane’s BTS sector is also struggling under supply constraints. Apartment construction rates are well below the levels needed to meet population growth, with many projects stalled due to financing challenges and increasing costs.
Since 2020, Brisbane has delivered less than half of the apartments required to meet government housing targets, with an annual shortfall of up to 1,000 units projected until 2027. For high density residential projects, Rawlinsons estimates construction costs range from $3,170/m2 for basic apartments to $5,425/m2 for higher end developments. As such, higher development costs are making projects less viable, leading to fewer new units hitting the market. The consequence? Higher prices and increased competition for existing stock.
Build-to-Rent (BTR) Initiatives and Obstacles
Build-to-rent has been positioned as a solution to the city’s rental crisis, offering long-term rental options in professionally managed developments. The Queensland government has introduced several measures to stimulate BTR construction, including:
- Reduction in management investment trust (MIT) withholding tax coming into effect on July 1st 2024.
- A reduction in land tax of up to 50% for up to 20 years for BTR developments that feature at least 10% of rental homes as affordable housing.
- A full exemption for the 2% foreign investor land tax surcharge for up to 20 years.
- 100% reduction in the taxable value of land for land tax foreign surcharge, for land used solely or primarily for an eligible BTR development.
- 100% discount on any additional foreign acquirer duty (AFAD) for land used—or to be used—for an eligible BTR development.
Despite these incentives, labour shortages and rising construction costs continue to hamper the delivery of new BTR projects. If these challenges persist, the sector may struggle to provide the relief needed for Brisbane’s housing stress in the short to medium term.
Brisbane's Housing Market: The Road Ahead
Brisbane’s housing market is at a crossroads. With vacancy rates at record lows and costs rising across the board, supply-side solutions are urgently needed. While alternatives like land lease communities and build-to-rent projects hold promise, their long-term success depends on continued policy support, faster development approvals, and addressing the ongoing constraints in the construction industry. Without these interventions, Brisbane’s affordability crisis is poised to deepen, leaving both renters and buyers with limited choices and higher costs.
Contact Information
For further information contact:
Hugh Menck MRICS
Head of Capital Transactions
+61432560589
Archer Halliday
Analyst | Capital Transactions
+61497599959
For a complete list of weekly commercial transactions in Queensland, visit McGees Wrap Up | McGees Property Brisbane
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