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

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