Sunday, February 27, 2011

RP Data's Quarterly Review

From RP Data's Quarterly Review for the December 2o1o Quarter, released February 2011:

Overall, the fourth quarter of 2010 has been characterised by continuing soft conditions within the residential property market whilst Australia's economic conditions are the envy of many other developed countries. For 2011 we are forecasting minimal property value growth as the market continues to transition out of the growth phase and from a market favouring the vendor to one where buyers are back in the driver's seat.

  • Brisbane's capital gains have been well below the combined capital city average since the start of 2009. Compared to Brisbane's longterm and medium term gains, the last 12 months has recorded a very weak performance.
  • Average discount levels currently sit at 8.6 percent for houses and 6.6 percent for units and at the same time during 2009 discount levels were recorded at 5.4 percent for houses and 4.5 percent for units.
  • Houses in Brisbane are currently taking an average of 60 days to sell whilst units take 55 days. In comparison, 12 months prior houses took 40 days and units 37 days to sell.
  • Of those Brisbane dwellings sold during the last year vendors had on average owned houses for 8.1 years and units for 6.4 years.
  • Brisbane's population was estimated to sit at just above 2 million persons at June 2009 and has grown at 2.7 percent over the 12 months, or by an estimated 52,104 persons.
  • During the last 12 months, value growth has been significantly lower than five year and ten year average levels with house values falling by 1.1 percent and unit values falling by 0.2 percent. Across the capitals, only Perth has recorded lower capital growth during the year.

  • There has been an improvement in unit rentals during the last quarter, increasing by 6.9 percent whilst house rents have softened by 1.0 percent.
  • With rents easing over the last year they remain well below their peak of $413/week for houses whilst unit rents are currently at an all-­‐time high.
  • Gross rental yields have generally been falling since the beginning of 2009 however, there has been some recent improvement with yields recorded at 4.3 percent for houses and 5.3 percent for units.

Flood Map

Here is another Brisbane flood map for January 2001. It does not easily tell you which buildings had basements that filled with water.

Soleil Marketing

A sign in the Soleil window has the following information.
Vendor finance - 5%
Prices as at January 2011
Studio - from $341,000 - estimated rent $330 to $380 per week
1 bedroom no parking - from $363,000 - estimated rent $400 to $470 per week
2 bedroom with parking -from $550,000 -estimated rent $550 to $650 per week
2 bedroom plus study with parking - from $659,000 - estimated rent $600 to $700 per week
3 bedroom with double parking - from $840,000 - estimated rent $800 to $950 per week.
Expected occupancy dates - levels 2 to 39: mid 2011. levels 40 to 64: early 2012

Compare rents in Admiralty Towers One, nearby.
1 bedroom, furnished with carpark - $520 per week
2 bedroom, unfurnished with carpark - $550 per week
2 bedroom, furnished, with car park & river views - $640 per week

So I think that Meriton's rent estimate is a little optimistic.
They are offering a 7% rent guarantee for 5 years on the 1 bedrooms. That suggests that the sales price is overpriced.

Saturday, February 26, 2011

Devine Half Year Results

Extracts from presentation to investors:

  • Strong market response to Hamilton Harbour project with third tower sales progressing well
  • Hamilton Harbour (Towers One & Two) construction advancing well, with construction of third tower targeted for mid-2011 commencement
  • Hamilton Harbour has continued to attract strong sales and enquiry with: - 92% of apartments in the first two stages at unconditional contract status, and 49% of Stage 3 now sold and unconditional
  • Hamilton Harbour Tower One is progressing well with structural cycles completing verticals up to floor 14 and slabs up to floor 12
  • Tower Two is close to entering structural cycles which will see the structure advance noticeably from this point in the coming months
  • First apartments expected to be completed by December 2011
  • New opportunity secured; 107 apartment project in Teneriffe, Brisbane CBD fringe (Commercial Road - 107 apartments (1 and 2 bedroom only), marketing to commence in second half of 2011)
  • New project signals Devine’s ability to apply high density residential capabilities to mid-scale, medium density opportunities

Receivers Move into Outrigger Noosa apartment development

Another Noosa property development has collapsed. This time, it is the Viridian Noosa Resort & Spa. This is a resort, in the hills behind Noosa, that had 198 apartments. Less than 40 were sold in four years -- leaving a massive 160 unsold.

This is not a surprise. The development was not in a great location, a walk up the hill from Hastings Street. The pool area is unimpressive. Most of the rooms look at an internal driveway, or scrublands. No ocean views here. See this review. The price was about $550,000 to $700,000 for a one bedroom apartment with no view.

Viridian is managed by Outrigger, and was developed by Leighton and Macquarie.

Other recently failed Noosa projects include: Elysium Noosa, Noosa Sanctury, Noosa Northshore, Noosa Beach Road (selling well below list price) and Noosa Firstlight. See SmartCompany.

Saturday, February 19, 2011

Macrossan, Soleil and Skyline

The photo above shows, from the left, the tops of Macrossan Apartments, Soleil (under construction), Skyline, then Admiralty Quays and River Place apartment.

The photo below shows, from the left, Soleil and then Macrossan Apartments. You can glimpse Skyline in between. The entry way in the bottom centre is the Macrossan Apartments lobby.

Pets and Apartments - A different spin

Contrary to popular wisdom, having a pet in your apartment during an open home when trying to sell it will help. See Pets Help Sell Manhattan Apartments.

Mosaic The Valley

Leightons has released a new representative image for the Mosaic The Valley apartment project on Ann Street. It is much blander with less greenery than previously visioned. The building appears to be closer to road, as the footpaths are narrower. The new image is above. The old image is below, and an older view is located here.

Mosaic is being developed by Leighton, which owns about half of Devine and is a constructing Hamilton Harbour with Devine.

Mosaic was launched in October 2009. It has 212 apartments, most of which are relatively small. Advertised today as 1 bedrooms starting at $365,000 and two bedroom starting at $540,000. No pool.

Wednesday, February 16, 2011

Australand reports...

Mr Fehring, Australand's executive general manager, residential, is reported in the AFR today as saying the margins were improving. However, the Queensland floods had "dampened activity and sentiment in an already subdued market."

Tuesday, February 15, 2011

Sunland Cautious

A headline in the AFR today: "Sunland cautious about year ahead." The story has the following information:
  • Sunland remains cautious as buyer activity plateaus and uncertainty about the economy prevails.
  • Consumers have adjusted their price points and are more cautious and conservative.
  • Sunland is not building any Gold Coast high rise, and plans for a residential tower in Labrador have been shelved due to 1200 new units languishing on the market.
  • The Carrington apartment project on Alice Street in Brisbane is well timed, with little competition for upmarket owner occupier-style CBD projects due for completion in 2012-13.
  • Affordability has been a key issue. Discounts of 20 and 30 percent have been offered to secure transactions.

Gold Coast Real Estate Ad

Well, this is an adventurous way to advertise a property. See You Tube.

Looking at Devine

The AFR reports today that Leighton Holdings is considering selling its under performing investments such as it 49% shareholding in property developer Devine.

See also Reuters and The Australian

Sunday, February 13, 2011

Investing in the Brisbane Property Market?

If you are planning on investing in the Brisbane property market, then take care! This blog focuses on apartments, primarily in inner city Brisbane. Some thoughts:

1. There are less overseas students wanting to rent apartments this year. This trend will continue.

2. There are less investors willing or able to purchase apartments, particularly high end apartments.

3. A number of people in their 50s and 60s, who may have considered purchasing an apartment to live in (downsizing) or as an investment are not buying at present. Either their super funds have less money than they hoped, they are more risk adverse, or banks will not lend. Also, people who were looking at riverfront apartments have paused buying decisions due to the floods.

4. There are a huge number of apartments on the way. At current sales rates, it will take years to sell these apartments. Many are small 1 or 2 bed apartments. Would you want to live in them? See list of apartments currently being built or being sold.

5. Many are predicting no capital growth this year; some a predicting 10% decrease in values, some predicting 35% decrease in values. This makes buyers nervous. Many are waiting. Maybe prices will not go down -- who knows? But there is no urgency in buying, and those who are making offers on investment properties are doing so at a significant discount to the list price. So sellers are not selling, and the number of apartments listed for sale is increasing. The only sellers who are selling are those who are dead, heading for bankruptcy, are bankrupt, are getting divorced or have lost their job. So it is hard to work out what the market price for a property (willing but not desperate seller; willing but not overly keen buyer) is actually doing at present. Maybe if salaries increase and unemployment does not decrease, then prices will go up? I hear that 25 year old storemen and labours in central Queensland are earning $150,000 a year plus overtime -- and are buying investment properties.

6. Rental returns on apartments are average. Interest rates, council rates, water charges and body corporate levies are increasing, thus decreasing net returns. This decreases property values.

7. The Gold Coast is dead dead dead. There are a huge number of unsold apartments in The Oracle. Juniper's Soul is coming up to settlement soon, and smart money is betting that it will end up like The Oracle. Juniper must be sweating. And Gold Coast apartment returns will take a dive, because fewer tourists are coming to the Gold Coast. What does this mean for Brisbane? Bad news about the Gold Coast impacts the mood of investors in Brisbane, and of interstate and international investors thinking about investing in Brisbane.

So not a good time to sell. And probably worth while waiting to buy. But if you listen to the real estate agents, who only make money if you buy, they will tell you otherwise.

New Apartment Projects In Brisbane

This is my list of actual and pending apartment projects in inner city Brisbane.

1. Macrossan Apartments, located behind Skyline and the Admiralty buildings. Not river front. 37 levels. Full floor apartments on higher levels -- 3 bedrooms plus study, about 250 sqm internal, with small balcony. High level of finishes. Expensive. See typical floor plan. The main bedroom looks right into Skyline -- not much privacy here. The apartment on level 26 will be auctioned (by the developer it seems) on 3 March 2011. The building is complete, but it seems that less than half the apartments have sold.

2A. Soleil, by Meriton. Next door to Macrossan, and also behind Skyline, is Soleil. Currently under construction. Over 400 apartments; 74 floors. Currently at about level 55. The developer will keep the management rights; and will keep ownership of a large number of apartments on higher floors. This, in my opinion, creates many issues for owners, so take care. Will be settled in stages, with lower floors settling first. This is a B grade development in my view.

Photos of Soleil under construction: Photo of Soleil, Macrossan and Skyline; photo of the 3 Admiralty buildings, River Place, Skyline, with Macrossan to the side and Soliel growing from behind above Skyline.

2B. Infinity, by Meriton. Located in the Roma Street area, behind but to tower over Evolution. 77 floors of apartments, so this will be a massive height for Brisbane, but the actual floor plate is not that large. Currently in off the plan sales - see brochure. The hole for the carpark has been dug, but the building itself is not yet under construction. With 2 bedroom apartments starting at $590,000, this looks to be expensive. Again, the developer will keep the management rights and a number of apartments in the building, so take care.

3. Sunland's "Carrington" development on corner of Alice Street and Albert Street. This development recently received Council approval. 47 floors of high end apartments. Will cast shadow over Botanical Gardens, which is not good for the public. If you read all the controversy about Q1 on the Gold Coast, I hope that Sunland does a better job on its first Brisbane apartment building. The AFR reports that construction will start when 50% of the 257 apartments have been pre-sold.

4. Devine's proposed development, on the corner of Margaret Street and Albert Street, at 30 Albert Street. This is right behind the Sunland development mentioned above. A development application was lodged on Christmas Eve, 2010, so this will be some way off. 37 floors, 420 apartments, 1 and 2 bed apartments only. Looks like another Charlotte Towers.

5. The Midtown, on Charlotte Street, opposite Charlotte Towers. Currently in pre-sales; demolition has started onsite. One and two bedroom apartments. 29 floors of apartments.

6. The Chelsea and Madison on Mayne, by Metro Property Developments. These apartment buildings are both in Bowen Hills, and contain 286 and 242 apartments. Metro is associated with David Devine and Ken Woodley, both ex-Devine. Their most recent development was Charlotte Towers, where (as reported elsewhere in this blog) capital growth has been on average about 1% and many purchasers off the plan have lost money. So if they follow the same approach, the developers will profit, but not the initial purchasers. It is interesting to read this. These apartments do not have development approval. (Metro is also planning on Brooklyn on Brookes, in the Valley. (Also, Richmond at Bowen Hills by another developer.)

7. Mosaic in the Valley, still waiting for development approval. 20 floors, about 250 apartments. Currently being sold off-the-plan.

8. McLachlan & Ann in the Valley. 234 apartments, currently being sold off the plan.

9. Kevlin Grove Urban Village: A bunch of apartment buildings under construction, including 3 buildings by Pradella (branded as Urban Edge); and Edenview; and Binary Apartments.

10. SouthPoint at SouthBank. 20 floors.

11. Newstead River Park - about 15 apartment buildings planned, with Mirvac completing "Pier" shortly, and "Park" in presales. FKP plans to build The Gasworks.

12. Northshore Hamilton (many developers, with a large number of apartments planned), Hamilton Reach (in presales) and Hamilton Harbour (three apartment buildings by Devine, currently under construction) and Portside by Multiplex (one building under construction, at least one more planned); and Rivana (by Citimark).

13. Rive at Albion/Breakfast Creek (under construction, but flooded). Two towers of apartments.

14. Waters Edge at West End. Developed by Pradella. (stage one complete; stage two under construction). Basement and pool area flooded.

15. FKP's The Milton at Milton. Was in off the plan sales. Display flooded.

16. The Capitol Apartments, South Brisbane. Currently in off-the-plan sales.

17. Yungaba Apartments, Kangaroo Point. Currently in construction, but delayed due to floods.

18. Montague West End - site flooded, and website not active.

19. The Apple, in the CBD. Small building on 1 bedroom apartments.

20. Belise, St Paul's Terrace, in the Valley. In presales, off the plan.

Wednesday, February 9, 2011

Flood Impact to Values

"Valuations on Brisbane homes are expected to decline in the aftermath of the floods, although the final impact for house prices remains unclear. RP Data senior research analyst Cameron Kusher believes Brisbane house prices could fall by as much as 10 per cent over the next few years, but that's against a backdrop of flat house prices nationwide.

“There will be an impact on property located further away from river and low-lying areas that may back onto a creek. People in those areas will find it much harder to sell those properties,” said the Brisbane-based researcher.

“In the short term, I think there could be some pain. If you don't need to sell, don't.”

Mr Kusher’s estimate of a 10 per cent drop is optimistic compared to Queensland University of Technology’s Professor Chris Eves, who predicted a drop of up to 35 per cent over the next 12 months.

Professor Eves also believes those in low-lying areas away from the river will suffer most.


The impact from the flood, which submerged nearly 15,000 homes, has forced valuers to reconsider assumptions about the risks and impact of once-in-a-century level inundations.

University of Queensland property studies professor Clive Warren said he wouldn't be surprised by a fall as much as 10 per cent on properties after the floods.

“Properties below that 1-in-100 [year] line will be blighted to some degree,” he said.

“They may well come off their prices. And people may well choose to go elsewhere.”

Professor Warren said numerous valuers expected a fall of as much as 10 per cent in these properties.

Brisbane home prices have already been tracking sideways for a year. Most recently, they dropped 0.5 per cent in the three months to December, seasonally adjusted, according to RP Data/Rismark. They were at a median price of $435,000, compared to a 0.4 per cent gain in national home prices in the same period, to a median price of $475,000."

See Brisbane Times and also Brisbane Business News

Property Plunge Could Reach 35%

Capital Growth

The potential for future capital growth remains the number one incentive for Queensland property investors, according to new research from the Real Estate Institute of Queensland (REIQ).

The REIQ conducted buyer and seller behaviour research late last year which found capital growth was the top reason for buying an investment property in Queensland for 74 per cent of buyers.

The next most common reasons to buy investment property were to fund retirement; for negative gearing purposes; as a means of deriving an income stream; or because they believed it offered a better long term return than shares or super.

Saturday, February 5, 2011

Gold Coast Auction Update

The AFR had a headline this week: "Gold Coast results highlight weakness". There were several auction events last weekend on the Gold Coast. Some agencies had clearance rates as low as 10% according to the AFR. The Ray White Sunday auction sold $12.4M worth of property, 41 sales from 103 listings, with an average sales price of $312,000.

A Circle on Cavill penthouse sold for $2.5M, originally sold off the plan for $5.95M. The Gold Coast press calls this a positive sign! How is making a loss of almost $4M a positive sign?
A large Q1 apartment, 3104, sold for $575,000 furnished, less than the mid $600Ks paid for this apartment unfurnished by the previous owner. See photo above.
Two Soul apartments (still off the plan) failed to attract bidders.
The Gold Coast press says that things are looking up! Can anyone explain to me why a large capital loss is a good thing?

Wednesday, February 2, 2011

Flood Clean Up Costs

A number of buildings are now realising the costs of flood clean up. I have heard of costs ranging from $400,000 to $10M, depending on the damage. Even buildings with slight damage appear to have huge clean up costs.

Body corporate committees are discussing special levies, in the thousands, for each unit owner.

From what I have heard, some unit owners are obtaining legal advice. Often, the body corporate manager recommends the insurance policy (and takes a large commission). So there is talk of suing the body corporate manager for the loss. In many cases, the developers appear to have been negligent as to where they placed critical equipment. So there may be lawsuits against developers and body corporate managers.

See this article about the Tennyson Reach flood cleanup costs.