Friday, December 24, 2010

Capital Growth

In December's Australian Property Investor magazine, there is a chart from Collier's that lists average capital growth and average hold years for certain Brisbane apartments, as at August 2010. The capital growth period and methodology to produce these figures is not disclosed:

Casino Towers - 5.9%, 3.7 years average hold
Aurora - 5.4%, 3.6 years average hold
Felix - 5.25%, 3.8 years average hold
Quay West - 4.9%, 5.1 years average hold
Festival Towers - 2.3%, 3.9 years average hold
M on Mary - 1.1%, 2.9 years average hold
Charlotte Towers, 0.9%, 3.5 years average hold.

My guess is that the hold period is calculated from when the off-the-plan contract is signed, not when settlement takes place.

Off-the-plan investors in Devine's Festival Towers and Charlotte Towers have clearly lost money. A word of warning for investors in Devine's Hamilton Harbour. Devine's Casino Towers has done ok, but that is unlikely to be repeated now that Jupiters is building a massive hotel across from Casino Towers that will block much of this buildings river views (but not the western sun). Out of this group, my pick would be Quay West -- only 132 apartments, with a long hold period and good capital growth, never to be built out views.

Differences in Apartments

A recent Adjudicator's decision regarding Admiralty Towers II highlights a factor that buyers and valuers sometimes overlook -- that is, some apartments have different rights and facilities than other apartments in the same building. In Admiralty Towers II, there are two swimming pools -- a lower pool and a pool on the top floor. Each pool also has a gym. The top floor pool also has a roof sundeck.

The bylaws of the building state that the owners of lots 126 to 193 may use both pools and gyms. The owners of lots 1 to 125 may only use the pool and gym on the lower floor, and cannot use the top floor pool, gym or sundeck.

A resident challenged this bylaw. The challenge failed. These kind of bylaws are not unfair or unreasonable. See Ref 0915-2010 issued 23 December 2010.

Thus, the value of an apartment on a higher floor should be more than a similar an apartment on a lower floor -- not just because of the views, but because the apartment has access to more facilities.

The moral of the story: when buying or renting, check to see if any apartments have access to exclusive use facilities. Make sure you are doing a like for like comparison when looking at recent sales data.


Ray White Market Update

I received a Ray White CBD Residential Market Update this week. Some extracts:
  • "we also have 37% more properties for sale so buyers have more choice"
  • "The inner city unit market continues to be popular..."
  • "While there is an increase in the number of listings, there is no evidence of an oversupply of units in the marketplace."
  • "Projects that are going ahead are price targeted toward the lower end of the market."
  • "there has been an abundance of rental properties available so far this year in the Inner City causing the vacancy factor to over around 4%" (compared to Sydney and Melbourne at 1.2%)
  • "Another factor is the rapid fall off of overseas students coming to Brisbane to study."
Ray White also reports that 91% of the properties that it auctioned this year sold, with an average of 61 days to sell. This compares with private treaty sales being 50% sold within 80 days. Doesn't sound like auctions are a fast way to sell. And 80 days time on market for private treaty is very bad -- and half of the properties listed for private treaty don't sell!! Not a good market for sellers.

Tips for 2011

Here are my tips for 2011 in relation to Brisbane apartments:

1. If you don't have to sell, don't sell. Wait until 2012 if you can to sell.
2. If you have to sell, don't sell by auction.
3. Don't buy off-the-plan.
4. If buying: Focus on good quality apartments in good locations. A cheap apartment in a less than desirable location is not a good investment.
5. Don't take risks.

The Oracle - Big Losses

INVESTORS who bought into the $850 million Oracle Broadbeach development on the Gold Coast have taken losses of up to $1m.

Receivers of the company behind the failed project are vowing to pursue legal action over the unsettled 200-odd apartments in the two-tower complex, once promoted by author and former model Tara Moss.

One Oracle apartment owner said he was aware of people who had settled on apartments located on the 44th floor for $3.5m and had since sold them for $2.5m.

Michael Kuhne said his late wife bought one of the three-bedroom Broadbeach apartments off the plan for $2.4m, and it was yet to settle.

He tried to sell the property last year, but there were no buyers. "I am trying to get rid of it and can't," he said.

KordaMentha announced on Thursday night that South Sky Investments, the Niecon-related company behind the Oracle, had been placed into voluntary receivership by director Michael Nikiforides. The Broadbeach project was highly leveraged with several financiers, including the National Australia Bank, sources said.

Queensland property analyst Bill Morris said the number of new high-rise apartments for sale on the Gold Coast had almost halved to about 750 in the past year, and the volume of sales for the three months to November was the lowest level since 1981.

"Things improved for a while, but the Gold Coast in particular has died. There is a general expectation in the market that prices could still fall," he said.

The two 40- and 50-storey Oracle towers have 505 apartments, a five-star hotel, shops and commercial office space and are among the tallest on the Gold Coast.

It is the second Niecon-related venture to fail this month after the company linked to the Nirvana By The Sea residential Gold Coast project, Kirra Beachfront Investments, was handed over to its financier.

Attention is turning to other luxury apartment towers on the Gold Coast, such as Juniper's Soul, a Surfers Paradise luxury apartment project, which settles at the end of next year, and the Hilton Surfers Paradise Hotel & Residences, which is also settling next year.

Source: The Australian

2010 Brisbane Apartment Awards

These are our awards for 2010:

1. Worst Real Estate Agent

Tavis Callard, principal of Open House Reality. Tavis signed a contract to purchase a house for himself, and never settled. He did not pay for advertising for this business, and is being sued for that. He ran Roma Properties (onsite manager for two apartment buildings) into the ground, and it went bankrupt. There are allegations that Roma Properties improperly used another company associated with Tavis to do work for the building, and the body corporate received a payment to settle this claim. Tavis has now filed for bankruptcy for himself. Would you let this man list your property for sale?

2. Wildest Advertising Claim

FKP Properties wins this for their overpriced The Milton development. Their sales agents are giving out printed information to potential investors about future property values. They have a sheet of paper showing investment returns for a 2 bed, 1 bath apartment listed at $650,000. The prediction is that this apartment will be worth $807,500 on completion of the project in 2013, and will be worth over $1M by 2016. The predicted rent is over $720 a week in 2013.

3. Worst Investment

This is a hard one. Many investors who purchased off-the-plan in 2006 or 2007 had to settle this year. Some were unable to get bank valuations anywhere near settlement. The contenders for this category are:
  • Mirvac's Tennyson Reach
  • Niecon's The Oracle at Broadbeach
  • Raptis' The Hilton Surfers Paradise
  • Evolution.
I think they are all bad investments, so maybe a four way tie!

4. Biggest Delayed Development

Again, a number of contenders for this category. There are many big developments that have been delayed indefinitely -- Trilogy, Evolution, Empire Square, FKP's Albion Mill. South Point is another contender here -- although it looks about to finally begin.

But the winner is El Dorado at Indooroopilly. Construction has been about to start for years now. What is going on at this development?

5. Most useless contribution to real estate

The winner is clearly the Queensland Office of Fair Trading. It is supposed to protect consumers and regulate real estate agents. What a poor job it does. Formal complaints were made about Tavis Callard, but they did nothing! And what about the complaints made to OFT regarding the illegally operating offsite agents on the Gold Coast, such as A1, Tailly and Accommodation One. Despite complaints from the public, OFT did nothing, and eventually, these people ran off with hundreds of thousands of consumer deposits. See prior posts. What a bad job OFT does!

Saturday, December 18, 2010

Which way is the market heading in Brisbane?



RP Data reports low auction clearance results for Brisbane for last week:

APM reports the following top sales for Brisbane City apartments (in the 4000 post code) -- which may not be accurate:



New Gold Coast Apartments - Colliers Report

The Gold Coast new apartment market has seen a continued decline in stock levels during the third quarter of 2010 to sit at its lowest level in six years

KEY FINDINGS.....

  • The Gold Coast and Tweed Coast new apartment market reported a total of 126 unconditional sales during the third quarter of 2010.
  • There were a total of 1,588 apartments available for sale at the end of September representing 3.1 years supply based on the current selling rate.
  • 2 projects sold out during the third quarter, and 2 projects were added.
  • The Southport / Labrador Precinct was the standout performer for the quarter with a total of 57 sales.
  • The high rise sector recorded the highest number of sales for the third quarter with 79 (63%) of the total 126 recorded.
  • The average sale price of a new apartment during the third quarter was around $680,000.

Pets in 212 Margaret

As reported in a prior post, there was a decision relating to pets in 212 Margaret apartment building in Brisbane. Here is the Decision.

It is interesting to read the submissions of some apartment owners who tried to prevent pets in other people's apartments. Maybe we should have a rule that says no children and TVs in their apartments. I have lived in expensive apartments in other cities where most people have pets. Some people in Brisbane are quite backwards! It is also strange that people have argued that there should be no pets because the building is being used (illegally) as a hotel!

"Jo Anast, owner of Lot 81, says she would like the possibility of having pets in the scheme and is in favour of the application.

Shane Doepel and Shaun Stevens, owners of Lot 31, say that the building is not suitable for housing pets in any circumstances, being a high-density CBD residential development. Most of the units are let as part of a very busy hotel. The scheme only has “modest common areas.” Owners who are buying into the scheme do so knowing that there is a “no pets” policy which in their case influenced their decision to buy.

Frank and Marilyn Moes, owners of Lot 61 (unit 1501) say that they purchased because of the “no pets” policy. They do not believe that living in the city is an appropriate environment for animals such as dogs and cats. There are no immediate close areas where a dog can be exercised, and dogs and cats should not be in all day but have a yard to play in and access to fresh air. Mr Moes also has an allergy to animal hair.

Rachel Findlay, owner of Lot 23 (unit 805) supports the application, believing it unreasonable to ban all pets. She has lived in CBD buildings which allow pets, and the animals have not been disruptive. In “Aurora” at 420 Queen Street, it is one of the reasons why the units are highly sought after. The body corporate should allow pets within reason such as pets below a certain weight/size.

Maria Barnett and Paul Schaller, owners of Lot 121 (unit 2701), say that before purchase they checked that pets were not allowed. He has severe allergies to dog and cat hair and would not be able to use the lifts or foyer if there was animal hair in the carpets. They say that in their experience with tenants, fish tanks can cause damage to carpets, clog drains and leave stains. The building is used as a hotel so a blanket ban on pets in not unreasonable. No matter how well- behaved pets are, they would cause extra work for the management and result in blocked-in balconies which would change the exterior of the building.

Verne Baistow, owner of Lot 95 (unit 2203) says that he supports a “no pets policy.” The units are too small to provide adequate room for an animal, and the units are used for hotel accommodation. “No animals are allowed in hotels” so there should not be any animals in the scheme building either. He is also concerned about health issues and noise.

Colin Yeoman and Louisa Farthing, owners of Lot 33 (room 1005) say that the registered by-law should remain as it is, since the building is inappropriate for the housing of pets.

Christine Torbey, owner of Unit 1801, says that the building is an inappropriate residence for pets, especially dogs and cats. Animals are unpredictable and it is not possible for an owner to control entirely an animal’s behaviour. She says that this is a “standard rule in city apartment blocks generally.”

Gregory Firth, owner of Unit 603 says that the scheme should not entertain pets at all."

"Likely to be orderly"

AUSTRALIA'S house prices are over-valued by 5 per cent to 10 per cent but any correction is ''likely to be orderly'' and the result of income and rent rises rather than a collapse in prices, says the International Monetary Fund.

See Brisbane Times

Brisbane Apartment Report from Colliers

The Brisbane Apartment market has recognised its strongest quarter of sales in over six years and suggests that Brisbane apartments are back on the radar for investors seeking low priced, yield driven product.

KEY FINDINGS.....

  • The Inner North was again the top performer, leading Brisbane purely through supply of price pointed apartments.
  • Q3 2010 finished with 1,584 new apartments available for sale in Inner Brisbane.
  • 425 unconditional sales were made, suggesting a new unit supply of 11 months.
  • The weighted average sales price of new apartments in Brisbane for Q3 was $534,894.
  • The median price of units in Inner Brisbane was $445,000.
  • High levels of residential supply are expected to enter the market in the short term.


South Point


The development, which incorporates the Heritage listed Collins Place building, will include three separate structures on the 0.85 hectare parcel of land.

A 20-storey building on the corner of Grey Street and Tribune Street will include a five-star hotel and 210 apartments.

The Emporium Hotel, Southpoint will include 132 rooms as well as a day spa, gymnasium, boutique conferencing facilities, restaurants and bars.

A 17-storey building at the centre of the site will consist of 2 storeys of retail including a full-range supermarket and 15 storeys of commercial offices. The upper level of the retail component will offer direct connection to the rail platform.

A third 24-storey building, on the corner of Vulture and Grey Streets will comprise 248 one, two and three bedroom apartments.

The development will be constructed in separate stages to meet the anticipated early demand for both the residential and commercial components.

South Point will bring a diverse range of new audiences to South Bank for both work and play and it will help to cement Grey Street as one of the great streets in Brisbane.

See South Bank newsletter.

Friday, December 17, 2010

The Oracle Goes Bust

Not unexpected - The Oracle tower's developer at Broadbeach went bust this week. It seems that the bank valuations for the off-the-plan sales were way less than the contract price, and so many apartments did not settle because the purchaser could not get finance. It seems that the banks were putting pressure on the developer to settle at lower prices. A downward spiral.

Admiralty Apartment Report

Colin Walsh from Ray White issued a report recently about the Admiralty Precinct. Here are some extracts:

Admiralty Quays

  • "one of the most sought after residences within the Brisbane CBD"
  • three bedroom sale for $1,350,000
  • 2 bed type C average price 2010 = $780,000

Admiralty Towers I

  • "Brisbane CBD's most tightly held residential apartment building"
  • 5 sales recorded this year
  • 2 bedroom sold for $750,000

Admiralty Towers II

  • "one of the most prestigious and desirable buildings in the Brisbane CBD"
  • 8 sales recorded this year
  • 3 bedroom sold for $1,063,800
  • 2 bed type C average price 2010 = $718,000
  • 2 bed type B average price 2010 = $838,000

Skyline

  • 15 sales recorded this year
  • 2 bed type J average price 2010 = $582,500
  • 2 bed type I average price 2010 = $647,100

Riverplace

  • "most affordable riverfront residential building in the Brisbane CBD"
  • 14 sales recorded this year
  • 2 bed type E average price 2010 = $527,500
  • 2 bed type B average price 2010 = $720,000

Aerial Photos of Brisbane

Mirvac's Newstead Waterfront project

Mirvac's Tennyson project

Pradella's Water's Edge

Kelvin Grove Urban Village

Chermside

South Bank

(photos taken September 2010)

Saturday, December 11, 2010

Casino Towers to Loose River Views

A new highrise hotel is to be built on the old State library site will block out river views from Casino Towers. So take care when buying in Casino Towers!

Friday, December 10, 2010

Apartment Sales Data

Double click image to make larger.

Real Estate Agents Say Ideal Conditions for Investors

The real estate agents industry lobby group, REIQ, issued a press release today, putting a positive spin on apartment sales in Queensland:

"Reduced demand for investment properties is providing ideal conditions for buyers, according to the Real Estate Institute of Queensland (REIQ).


Over the September quarter, median unit and townhouse prices held steady in most areas of the state, while demand for properties usually targeted by investors and first home buyers reduced markedly as economic conditions and higher interest rates sidelined buyers.


Preliminary sales in the $350,000 to $500,000 price bracket across the State fell more than 20 per cent compared to the June quarter while sales in all other price brackets held their ground.


“The number of first home buyers has fallen since their high of last year, however, we anticipate demand from first-timers to continue to gradually increase next year,” REIQ managing director Dan Molloy said.


“Investors have also been sitting on the sidelines, with investment demand currently half of what it is was during 2007.


“Investors and first home buyers are usually competing for the same affordably-priced properties but the current lack of competition between these two buyer types has created ideal buying conditions, especially for investors.”

Sunday, December 5, 2010

US News

"LOOKING for a deal in a down market? As winter sets in, the fruits of desperation — foreclosure sales, short sales, auction sales and deep discounts — are appearing in bountiful number, if anyone out there is hungry for a bargain."

TWO-BEDROOM apartments have long been the workhorse of the New York City real estate market, accounting year after year for the largest percentage of apartments sold.

When the recession hit, buyers fled the market and prices fell across the board. After things stabilized in late 2009, the market share for two-bedrooms had dropped from a typical 40 percent to as low as 25 percent, because more people had found that they could afford three-bedrooms, which took sales away from two-bedrooms.

Now, after a lull that has lasted for more than a year, two-bedrooms are back.

NYTimes

Real Estate Investors Look to the Future, and See Signs to Buy Apartment Towers


FOR some New Yorkers on the hunt for an apartment, the must-have item in the search is nothing as prosaic as a walk-in closet or a second bathroom. It is a number — a lucky number.

Saturday, December 4, 2010

Brisbane Market About To Get Worse?


RP Data reports the following:

"The number of properties being advertised for sale nationally has risen sharply during the spring selling season of this year and the current volume of stock on the market is higher than those levels recorded during the depths of the GFC. ...

Across the major states, total listings are at the highest levels within Queensland. Across the state there are currently 75,655 properties advertised for sale which is the highest volume since RP Data started tracking listing volumes in 2007. ...

Despite Queensland being the country’s third most populous state, the number of property listings in Queensland are 15% higher than what is being recorded in New South Wales and 61% higher than Victorian listings. Since September 2009, Queensland has consistently recorded a greater volume of stock advertised for sale than that within New South Wales. ...

Within Brisbane and Hobart the number of properties advertised for sale are at their highest level since the beginning of 2007. ...

The real test for the property market will be around February of next year. Last time listings mounted to similar levels as they are currently the number of properties advertised for sale did not return to the pre Christmas levels. During the other two post Christmas periods detailed the volume of listings rapidly returned to pre Christmas levels in February. Should listings return to current levels it will indicate that there are many vendors who, for one reason or another, are willing to brave the slow market conditions and press ahead with the sale of their home. If listings don’t return to their current levels around February it probably means that many vendors have reassessed their position and preferred to hold off selling until conditions improve. Overall, listings data during the early part of 2011 will provide a very timely indicator and significant insight into the overall health of the Australian residential property market. "


More Details from Colliers Apartment Report

A post below mentioned the Colliers September 2010 Brisbane Apartment report. See "Why Are Colliers Optimistic". Some more details:

See this report:

Lachlan Walker, Colliers International project management & research - residential, says the Brisbane apartment market is in a similar position in the property cycle as it was more than a decade ago, where the market was looking more positive and just a few years from a major property boom, following a substantial period of depressed market conditions.

"The resounding theme for the September 2010 quarter is that the Brisbane Apartment market has made strong progress in recovering from the effects of the GFC," he says.

"It has been a difficult two years since the impacts of the declining US economy impacted the Australian property market, however the most recent quarter has seen the strongest rate of sale for the Brisbane market since 2004."

The report revealed that there were 425 unconditional sales of new apartments within Brisbane's Inner Ring, encompassing the five kilometre radius from the CBD, representing an increase of 21 per cent per cent from the 276 sales recorded in the June 2010 quarter. This brings the total unconditional sales for the 2010 year to-date to 977 transactions for Brisbane's Inner Ring, 182 more transactions than recorded for the entire 2009 calendar year. It must be noted that 32 per cent or 135 of the 425 unconditional sales were recorded in Laing O'Rourke's new residential release, M & A, in Brisbane's Fortitude Valley.

Other strong performers were FKP's The Milton to be developed by FKP which registered 68 unconditional sales for the three month period, as well as Devine's Riverside Hamilton and Aria Property Group's Station 16, which saw 41 and 42 sales respectively.


More Losses

Mirvac's Tennyson Reach: Apt 3302 is listed for sale at "half price". This is a three bedroom riverfront apartment (on a low floor). Approximately 150sqm. Listed for sale for $865,000 (a huge loss for the current owner).

Riparian, Apt 4504 at 71 Eagle Street. Sold by Mikki Finlay for $1,286,000 at auction last week. 2 bed, 2 bath, 2 car, 186 sqm. Last sold in March 2006 for $1,575,000. Good job Mikki, you only sold at a capital lost of $289,000 plus stamp duty. Hope you didn't charge commission?! Maybe sellers would do better listing on eBay?

Buyer Confidence Low

Extracts from a story in today's Courier Mail:

HOMEBUYER confidence has taken a dive in southeast Queensland with predictions of more pain to come.

While auction clearance rates have been on the way down for months, auctioneers are now reporting a drop in those even registering to bid.

Auctioneer Jason Andrew said only half the auctions he held last week attracted bidder registrations – significantly down on the highs of 80 per cent over the previous two weeks.

"Sixty one per cent of the properties we auctioned did not attract a genuine bid," he said.

" One property in particular sold for almost $300,000 under the vendor's original reserve."


Thursday, December 2, 2010

Hotel To Block Apartment Views

A new highrise hotel complex is planned for downtown Brisbane. If built, it will be located next door to the Vision hole, and adjacent to 212 Margaret and River City Apartments. It will block views from apartments in both buildings, so take care!

It will be located at 103 Mary Street, and will be 32 storeys, with 230 apartments or hotel rooms, but only 53 car parks.

See Brisbane Times.

Top End Heading Towards The Bottom

Here is evidence that, despite what real estate agents and developers tell you, the top end apartment market is not going great. Many people have overpaid in the past 4 years.

Apt 80 in Flow, at West End, now listed for $1,850,000. This is a massive 4 bedroom, 3.5 bathrooms, 4 car, riverview penthouse apartment. It is 272 sqm internal, and 370 sqm total floor space. It has been for sale for a while. It went to auction in March 2009 and did not sell. (It was purchased off-the-plan in 2006 for over $2.3M. I think a real estate agent's investment company purchased it, but am not sure. So with stamp duty and interest, a loss over well over half a million bucks!)

By comparison, Apt 23, on a lower floor (3rd floor -- partial river views) - 3 bedrooms, was listed for sale by the developer for $1.4M in November 2007.

Or the same developer, Pradella, was selling apartments off-the-plan in Waters Edge next door in May 2008 which are not as good for $1.9M to $2.2M (these are A1 and A2 apartments, 159 sqm, 3 bedrooms).

So you can see that prices being paid for expensive apartments have not held up. (Flow and Waters Edge and Riverpoint are not the greatest locations, looking west, in a semi-industrial area a long walk from any facilities. Infrastructure touted by developers 4 years ago has not arrived.)

If Flow has been a bad investment for some, what about a $4.5M capital loss. See this story.