Sunday, January 31, 2010

Auction Results

This is supposed to be selling season. APM reports that only 8 properties in Brisbane sold at auction this Saturday. No units were reported as being sold at auction. Although auctions are not as common in Brisbane as in Melbourne, and many agents don't report to APM, this is not a promising sign.

W4

It seems that W4 Apartments by Donovan Hill at Newstead have problems. From a communication from a lawyer in Brisbane: "Our recommendation is that for the time being you do not issue your own proceedings and support the QBSA. It would be unwise to effect full repairs to the building which are likely to be in excess of $1.6M as it will render the QBSA proceedings useless." Temporary repairs were recommended to prevent the situation from getting worse.

This is an example of the risk of buying off the plan.

"Poor! Downstairs carpark always floods. Carpark storage broken into. Bird poo everywhere. Poor finish to everything (bathroom tiling loose after 12 mths). Airconditioning problems leading to high electricy bill. Cheap paint on walls. Stupid light (hits your head all the time if you dont put your dining table in that position). Cracked plastering dropping off ceilings. Thats all folks."
"Been in the unit for 4 months now. Very poor finish, everything seems very cheap and tacky.They dont look like new units, more like a renovated unit... The floor is a really cheap vinyl. It comes with some very ordinary light fittings which are supposed to be designed by a famous guy. They look like my five year old made them!"

Saturday, January 30, 2010

Timing the Market - Letter to the Editor

A good letter from yesterday's AFR:

"The latest APM report clearly shows that house prices are rising mainly because of resurgent interest in high-end properties; but many people will sadly delude themselves that this is a sure sign of capital growth in their own, low to mid-end houses or investment properties. They should understand that the property markets do not all move in the same way at the same time.

By selling and trading up to a more prestigious area now, there is the real risk of "buying into the rise" and paying a premium to do so. Time in the market , or timing the market? The time to buy into high-end property was when no one could service the debt or sell it - during the middle of the financial crisis. It is very difficult to do well in an asset class when everyone else is interested in it."
Chris Embery, South Australia.

The Milton

FKP has received development approval from the Council for its Milton Railway Station development. This development was once called Union, and is now called "The Milton".

The Milton will be a 31-storey, 303 residential apartment building on Railway Terrace. It will also have a number of retail lots.

Friday, January 29, 2010

RP Data - Rismark December 2009 report

Units outperform houses

2009 saw Australian unit values increase by 13.5 per cent compared with house values up 10.4 per cent. The trend was the consistent across every capital city, with units returning a strong gain over the year.

According to Mr Lawless, “The higher gains in the unit market are a deviation from normal performances. Historically houses have tended to outperform units. The recent reversal in fortunes has occurred due to more buyers leaning towards units because they have a more affordable price tag and are often located in more strategic locations in relation to transport and amenity than many detached housing options. Other factors may also include changing housing preferences, particularly amongst baby boomers, and more highly targeted unit developments being delivered to the market.”

Brisbane The Brisbane market remained comparatively subdued during 2009 with values increasing by 7.3 per cent over the year. The comparatively weak performance can partly be attributed to the strong gains recorded in 2007 where Brisbane values gained 24.6 per cent over the year. Gross rental yields in Brisbane remain above the national average with houses returning 4.4 per cent and units returning 5.0 per cent. 2010 is likely to see Brisbane outperform the national average due to the fact it is in a later stage of the cycle, together with ongoing strong population growth and the benefit of several major infrastructure projects coming to fruition. The median house price in Brisbane is now $463,000 and the median unit price $383,600

See RP Data Report

"December research undertaken by RP Data and Rismark International showed Brisbane property values rose by 7.3 per cent in 2009, well below the national average of 11.5 per cent.

This confirmed the findings of the Australian Property Monitors House Price Report, released earlier this week,which RP Data disputed at the time.

RP Data research director Tim Lawless said better performing capitals in 2009 included Darwin (16.6 per cent), Melbourne (15.6 per cent), Canberra (14.7 per cent), Hobart (12.4 per cent) and Sydney (11.4 per cent).

But Mr Lawless said he expected 2010 to be a very different story for the Sunshine State capital.

"In Brisbane, we have vacancy rates of around three per cent, very strong population growth and not a great deal of new housing being released. So that's the dynamic that's pushing prices upwards," he said.

Brisbane Times


Gold Coast - Colliers Newsletter

"Sellers who have been holding on for the last 2 years, not needing to sell, are now making the decision to sell.

There is good buyer interest however some are still looking to find the bargains, which are almost gone from the market as the competition from buyers increases.

Recent auction results confirm buyers are active in the market, but their offers are sometimes falling short of the owners expectations. The real test for the properties that have passed in at auction is to see if they sell within the next 2 weeks. These sales will occur because buyers realise that they need to pay a little more than their first offer to secure the property or sellers realise the market will only support a certain price level."

This sounds to me like prices are going down.

Median Prices Can Be Misleading

From Chris Joye at Rismark:

“In the first quarter of 2009, some median index providers reported misleading results, claiming that house prices were falling when in fact they were rising rapidly. The medians were being dragged down by a surge in first time buyers purchasing cheap homes in the first three months of 2009. The RP Data-Rismark Hedonic Indices, in contrast, reported strong growth of circa 3 per cent in the first quarter in 2009.

“Since the first quarter, the RP Data-Rismark Hedonic Index has shown stable growth. In comparison, the median price indices are being artificially boosted by the fading of first time buyers and the return of upgraders buying more expensive homes, which drag the medians upwards. At the current time, the true rates of capital gains across Australia are likely to be substantially less than those reported by median price suppliers.”

Inner City Rents

"RTA general manager Fergus Smith said median rents for two-bedroom units in the Brisbane City/Spring Hill area rose by $30 a week from $510 to $540."

Wednesday, January 27, 2010

Ice Cream Lickers Are Back

"THEY are usually like a thorn in the flesh of real estate agents but this summer the "ice-cream lickers" are responsible for the early stages of a recovery in the holiday home market.

Real estate agents describe holidaymakers who inspect properties after looking at the advertisements in the windows of real estate agencies, yet rarely follow through with a purchase, as "ice-cream lickers".

Agents are reporting that it is these interested parties who are snapping up the bargain-priced homes in beach locations along the east coast. ...

Exclusive destinations such as Palm Beach, in Sydney's north, and Noosa, north of Brisbane, had also reported more interest.

Real estate agent Marcus Bengtsson at Tom Offermann Real Estate in Noosa said there were "absolutely" more inquiries this year compared with last year. "People come up here and fall in love with it," he said.

"It might be on their first visit or the second (that they decide to buy a property). They look at the local property magazines while lying by the pool."

Joe Buchanan of Firstlight International -- the offshoot of private equity player Blue Sky Capital -- said he now had 30 names on a reserve list for those wishing to acquire a share of the company's yet-to-be-developed luxury beachfront apartments on Noosa's Hastings Street.

Up to eight of the 20 units will be priced between $12m and $16m for individual ownership, while the remainder will be co-owned. "Over the Christmas holiday period, we have maybe had eight to 10 inquiries," he said.

While property prices in some holiday destinations have recently staged a recovery, they have fallen in price by about 10 per cent since the start of the global financial crisis, defying the trend of a stronger housing recovery in state capitals.

APM economist Matthew Bell said that in Queensland and NSW during December, prices were still not back to the levels they were during the boom more than two years ago, despite rising between 1 and 3.5 percentage points during the past six months.

Hotel and resorts analyst Dean Dransfield of Dransfield Hotels & Resorts said securing sales from holidaymakers could be challenging. "You have to call in bankers (and such people) and that type of work people don't want to do on holiday," Mr Dransfield said." Source: The Australian

Low Clearance Rate a Mega Auction on Gold Coast

137 properties were originally listed for sale at the large Ray White Gold Coast auction held on Sunday. 65 sold prior to or on auction day. That is a 47% clearance rate after at least a 4 week campaign. Not very good. And it seems that pricing achieved was not great, despite the big lead up publicity. In my view, auctioning non-unique apartments is not a smart tactic. Two apartments in Circle on Cavill sold for less than $400,000 each, furnished.

As reported in the Gold Coast Bulletin:

"But not everyone was optimistic about the property market, with two vendors at the auction, who wished to remain anonymous, claiming they fell short by about $130,000 over three Surfers Paradise units they had to sell due to family circumstances.

"I don't think the confidence is in the market," said the vendor."

A West End Love Story, in Brisbane

There is a very fancy website for Montague at West End. It is located behind Stockland's Koko.

See http://montaguebrisbane.com.au/. I think this was once called "The Wave". The development has a large number of very small apartments. Pricing starting from $290,000. Developed by Mirae Queensland Pty Ltd.

Sunday, January 24, 2010

Charlotte Towers and Vision


This is a photo taken today of Charlotte Towers, from Margaret Street, with the Vision hole in the foreground. Vision Brisbane is under administration.

Mortages and United States Residential Property

"MUCH has been said about the high rate of home foreclosures, but the most interesting question may be this: Why is the mortgage default rate so low?
David G. Klein

Related

Weekend Business: Richard Thaler on strategic defaults and home foreclosures.

After all, millions of American homeowners are “underwater,” meaning that they owe more on their mortgages than their homes are worth. In Nevada, nearly two-thirds of homeowners are in this category. Yet most of them are dutifully continuing to pay their mortgages, despite substantial financial incentives for walking away from them."

Full story

Soul - Juniper's New Development


Soul is a Juniper development at Surfer's Paradise, currently under construction. All apartments have ocean views that cannot be built out. The apartments are being sold furnished. Compared to Brisbane City apartments, they are large. For example, two bed apartments range in size from 122sqm to 131sqm including balcony. Courier Mail advertorial is here.

Example pricing includes:

3103 - $1,575,000

3402 - $1,545,000

3603 - $1,700,000

3604 - $1,800,000

3802 - $1,645,000

3803 - $1,750,000

3804 - $1,850,000

I have been told that only two 3 Bedroom apartments are still available on level 5 – 39

1805 - $2,295,000 (161 sqm)

2705 - $2,695,000

Saturday, January 23, 2010

Will Brisbane Apartment Prices Rise or Fall in 2010?

I do not know! The messages are mixed at present. My predication is that some buildings will have average price growth, while other buildings (e.g., those with a large number and % of investor apartments -- e.g. Aurora and Charlotte Towers -- or those that were aggressively sold off the plan during the boom -- e.g. Evolution) will have no price growth or price decreases.


Factors suggesting price increases for Brisbane apartments include:
  • increased migration to Brisbane
  • mining sector likely to remain strong
  • few large new apartment buildings being completed in the next 18 months
  • net returns of 5% or better for some apartments
Factors suggesting no price increases (or possible price decreases) for Brisbane apartments include:
  • likely interest rate increases in 2010
  • rents unlikely to increase significantly in 2010, and may even decrease for some buildings/areas
  • lack of first home buyers, many of whom purchase apartments
  • investors only purchasing when the price is right or the seller is desperate
  • difficulties for investors getting loans
  • banks are requiring a higher % of down payment, so investors have less to spend
  • valuations are more conservative, making it harder for investors to obtain highly geared loans
  • difficulties redrawing against existing loans to invest, because property prices have not increased significantly in recent times
Risks for the investor in Brisbane include:
  • foreign students loosing interest in Brisbane or Australia -- as they make up a significant percentage of renters
  • wages stagnate -- affordability (% of wages spent on property) already stretched, so unless wages increase, it is unlikely that property prices will increase significantly
  • council rates increasing
  • body corporate levies are already high (over $6,000 a year in some buildings), and may increase more this year
  • federal government limiting or removing ability to negatively gear or claim depreciation
  • unemployment increases

Quattro - "New" Spring Hill Apartment Building

Apartments in a new apartment building are currently being marketed, with the official launch next weekend.

The building is Quattro. All the apartments are two bedrooms, two bathrooms, about 84sqm internal. There are 4 apartments per floor, over 13 floors. There are 52 apartments in total. They have ducted air-conditioning.

The pricing starts at $450,000 and goes to $600,000, depending on floor and view. Expressions of interest have been submitted for all apartments below $500,000.

I suspect that some of the apartments will get a lot of noise from Turbot Street.

It appears from the website that the building manager plans to rent out apartments on a short term and overnight basis. The development is associated with Balmain Trilogy. The building has been sitting empty for a year, due to financial and legal issues.

Rents in 2010

  • 2009 weak year for rent growth
  • Still down in 2010
  • But will rise within months

RENTS across Australia stagnated and in some cases even fell in the December quarter, but are expected to rise later this year.

A report to be released by Australian Property Monitors today says last year was the weakest for national rental growth since 2002.

While APM flags a strong lift in rents is likely this year, property managers and landlords reported that the market had remained soft so far this month, which is typically the busiest month for the rental market.

Chris Rolls, managing director of the Gold Coast and Brisbane residential property manager Rental Express, said: "We have found this is the slowest start to the year for the last five years."

Mr Rolls, who owns a four-bedroom rental property in Brisbane suburb Kelvin Grove, said the contract for the property came up for renewal in 10 days and he had opted to keep the rent at $520 a week in the hope that the current tenants would not leave.

"The risk is that if you increase the rent, and they don't pay it and instead move out, I won't get the same rent. It was top rent 12 months ago," Mr Rolls said.


Harcourts New Farm owner and property manager Kylie Pridham agreed the tenant's reprieve - brought about by the global financial crisis - would not last long, with vacancy rates in Brisbane to remain about three per cent.

"We have had to reduce [the rent] on some properties by $50 a week, but that won't last," Ms Pridham told theAustralian Financial Review.

"As soon as the lease finishes in six months time those rents will be back up."

Source: Brisbane Times

Interest in the sale may be strong but the general property outlook for the year is a little more sobering, according to property analyst Michael Matusik. Mr Matusik warned that property was likely to be oversupplied this year. He cited factors including a shrinking average household size, less impact than expected from overseas migration and lots of empty houses around the country.

Mr Matusik said that after decades of overconsuming property, the past year had seen a more frugal mindset which could continue.

And he said the rental market was not as tight as some commentators claimed. Rental analyst Louis Christopher of SQM research said claims of an imminent increase in rents were optimistic.

"There is no evidence to suggest we will see significant increases in rents," Mr Christopher said. "Despite recent aggressive forecasts, increases of between 3-5 per cent in most areas are more likely, depending on what you are renting and where," he said.

His calculations put Brisbane's vacancy rate at 3.4 per cent last month, with 8603 homes available for rent. This is up nearly half a per cent from the previous month.

Source: Courier Mail

Sunday, January 17, 2010

South Bank Student Accommodation

Urbanest is operating a student dormitory accommodation building at South Bank, near the TAFE. It has a total of 713 rooms and studios, which are furnished and air-conditioned. The rooms are small and tight -- for example, 5 bedrooms will share a kitchen. And the pricing is amazing -- for example, a studio for one person is listed on the website as being $435 a week, or a bedroom in a 4 bedroom hallway is $336 per week.

For $650 a week, you could rent a large two bed furnished apartment in the Arbour on Grey, or for $750 a luxury two bed furnished apartment in Saville South Bank. So two students sharing a two bedroom apartment would do much better than renting in Urbanest.

Infinity

Meriton's Infinity Apartments has a webpage. It dwarfs nearby buildings, including Evolution.
Coming soon to Brisbane's CBD, Meriton's latest and most impressive apartment development to date - Infinity: 236 metres / 77 levels / views - unmatched. Welcome to where your new life starts but the horizon never ends. Soar across 360 degree views from sunrise to sunset, high above the Brisbane River and enjoy the best of Brisbane City living, day and night.

Rents and Medium Prices - Comment from Matusik

"Despite rents rising by 14% - according to the official figures (during 2008) - 70% of renters that year did not pay more rent and 60% of renters have never paid any more rent from the day they moved into the accommodation. Beware of any rent or even end price analysis based around median results. All that shows is what type of property sold or rented rather than a change in actual values. Resales analysis and lease renewals are the only way to truly understand what is happening in the residential market."

Are more high rise apartments needed in Brisbane?

Brisbane will need an apartment building boom on the scale of Dubai if it is to accommodate a forecasted growth in population by 2030, the State Opposition claims. However, he estimated as many as 1725 20-storey buildings would need to be built before 2031 in order to cope.

"It is areas like Indooroopilly, Chermside, Mt Gravatt that are designated to do it," he said.

The plan also nominates the Brisbane CBD, Carindale, Toombul, Mitchelton, Wynnum Central and Toowong. Mr Gibson said the difficulty was finding the land in these areas to build thousands more apartments.

"You go through street by street and you identify where you can build 82 new 20-storey building every year for the next 21 years and the land is not there right now," he said.

Brisbane Times & The Australian

Vision Brisbane Finally in Administration

It is not a surprise to learn that the companies developing the Vision apartment tower in downtown Brisbane went into administration yesterday. I wonder when the off-the-plan purchasers will get their deposits back?

See GCB.

Proposed Milton Development on Milton Road

More than 10 years after it was closed down and sold by Tennis Queensland, the Milton Tennis Centre, together with the adjoining Milton Bowls site, has a development application on it to create a new "Emporium" style precinct, with residential, retail and commercial facilities.

The Seymour Group, owned by Queensland business identity Kevin Seymour, put in their application to the Brisbane City Council just before Christmas and although it is "extremely early days", the group are very excited about their plans for this famous parcel of land, according to a company spokesperson.

"The Milton Tennis Centre site is iconic in Brisbane and it has been vacant for so long. We’ve written into the code that we’ve submitted to council that there will certainly be a reference to the original centre somewhere in the new development," the spokesperson said.

Located at Frew Park, Milton Rd was the home of Queensland tennis from 1915. It consisted of 19 hard courts and four grass courts and hosted eight Australian Opens and 16 Davis Cup ties (including three finals). It hosted its last Davis Cup tie in 1990, the quarterfinal win over New Zealand featuring John Fitzgerald and Wally Masur.

Lindsay Davenport won the last world tour event at Milton in 1994, after which the wooden grandstands were declared unsafe. The Milton Tennis Centre closed in 1999 when Tennis Queensland sold the property to cover more than $1 million in debts. Doncaster Holdings sold the site to Multiplex for a reported $5.9 million in April 2002. Derelict and having suffered two fires, the stadium was demolished in May 2002. It has sat deserted and derelict since then.

It is understood the Seymour Group paid a total of $30.15 million for the tennis and the bowls sites in 2008. It currently has approval for 174 residential apartments but the Seymour Group wants to create a whole new precinct for both plots of the land, which total about 3.2 hectares.

"We’re thinking it would be a modern version of the Emporium in the Valley," the spokeswoman said.

Monday, January 11, 2010

Brisbane Apartment - medium price increases

The medium apartment price for Brisbane, as reported by RP Data - Rismark, is up 10% for the period January to November 2009. This is better than the increase in the medium price for Brisbane houses.


The medium price for Brisbane apartments is listed as $375,000, and the time on market for apartments in Brisbane is said to be 29 days.

Saturday, January 9, 2010

Devine


The Courier Mail has recently published two stories relating to David Devine, founder and major shareholder of Devine Ltd. One story showed Mr Devine living in a penthouse in Kangaroo Point (not built by Devine). The story in today's paper was not flattering.

Two days ago, there was a story titled "Devine sues former employee over espionage claims" which started "Devine Industries Pty Ltd is suing the former personal assistant of founding..." Links on other websites include the summary: "TWO of Queensland's biggest construction firms are in a legal battle involving claims of commercial espionage, fraud and embezzlement of more than $500,000."

The Courier Mail has removed this story from its website and did not include today's story on its website. I wonder why?

The link to the story that has been taken down is:http://www.news.com.au/couriermail/story/0,23739,26553326-952,00.html

"Devine Ltd said is not a party to a case before the Supreme Court being reported in the media, but rather Devine Industries Pty Ltd, a privately-owned entity by David Devine.

The company was responding to the media articles published in The Courier Mail and The Herald Sun." See Business Spectator.

Interestingly, both David Devine (currently listed as managing director of Devine) and Ken Woodley, marketing director and also a major shareholder, do not live in Devine built buildings. According to RP Data, Mr Devine lives in a penthouse apartment in a building at 55 Darragh Street, Kangaroo Point that is over 1000 sqm in floor area, has 4 bedrooms, 4 bathrooms, 4 car parks - that he paid $2.5M in 1998. Mr Woodley lives in a subpenthouse in a Mirvac building, Quay West on Alice Street in Brisbane.
(Photo of Ken Woodley, on the right.)

A few years ago, both Mr Devine and Mr Woodley started legal actions to change the body corporate fees that they paid for their homes. They were successful in having their body corporate fees decreased. As a result, the body corporate fees for the owners of smaller, less expensive apartments in these buildings increased.



Property Directories

House Hunters Directory
Real Estate agents

Worldwide real estate companies directory and property buyers and sellers guide.

Friday, January 8, 2010

Google Search - Shows Less Interest in Real Estate

Google Insights allows you to examine what people search for on Google. In the real estate category, Google shows that searches are down for 2009, particularly in December 2009. (Google shows that the peak month for searches for real estate in Queensland and Australia are January followed by September). December 2009 was worst on record.



Real Estate Marketing Technology

This is an interesting websites for real estate agents, involving the use of technology.

New Development on Ann Street

MacLachlan & Ann -- a new development in a central area of the Valley, selling off the plan soon.

Charlotte Towers For Sale

Following on from the post listing Charlotte Towers apartments that sold in 2009, I noticed that there are a huge number of 1 bedroom apartments currently listed for sale in this building. Most do not have a car park. In my view, a one bed in Charlotte Towers without a car park is worth about $305,000 to $325,000, depending on floor and view. There are a number of other buildings in the city area where there are no apartments for sale at all.

Wednesday, January 6, 2010

Misleading Market Commentary

There is interesting market commentary from Chris Joye from Rismark, rebutting silly and factually incorrect statements published by the stock spruikers, Morning Money.

See Chris' blog entry, located here.

Friday, January 1, 2010

Alderley Square

PCN Projects, who are the developers of the proposed El Dorado Village at Indooroopilly, have launched a website for a new project at Alderley, called Alderley Square. There are little details about the project on the website.

"Alderley Square will provide a village-style, mixed use community that is set to revitalize and reinvigorate the heart of one of Brisbane's most established suburbs. It will combine the finest of residential apartment living, a thriving retail centre and bustling commercial precinct, all centred around a fully integrated transport network. Its restaurants, cafes and public gathering spaces will be evocative of those found in European capitals. And it's all just 15 minutes from the CBD."

Review of My Predictions

I made predictions at the beginning of 2008 and 2009. Both times, my predictions were mostly wrong! I guess I should stop making predictions about real estate.


In 2009, the Brisbane apartment market went backwards in the first half of the year, and regained some of the lost ground in the second half of the year.

In the new apartment market, there were more cancellations of projects then new projects starting. Most developers struggled to achieve off-the-plan sales. The new luxury apartment market died. Most of the pre-sales were achieved for budget priced developments, of small apartments. A number of people who purchased off the plan in the boom times were unable to settle in 2009 -- often because the bank valuations came in much lower than the contract price. Developers dropped prices and cancelled projects.

Prices dropped in the resale apartment market. Rents did not rise, and in some instances, took a minor step backwards. For a number of sales, the vendor lost money on the resale.

The Gold Coast and Sunshine Coast markets were harder hit than Brisbane.