Terry Ryder, a real estate commentator, had an interesting article in The Australian on Thursday about investing in Noosa.
"The apartment market has done even worse, delivering growth averaging less than 2 per cent a year. The median unit price for the Noosa region today is lower than four years ago. This kind of subnormal performance is common among popular seachange locations -- contrary to the widely held belief that the Gold Coast and Byron Bay are great places to invest in real estate. They may be lovely places to live but that's a different matter. Investors want an affordable entry price, good income returns and high capital growth -- and they're unlikely to find any of the above in these markets."Friday, June 26, 2009
Saturday, June 20, 2009
Brisbane Apartment Recent Auction Results
- Felix, Apt 317, Level 31, 3 bedrooms, 3 bathrooms, over 150 sqm - highest bid $820,000, now listed at $950,000
- Willahra Tower, Apt 49, 2 bed, 2 bath, 96sqm, no bid at auction, now listed at $449,000
- Quay West, Apt 401, Level 4, 2 bed, 2 bath, 126 sqm, vendor bid of $600,000
- Roma Street Parklands, Building 3, Apt 3095, 3 bed, 2 bath, end/rear unit, vendor bid $535,000, listed at $600,000 and reported as sold
- Roma Street Parklands, Building 4, Apt 4046, 3 bed, 2 bath, lower floor with no view, vendor bid $550,000, now listed at $700,000
- SoHo South Brisbane, Apt 605, 3 bed, 2 bath, impacted by new bridge being built, highest bid $550,000, now listed at $600,000
- Toowong, 24/12 Patrick Lane, 2 bed, 2 bath, sold for $487,000
- New Farm, 7/38 Elystan Road, 2 bed, 1 bath, sold for $780,000
Thursday, June 18, 2009
South Point at South Bank - New Website
"Take a moment to appreciate the journey that a stroll through a palatial Southpoint residence offers. Once inside, the walls ascend forever and the warm, opulent timber floor implores you to remove your shoes. There are vast living areas, lavish dining rooms and king-sized bedrooms. Lean on the private bar, recline near the classic fireplace, and discover the divine natural stone top kitchen that forms a living space all of its own. There's even the rare luxury of a powder room. This is just a sample of what gives Southpoint Residences their unique difference - there is so much more to be experienced."
Map and Transport
Units Gain Market Share
With the growing market share, units have also shown a stronger capital growth than houses in nearly every capital of the country. In Sydney, Brisbane and Canberra, units showed positive 12 month growth in median value up to February this year, compared to negative growth for house median values. ...
Another key is to make sure there is a parking spot included, something that can make a huge difference in demand, especially if the unit is in an area with few street parking opportunities. “No matter where you buy an apartment, never ever buy it without allocated parking,” says Wakelin.
What not to buy
There are, however, areas where demand is not so strong. For one, stay away from high-rise apartments, particularly in areas of overdevelopment such as the Gold Coast, the Sydney CBD or the Docklands in Melbourne, say experts.
“We find for investment purposes, high-rise apartments do not work,” says Wakelin. “They are very generic, so there’s little scarcity value with them.” Ryder agrees, saying investors should not be swayed by the magnificent views from atop beachfront high-rises in the Gold Coast. Investors should remember they won’t be living in these properties, and in the long run, they don’t show as much capital growth.
“There’s a lot of glamour in buying a high rise, but history shows it’s generally a poor investment,” says Ryder. “Put aside the emotions, and just look at the sums. You’re better off not buying something with an ocean view like in Surfer’s Paradise.”
He also says buying a used apartment is better than buying a brand new one.
“There’s a huge price differential with a new product and equivalent second-hand product,” says Ryder. “That’s simply because the cost of development is so high. The research shows there’s commonly a price difference between 30-40% between new and old apartments.”
That ultimately means for an investor that it’s harder to get capital growth out of a newer product. It might look nicer, but it will cost you in the long run. There’s also little scarcity in some areas for new product, such as the Gold Coast, where new apartments have been built without abandon. And once its no longer new, you actually lose that tag and that value.
“There’s a lot of risk in committing to buy something now and paying two years later, whereas the market can go in the wrong direction in that time,” says Ryder. “Plus developers tend to build that (expected value growth) into today’s prices these days.”
Time to Invest?
REA
Wednesday, June 17, 2009
Some Owners Unable to Pay Strata Levies
"A call by debt collection agencies for reforms to the cost-recovery process for bodies corporate comes as apartment owners at a Brisbane building are locked in a legal fight with a resident, who had racked up a debt of more than $50,000 since 2004."
"In the Brisbane case, one of the owners in the 51-unit 1970s building on Leichhardt Street said that since 2004, the problem owner had not paid his strata fees or levies on time.
In two previous actions against him, one of the building's apartment owners, who did not want to be named for fear of retribution, said the problem owner ended up paying, with $20,000 of the $50,000 owed comprising legal fees.
"We have had two actions against him previously where he has paid on the steps of the court," they said.
"Because he is an ongoing serial pest, we should have some entitlement to say you are no longer entitled to be here."
The AustralianGold Coast Bad - Midwood
On the Gold Coast, there were 79 new unit sales in the three months to May 2009, compared with just 49 the previous quarter. But it is a long way from the boom times of 2007 when 369 new units sold in the August quarter. The latest Midwood Queensland Investment Report says at current take-up rates there is more than four years' supply of new unit stock. In the past three months, nearly half of the new unit sales were in Meriton's Brighton on Broadwater project.
Midwood report author Bill Morris said most of these deals were in the sub $500,000 range, where the market was fairly steady.
Median price data from the Real Estate Institute of Queensland released yesterday reveals no change in the median price for units in the Gold Coast local government area.
The median of $345,000 for the March quarter is 3.4 per cent down on the previous year.
Real Estate Institute of Queensland chief executive officer Peter McGrath said price discounting had helped bring buyers back into the market at the upper end. "We've seen some receiver sales where people who bought a unit off the plan for $2.5 million, being sold for $1.6-$1.7 million," Mr McGrath said.
"Units that had previously been selling for $900,000 were getting $750,000."
In Brisbane, the unit market also is showing signs of improvement despite the median price for the Brisbane statistical division dropping 1.4 per cent over the quarter to $345,000. Over the year, the median has increased by 2.6 per cent.
There were 28 unconditional new apartment sales in Brisbane during the May 2009 quarter, the highest number since February last year. For the past 18 months, new unit sales have averaged 13 every three months.
The median price for all unit deals in Brisbane city has fallen 4.3 per cent to $440,000 in the three months to March 2009. Over the previous 12 months the median increased 1 per cent to $450,000.
The Australian and GCSaturday, June 13, 2009
Housing Prices Hold Up
"Of course it's not good news at the top of the market, but despite all the attention given to Mosman, Toorak, Peppermint Grove and Noosa, that's only a small fraction of total Australian housing and doesn't matter very much in the overall economic scheme of things."
The AgeMaintenance Fees
Interesting comment from another blog:
"I must admit I had no idea what I was doing when I bought my first apartment; Low fees meant I liked the building, without knowing anything financially about the building, I have since researched the other buildings I was also interested in, and to be honest I was just plain LUCKY I bought in the building I did, only after joining the committee did I realize we actually have a huge surplus as well as low fees ( that have actually gone down further since I bought)
I also think it's a huge mistakes for people who purchase an apartment or unit with a strata title, but fail to join the committee or even attend the AGM, Its probably their biggest investment they will ever make, but they don't care how, or who is running it."
Union at Milton
Off The Plan Contracts
This week, the Queensland Fair Trading Minister Peter Lawlor announced that the Government would be legislating in response to the Court of Appeal decision of Bossichix Pty Ltd v Martinek Holdings Pty Ltd [2009] QCA 154 handed down on June 5.
The Minister said:
"The Supreme Court last Friday dismissed an appeal where, in the first instance, the buyer of a unit in a community titles scheme was held to have validly terminated the contract based on a technical breach of the Body Corporate and Community Management Act 1997. The technical breach related to section 212 of the Act and the court held that the contract did not strictly comply with the wording required to be used by the section.
The decision means that buyers can now potentially avoid a contract purely on a technical breach of the Act, even if they haven't experienced any material detriment. This puts hundreds and potentially thousands of off-the-plan contracts at risk. It is a potentially serious situation for the development sector and the wider Queensland economy.
The issue is that this legal precedent could be used, for example, where a buyer simply regrets entering into a contract, or if the buyer could have purchased a unit or property at a lower price. This was never the intention of the legislation and creates great uncertainty for sellers and developers, particularly in relation to off-the-plan sales where there is a long period of time between execution of the contract and settlement. We cannot afford this uncertainty in today's economic climate.
At the same time, the Government is not looking to in any way water down the legitimate consumer protections encompassed in the Act - rather to correct a technical failure of the contracts to fully reflect the requirements of the legislation. All of the normal protections of the legislation will be preserved.
The Government will be introducing legislation next week to address this situation and ensure that both buyer and seller are returned to the situation they believed to be the case - and agreed to - at the time of the signing of the contract."
Wednesday, June 10, 2009
Fire at Grosvenor
Monday, June 8, 2009
Comment from a Reader re Oaks and Aurora
A reader kindly sent me this note, in response to a prior posting:
I am concerned about trends in the industry, whereby the Oaks are flouting the law by operating a hotel in a Classification 2 building. The Oaks has more money than any Owner’s Corporation, and they know as long as Brisbane City Council and the State Government of Queensland turn a blind eye to them, they can out spend any Body Corporate in our legal system.
I went to a recent auction run by LJ Hooker in Aurora, and the agent was late because he could not get up and down the lift (the Oaks closes two of their five lifts down between 10:00 am and 2:00 pm). When we finally got into the building, there were hotel guests unpacking and repacking their bags in the lobby. The lifts were crowded with students, overnight stays ....
It is no surprise to me that the auction of a $1.1 Million plus unit did not attract any bids. The vendor made a bid of $725,000, and about 12 people stood around, hands in pockets. After the auctioneer consulted with the owner and got instruction, the vendor’s bid was lifted to $770,000 and again no bids. I don’t know if this property ever sold. It was passed in on the day.
The presence of any hotel group, in my opinion devalues the units and lowers the general feel and look of a residential building and diminishes the lifestyle of resident owners. Other factors to consider are:
Don’t Owners get Higher Rents for Hotel Guests/Short Term?
Your committee and the Manager might try to tell investors that they will earn more money. Yes, their rents might be a bit higher, but that is only part of the story. With higher rents, come higher risks, such as risk of vacancy, more tenant churn, more wear and tear on common property and much higher Management Fees.
The Oaks tend to return to investors about 48% to 50% of the total rent collected, when the high management fees, charge-on costs and miscellaneous costs are all taken into account. I believe this to be in line with any other hotel group’s figures. Perhaps someone from the Oaks could confirm these figures.
Rental Pools – How do they work?As an investor in a ‘hotel’, your unit is most likely going to go in a ‘rental pool’. It is impossible to tell how often your unit is let out, as the agreement entitles you only to a portion of the total pooled funds. That means that if your unit is a superior one, and is let fully, you will be subsidizing other units which may be inferior and not let out fully.
There are lots of hidden costs to any investor from their hotel manager. One horror story involves an owner who double checked his statements, and each month they would be buying ashtray, glasses, microwave, mattress protector, etc. The Managers did not need to give any proof that the item was damaged or broken, they simply went ahead and bought these items, added a hefty commission and merrily went about spending the owners’ money, despite instruction from the owner that she would replace any items in the unit herself. Another horror story involves a man who went straight to the manager’s desk and asked if there were any vacancies. Yes, the manager said, just go to that phone over there and ring this number. The unassuming man went over and used the phone, the manager answered and earned 30% commission (out of the owner’s pocket) for the exercise. There are more stories where these come from. This is just scratching the surface.
Fire Regulations?As indicated already, regulations appear to mean nothing to the Oaks. They run a hotel in Aurora, which is a Classification 2 Building, with inferior fire safety protection for the occupants.
How do Hotel Groups and bad Managers devalue units?
There are many drawbacks to a hotel group taking control of a residential building. Investors need to be aware that although it may seem that rents increase, their net income will drop. Aurora has shown us that units will be significantly devalued by the presence of the Oaks, or any other hotel group. Colin Archer was recently quoted at the Unit Owner’s Conference as saying that “if owners want to buy into a hotel, they should buy a hotel. If they don’t wish to live in a hotel, don’t buy in a residential building managed by any hotel group”, because he well knows the massive and negative impact a hotel operation has on the permanent, resident owners. One owner stood up and asked Colin Archer what owners in Aurora could do to protect themselves, because the Management Rights were sold to a Hotel Group to the detriment of owners. He started squirming in his seat. He is a director of the Oaks, and he was sitting on the panel with Michael Teys who sold him the Management Rights. They seemed to think it was quite a funny joke. After some good natured squirming, Colin Archer said that owners need to ensure a bylaw is in place with a three month limit on leases. To his credit (I think he wants to retain his right to practice law), Michael Teys stood up and corrected Colin Archer. He told the crowd that such a bylaw would offer absolutely no protection to owners.
Take also into account that backpackers, suitcases and crowds in the lobby negatively impact on any residential home. In Aurora, I believe that two of the five lifts are closed off to residents because of the cleaners activity between 10:00 am and 2:00 pm. Cleaners block not only the lifts, but the corridors of all of those unfortunate souls who live on the ‘hotel’ level. There is more wear and tear on common property, and the end result is that all owners pay a price – investors pay the financial price and resident owners pay the price of a diminished lifestyle.
Is there any upside to a Hotel?No, not that I can see. Hotel Management Rights are there for the sole benefit of the managers, and to the detriment of both investor owners and resident owners. If someone can convince me that the Oaks have increased the value of the units in Aurora, or enhanced the lifestyle of all occupants, I will happily listen. Until I hear a good case for owners, I won’t be changing my mind anytime soon.
Sunday, June 7, 2009
Mirvac Sues Many
Oaks Sells Out - To Brother!
At the recent Oaks AGM, there were reports that angry Aurora owners questioned the CEO of Oaks, and that he could not provide sensible answers.
See ASX Release and follow-up.
Apartment House
Bovis Lend Lease, an Australian company, is building a wonderful apartment building in New York City - 535 West End Avenue.
Some floors are full floor apartments, and on other floors there are two apartments per floor. One of the smaller apartments is 5 bedrooms, 5 bathrooms and is 408 square metres in size.
Why don't we get this quality apartment house in Brisbane?