Saturday, November 28, 2009

Take Care Buying Off the Plan

If you believe the sales agents hired by developers who sell apartments in Brisbane off-the-plan, you can't go wrong. Sign today, but don't pay for a few years. Population growth. Depreciation benefits. Get is early to choose the best apartment. Early buyers will get the best price. There will be a price rise soon, so sign today!

But there are huge risks:
  • the building may never start, and so the deposit is tied up for years
  • the apartment may look different to what you expect, or have a worse view
  • there could be development next door, impacting your view and the location
  • the developer could onsell the development, and so you end up buying from someone other than who you signed with
  • the apartment may be up to 5% smaller than set out in the marketing plans
  • the quality may be different to what you expect.
However, the biggest risk is that you pay the wrong price. You are trying to guess tomorrow's price today. And let me tell you, prices do go down. In addition, you are paying for the developers marketing and sales costs, which is often more than 5% of the the purchase price. So you are 5% behind before you start.

Let's look at some examples of buildings marketed off-the-plan to see how the purchasers did.
Devine is selling Hamilton Harbour like hot cakes. Let's see their track record. Here are some example resales for Charlotte Towers, their most recent Brisbane apartment development. I have looked at typical midlevel apartments:

Apt 2003 - purchased Jan 05 for $444K, resold July 08 for $425K
Apt 2210 - purchased Dec 04 for $333K, resold Jan 09 for $312K
Apt 2302 - purchased March 07 for $483K, resold March 09 for $468K
Apt 2307 - purchased Sept 06 for $497K, resold May 09 for $490K
Apt 2308 - purchased Sept 05 for $501K, resold Feb 09 for $485K
Apt 2410 - purchased Dec 04 for $351K, resold March 08 for $310K
Apt 2608 - purchased Sept 04 for $508K, resold Aug 09 for $492.5K
Apt 2703 - purchased March 06 for $492K, resold Feb 08 for $461K
Apt 2908 - purchased Feb 05 for $508K, resold Nov 08 for $485K

Keep in mind the the purchasers paid stamp duty of between $5,000 and $15,000 and agents fees to sell the apartment of roughly $12,000, then you can see that many of the off-the-plan purchasers lost more than $30,000, after holding for 3 to 5 years.

Another example is FKP's Vue apartments, at 92 Quay Street, Brisbane.
Apt 1106 - purchased Oct 04 for $400K, resold July 07 for $368K
Apt 1205 - purchased Oct 04 for $475K, resold July 07 for $440K
Apt 2008 - purchased Jan 05 for $504K, resold Aug 08 for $480K
Apt 2409 - purchased June 06 for $535K, resold Feb 09 for $445K

So take extreme care building off the plan, as you may end up paying too much for something that you don't like or want.

Union at Milton

"Thank you for your email enquiry regarding our proposed project at Milton.

We are currently working thru the final stages of our Development approval, which we are hoping will be confirmed early December....
In broad terms we intend to develop a modern iconic 30 storey building with multi level car parking and a wide choice of unit types i.e. 1 bedroom, 1+1 bedroom and differing design 2 bedroom apartments. There will be attractive mix of retail at ground level, a very generous entry lobby and excellent resident facilities ie pool, gymnasium, owners lounge and more."

El Dorado Indooroopilly

The El Dorodo Indooroopilly redevelopment is being advertised again. It has been in off the plan sales now of over 18 months, with most of the buyers being South African. The prices have been substantially increased.
Here is the current price list for the apartments on the first level (which is immediately above the cinema.)

101 3 bed, 2 bath $845,000
102 3 bed, 2 bath $850,000
103 2 bed, 2 bath, study $780,000
104 2 bed, 2 bath $695,000
105 2 bed, 2 bath $695,000
106 1 bed, 1 bath, study SOLD
107 1 bed, 1 bath SOLD
108 2 bed, 2 bath $690,000
109 2 bed, 2 bath $690,000
110 2 bed, 2 bath, study $775,000

Very expensive!! You can buy a large good quality new two bed two bath apartment in Indooroopilly for $500,000. So these prices are incredible! The project was originally advertised as starting in February 2009. My guess is that it will not start until late 2010 if at all.

Sunday, November 22, 2009

Tennyson Reach Auction Results

Mirvac auctioned 9 apartments at Tennyson Reach last weekend. There are more than 15 purchasers of off-the-plan apartments at Tennyson Reach who failed to settle. Mirvac auctioned off nine apartments where there was no legal dispute between the Mirvac customer and Mirvac. (S0 there will be more sales of failed settlements coming.) The auctions were all three bedroom apartments with river or mangrove views. For all these apartments, they sold off-the-plan for more than $1M.

At the auction, there was only one apartment where bidding was more than $1M. This was apartment 3311 (a 6th floor end apartment, 234 sqm including balcony.)

For all other apartments, the majority of bids were in the $800K and $900K range. Most of the apartments did not reach the reserve, and were passed in. Some sold after auction, and at least 5 were still for sale when I looked recently. The apartments that did not sell at auction or immediately after were:

Mirvac is being very secretive regarding the results of the auction and the ultimate sales price. In my experience, when the seller and seller's agent do not publicise auction results, this is often because the results were not good. The results were not reported to APM, and so the weekend auction result report for last weekend was even worse than reported for Brisbane.

Friday, November 20, 2009

Hamilton Harbour Update

"Strong pre-sales of residential units in Hamilton Harbour stage 1 with 89% of 257 units now sold. (This project is also a JV with Leighton Properties) ... Hamilton Harbour and King George Central forecast to commence later this calendar year subject to finance being secured."

Devine Annoucement


AGM Speech

The Mill At Albion

The rumor around town is that the Mill at Albion development, by FKP, has been shelved and will not go ahead.

Brisbane Development Update

In April 2008, I listed apartments buildings that were planned for Brisbane.

Here is an update of that post. Times have changed!

  1. Trilogy Hotel - 192 apartments - being sold off the plan, but project on indefinite hold
  2. Trilogy Skyhome Apartments - 109 apartments - on indefinite hold
  3. Westin Residences (Empire Square) - 104 apartments - project abandoned.
  4. Waters Edge at West End - 220 apartments in the first 2 buildings to be released - earthworks have started
  5. Union at Milton - 213 residential apartments and 127 hotel rooms - status unknown
  6. French Quarter - about 70 apartments and 150 hotel rooms - project abandoned
  7. Hamilton Harbour - about 250 apartments - stages one and two being sold off-the-plan; construction finance not yet obtained
  8. Meriton Tower - 200 serviced apartments plus 200 residential apartments - now called Soleil, and all apartments -- no hotel or serviced apartment component.
  9. The Mill at Albion - likely to be cancelled
  10. Waterfront Newstead - 631 apartments - two buildings under construction

Current off-the-plan buildings being marketed and under construction

  1. Vision (400 apartments) - cancelled
  2. Iceworks at Paddington (47 apartments) - complete
  3. Parklands at Sherwood (82 apartments for sale now; 211 apartments planned in total) stages one and two complete
  4. Tennyson Reach (393 apartments) - two buildings complete, and a third building under construction
  5. SL8 (112 apartments) - complete
  6. Ciana Indooroopilly (132 apartments) - complete
  7. Portside Hamilton - three buildings complete, one building in off-the-plan sales
  8. Riverpoint West End (280 apartments) - under construction
  9. The Macrossan (42 apartments) - under construction
  10. SW1 (57 apartments) - complete
  11. Fresh Toowong (92 apartments) - complete

Infinity in Herschel Street

"HIGH-rise king Harry Triguboff, confident that the Brisbane and Gold Coast apartment markets are heading for a price surge, is to step up his quest for new development sites and hasten the launch of two major projects.

The veteran developer is putting sites in the Brisbane CBD and central Gold Coast 'under the microscope'.

He says he will bring forward the launch of a 77-level Brisbane tower, Infinity, by several months to the middle of 2010.

"Prices in Queensland will, I am sure, follow suit and that will happen sooner rather than later. They may not reach Sydney levels but the gap will close.

"That's because apartment supply levels in Brisbane and the Gold Coast are falling and, with the credit squeeze forcing many projects to be shelved or deferred, supply will get even tighter. That means rents will go up, with rent pressures being further increased by strong migration to south-east Queensland."

He ventured into the Brisbane market in 2007 when he acquired a site on the corner of Adelaide and Boundary streets in a move he described as 'the opening of a third development front'. Construction of Soleil, a 74-level tower which will be Brisbane's tallest apartment building, is under way on the site and due for completion by late 2011.

Meriton has sold 82 one, two and three-bedroom apartments in Soleil, where prices start at $310,000 and peak at $900,000.

New project, Infinity, is a 77-level tower on a $25 million Herschel Street site and will include 209 apartments, 422 serviced apartments, and office and retail space.

Mr Triguboff says he is looking closely at a third Brisbane development site -- one on which another major developer has shelved plans for a sizeable project."