Sunday, December 28, 2008

Fortitude Valley

"On the unit front, Wooloowin, Annerley, Moorooka and Camp Hill all priced under $350,000, are tipped to give good returns next year. The surprise additions of inner-city Fortitude Valley and East Brisbane are also considered affordable areas for unit buyers.

"For people who are priced out of the city itself, these areas are a good option," Mr Kusher said.

"Fortitude Valley in particular has got a really good rental yield at the moment and stock there is quite varied. Overall, rental growth is starting to improve, so for those people who have perhaps lost money in shares, more investors will be attracted back to property."

See Brisbane Times

Predictions for 2009

At the beginning of 2008, I made a number of predictions in this post.

The predictions were mostly wrong!

The Brisbane apartment market did not grow significantly in 2008, and took a minor step backwards. At present, there are fewer buyers and more sellers. For some off-the-plan developments, no sales have been made for months. Second tier buildings and buildings with more than 200 apartments have not done well.

So I will be careful with my predictions for 2009:

I still believe that quality inner city apartments in Brisbane will do well in 2009. Provided there is no significant unemployment and provided that foreign students continue to come to Brisbane, vacancy rates will remain low.

In 2008, only four new inner city apartment buildings completed and settled. These were Evolution (over priced), M on Mary (which has mostly 1 bedroom apartments, and the developer is now in liquidation), Flow at West End and Iceworks at Paddington. In 2009, no new large inner city apartments will settle. Groundwork has started on Mertion's Soleil and the Trilogy Tower project, but these will no complete until 2012. Mirvac's Tennyson Reach project will settle two buildings in 2009, and FKP's SL8 at West End will also probably complete in 2009. So not much new stock.

So here are some predictions for 2009:

• The price of a good quality 2 bedroom 2 bathroom apartment in Brisbane, with views, will range from $780,000 to $850,000.
• The price of an average quality 2 bedroom 2 bathroom apartment in Brisbane will struggle to pass $550,000.
• Average rent for an unfurnished 2 bedroom apartment will rise to $600 per week.
• Investors will return to the market, as interest rates are falling and rents are rising.
• There will be more action in the inner suburbs than in the city. Prices for quality apartments in areas such as Indooroopilly and Toowong (where there is a train station and regional shopping, close to education facilities) will boom. By the end on 2008, it will be hard to find a good quality 2 bedroom apartment in these areas for less than $600,000.

• The Gold Coast apartment market will tank even more. The Sunshine Coast apartment market will remain steady.

Meriton's 43 Herschel Street

Here is a floor layout, as submitted to council by Meriton. It shows 10 apartments per floor, with a mix of studios, 1 beds and one 2 bedroom apartment. The apartments have no balcony, and are small. The 1 bed hotel suites in Trilogy Towers are larger than the 1 bedroom apartments in this proposed building.

More photos and images here.

Thursday, December 18, 2008

Stockland Downgrades Residential Portfolio by $105M

"He said two factors in the past two months had prompted the downgrade of its residential inventory.

He said there had been a "massive downturn" in the top end of the residential market.

Secondly, the company had made a "conscious decision" to sell some high-end projects outright at a discount to their carrying value.

Mr Quinn said: "The first home buyers are well and truly back because it is now cheaper to buy than to rent."

Stockland had started to reconfigure some high-end projects to create more affordable products.

"Traditionally, 20-25 per cent of our market is first home buyers. They now represent 45 per cent of our total buyer profile." He said sales had picked up nationwide."

See The Australian

Wednesday, December 10, 2008

West End Overpriced?

What would you pay for a new 2 bedroom apartment at the southern end of West End, with nice views of a factory roof, surrounded by industrial buildings, walking distance to nothing, an irregular bus a few times a day, brown carpets and "a minimalist look"? How about $579,000 in Ferry Road, West End? That just seems extremely high to me. Buyers beware!

Rate Increases For Brisbane Apartments

"A ceiling on rate increases for Brisbane's CBD unit owners under Brisbane City Council's controversial new rates policy will be debated at today's last council meeting for 2008.

Lord Mayor Campbell Newman promised to introduce the policy from the third quarter of the 2008-09 financial year, which starts on January 1.

The scheme was proposed at June's Brisbane City Council budget and - suggested lifting the general rate paid by unit owners so they pay an equivalent rate to home owners in a property of the same value."

Brisbane Times

Time to Buy

According to the NY Times: See New York Times for this interesting story.

Sunday, December 7, 2008

Meriton on Herschel Street

Meriton has applied to build a second apartment building in Brisbane. It is located at 43 Herschel Street, Brisbane, near Roma Street Station. It is 73 stories, with over 400 apartments, and a basement 10 floors underground parking.

Gold Coast Not Golden

I am always surprised to read commentary about Gold Coast apartments which is so positive -- when the market is very dead, nothing is selling, and prices are falling for what is selling. For apartments that are holiday rentals, most owners will receive low returns, not enough to cover outgoings. Yet, agents still talk the market up. Here is a more realistic story:

Not all Doom & Gloom

"THE economics of Australia's $3.3 trillion housing market is widely misunderstood, with sensationalist claims that a housing bubble caused the global credit crisis and that Australian house prices will fall by 30 per cent to 50 per cent. In fact, the latest RP Data-Rismark Index results show that Australian house prices declined by just 0.8 per cent in the 12 months to October this year, and increased during the most recent three months.

In Australia, the hyperbolic predictions of economists Steve Keen and Gerard Minack that house prices will fall by 30 per cent to 50 per cent have been relentlessly recycled in newspapers and purportedly credible programs such as 60 Minutes and The 7.30 Report.

The doomsayers' claims are based on the assumption that housing affordability is at an all-time low.

They dismiss the fact house prices are determined by supply as well as demand (affordability is a demand-side factor) and conclude that prices must fall by some arbitrarily large margin. Keen likes to shock by quotingstatistics about the rise in household debt without acknowledging that debt-servicing ratios have remained unchanged thanks to vastly lower real interest rates, the emergence of two-income households and higher real incomes.

Recent analysis by the Reserve Bank of Australia has comprehensively demonstrated that housing affordability is not at an all-time low. According to one of the Reserve Bank's benchmarks, the representative household in June 2007 had more real disposable income left over after purchasing a home and servicing a 90per cent mortgage than at any other time since June 1982.

The bank also found that the representative household could afford to buy 33 per cent of all homes in June 2007, which, although less than the historical average of 45 per cent, was markedly better than the 13 per cent of homes available to it in June 1990.

Importantly, the Reserve Bank's present 4.25 per cent cash rate is considerably lower than the 6.25 per cent rate that existed in June 2007. Since mortgage rates peaked at 9.6 per cent in August, the Reserve Bank has pushed them down to about 6.7 per cent, with markets predicting that they will be less than 5 per cent by mid-2009. At the same time, house prices have not appreciated...."

"The Reserve Bank believes Australia's housing market is leading the US by three years, having entered into its downturn in 2004. There is also a consensus between the Reserve Bank and most economists that the doomsayers' predictions will be proven wrong. A striking counterfactual is the 1990-92 recession, when unemployment hit 10.9 per cent yet house prices rose by 2 per cent a year according to the Australian Bureau of Statistics.

The media would do well to interrogate sensationalism."

Source: The Australian

Water's Edge Update

Monday, December 1, 2008

October 2008 Property Index

"Claims that the Australian property market would in 2008 experience a major downturn have been proven incorrect based on the most recent findings of the RP Data-Rismark Hedonic Property Value Index, which in October again showed that Australian capital city property prices had increased for the second consecutive month. ...

Based on RP Data-Rismark Index results, RP Data head of research Tim Lawless believes that the doom and gloom merchants have misunderstood the fundamentals and the diversity of the Australian residential property market by predicting that Australia was headed for a market-wide implosion in 2008.

“The facts are that over the past 12 months Australian property values have declined by just 0.8 percent which is a phenomenal result when compared to the S&P/ASX 200 index which reported a decline of 40.5 percent,” Mr Lawless said. “The October RP Data-Rismark Index results reinforce my suggestion that the Australian property market has moved through the bottom of its cycle.” ...

For savvy investors the timing to enter the market is now better than ever according to RP Data’s Tim Lawless – “For investors who are willing to go against the flow, buying conditions are exceptionally strong and yields are improving every month,” he said.

“The fundamentals underlying the Australian property market are extremely robust. Investors need to take into account current supply constraints, infrastructure delivery, immigration, vacancy rates, rising rents and expectations that interest rates will continue to fall. These are the basics that should fuel capital gains for investors.”

Melbourne, Brisbane & Sydney
In the 10 months to October 2008, Melbourne residential values have been flat (+0.2 percent) while Brisbane (-1.7 percent) and Sydney (-1.9 percent) are off slightly. However, during August, September and October 2008 Melbourne (+1.1 percent) and Sydney (+0.5 percent) property values have increased consistent with the overall market recovery following the Q2 contractions.

See Press Release and Details

Value of Brisbane Car Park?

A car park in down town Brisbane appear to add about $60,000 to the value of an apartment. A two bedroom apartment without a car park is virtually unsaleable.
FindACarPark is a good site to look at to see the rental value of a car park in Brisbane - seems to be about $400 to $500 per month to rent. When I looked, no car park was listed for sale in Brisbane.
See also this site.

Brisbane In Summer