Monday, April 19, 2010
Australian Property Monitors (APM) – a fully owned subsidiary of Fairfax Media – last month published a study which outlined what houses across Queensland (and by suburb) could be worth in three, five and ten years’ time. Needless to say, the projected growth trajectory is almost exponential, rising on average by 11% per annum across Queensland over the next decade. Prices rose by 11.7% each year, across Brisbane for example, during the noughties. Hopefully, APM did more work than just assume that the past will be repeated. But one wonders.
A check on 25 randomly selected Queensland suburbs finds a pretty consistent projected growth pattern, with values expected to rise by 30% in the next three years, then by just 10% between year four and five and then by a whopping 115% between the sixth and tenth year. By 2020, just short of 600 Queensland suburbs are expected to enjoy a median price over $1 million; and 54 areas could be, on average, priced over $2 million. The median Brisbane house price, today, is around $440,000.
What is driving the growth in five years’ time? Why does the growth rate plummet in year four? Surely there is something more than just “demand exceeding supply and strong economic growth, particularly in resources,” as quoted in the accompanying media commentary. Please APM, explain to us your methodology, as it is absent from the published forecasts.
Also puzzling is why Hamilton’s house values are expected to drop 20% over the next three years, whilst neighbouring Ascot’s prices are forecast to rise by 7% over the same period. And why just 7% – isn’t Ascot (and Hamilton for that matter) in a prime spot, with heaps of infrastructure support? Similarly, South Brisbane’s values are to drop by 8% by 2012, but West End’s values will rise by a staggering 33% or $236,000. Ditto for Surfers Paradise, down 36% in three years, versus a projected 20% jump for adjacent Broadbeach. I could go on and on. Please, APM, explain these anomalies as well.
The Gold Coast market, and in particular Surfers Paradise, has been getting a caning of late. According to the latest Queensland government valuations issued in March, ocean-front land has fallen by 30% on the coast, with residential values down 18% in Surfers Paradise since 2007, when land was last valued on the Gold Coast. According to a recent study by the REIQ, median dwelling prices in Surfers Paradise dropped by 30% during 2009.
Now there is no question that the Gold Coast is doing it tougher than the rest, with our data – which is based on cleaned up resales – showing that apartment values fell 9% during 2008 and a further 4% last year. But ocean-front apartment values – in Surfers Paradise at least – and again based on individual resale analysis, actually rose last year. Up by 8.9%!
There are two messages here. Firstly, in order to get a true handle on the residential market it pays dividends to narrow down the sample set and investigate individual resales. Sweeping statements – and especially based on suburb, or worse still, postcode analysis – are nearly always incorrect.
The second message comes in the form of a question. Why does the media (and too many punters, as well) accept these forecasts as if they are gospel? I understand why the Fairfax Media might, but the Murdoch Press? Maybe digging around a bit is too much work for journos these days. A recent study commissioned by crikey.com suggests this is the case, with nearly 55% of the stories published across ten major Australian newspapers late last year being driven by media releases or public relations firms.
So what do I think prices will do over the next decade? In short, my answer is…not as much as they did over the last ten years.
Dwellings are overpriced but not (yet, anyway) oversupplied. The current “boom” is likely to run out of puff within the next twelve months, on the back of rising interest rates and declining affordability. We could “crash and burn” like the US recently did or go through a long, drawn-out adjustment, as happened in the 1990s. The latter means that residential values will be flat until affordability is rebuilt by a combination of gradual increases in household incomes and cyclical declines in interest rates. Given this scenario, growth over 5% per annum would be a strong result.
It’s back to the future, if you ask me.
Sunday, April 18, 2010
- higher interest rates
- risk of lower numbers of overseas students and tourists visiting Australia (including due to the higher Aussie Dollar)
- The review of the Australian Tax System, due within weeks, which will likely impact the treatment of capital gains for real estate, and probably recommend the removal of negatively gearing of losses from investment properties to offset income tax from income earned from other sources
- difficulties in obtaining investment loans, and the banks requiring a higher deposit for investment property loans
- increased school fees, which impacts the ability of many families wanting to invest in property
- increased body corporate fees and rates, making returns less
- poor performing vacation rentals and low vacation rental returns, often less than 2% net returns
Saturday, April 10, 2010
Sunday, April 4, 2010
- Mr Callard, and his family, including his father, has a number of companies and trusts associated with them. These include Roma Properties, that has the management rights for Admiralty Towers Two. Roma Properties also had the management rights for Admiralty Towers One, but after a number of breach notices from the body corporate, sold the management rights and made a payment of more than $100,000 to the body corporate in relation to their breaches.
- Roma Properties' conduct is being investigated by the body corporate for Admiralty Towers Two. It seems that a company called Brisbane City Cleaning and Maintenance, associated with Tavis Callard, billed the body corporate and owners who it managed properties for. See letter.
- There is was a recent success complaint against Roma Properties before the Office of Fair Trading.
- Mr Callard and his wife signed a contract to purchase a house at Pullenvale at the end of 2009, but failed to settle and lost their deposit. They moved into the house prior to settlement on a lease, but have not paid their rent. When the Callard's moved out, the house was in a terrible mess.
- Mr Callard has not paid other accounts, such as hospital bills.
- At least one company associated with Tavis Callard is being sued for failure to pay an account. This appears to relate to payments for signs for the Open House business. See this pending District Court lawsuit, filed by Adshel Street Furniture in October 2009 for money owing.
- Roma Properties has failed to pay accounts on behalf of the owners of properties it manages, thus causing late payment and interest fees to the owners.
- Another lawsuit involving Roma Properties and Admiralty Towers Two is detailed here.
- There have been all sorts of issues involving the Callards and their indirect ownership of a coffee shop premises (now vacant) at Admiralty Towers. It is now listed for sale by auction.
Saturday, April 3, 2010
The economist from Australian Property Monitors, Matthew Bell, a Fairfax Media-owned company, says Brisbane (and Queensland in general) will be one of the better performers of 2010, along with Perth."