Thursday, June 30, 2011

Buyer Behaviour

From a Johnson Dixon newsletter:

"Enquiry for most forms of property has slowly been gathering pace for some months now which is pleasing. What is not so pleasing is that most buyers in the market today tend to only strike once with an offer on a property, which if not accepted, rather than negotiating further, buyers are moving straight on to the next property. This fundamental change in buyer behaviour represents a radical shift in the market, one that has been brought about by the broad belief that buyers now have the power of choice."

Tuesday, June 28, 2011

Growth or Bust?

"Potential home buyers hoping for Brisbane's property market bubble to burst may have to wait another three years, says a leading economic forecaster. BIS Shrapnel has predicted the market will turn around this financial year with an impending mining boom, but warns aggressive interest rate rises could see property prices fall in 2014. BIS Shrapnel analyst Angie Zigomanis said Brisbane's median house price was tipped to increase 15 per cent from $440,000 to $505,000 over the next three years."

Tennyson Reach Write Down

"LEADING property developer Mirvac Group has written down the value of a flood-damaged development, Tennyson Reach in Brisbane, by $80.8 million.

The latest writedown, which the company previously foreshadowed, brings the total in the group's residential land assets to $295m this year.

Mirvac said that since the January floods, the Tennyson residential market had limited transactions and pricing had been affected by uncertainties created by the pending results of the Queensland flood inquiries.

The group revalued the carrying value of Tennyson Reach, including 43 unsold apartments and the remaining undeveloped land.

"This has led to a provision of $80.8m, resulting in zero value as at May 31, 2011," the company said in an ASX announcement."

The Australian

See also Courier Mail

This is not a surprise. This development was not in a great location, and there are very few facilities for residents in the area. The development had bombed well prior to the flood -- the flood was the last blow for a dog of a project.

Midtown on Charlotte Street

"Chinese-owned development and construction firm Yanjian Australia has started work on a $72 million, 142-apartment building in Charlotte St in the Brisbane CBD, which it will fund entirely with its own equity.

It will be the first new apartment project in the heart of the Brisbane CBD for nearly four years. ...

Yanjian's Brisbane-based managing director Marcus Ng said the building, to be known as Midtown, would offer apartments ranging in price from $220,000 to $720,000."

Wednesday, June 15, 2011

Apartment Starts and Sales Drop

THE latest data from the Australian Bureau of Statistics shows a worrying trend for apartment developers with commencement of new product down almost 13 per cent in the last 12 months.

The downward trend for apartment starts and sales comes as Queensland makes history by becoming the worst state for mortgage defaults. Two per cent of Queensland mortgage holders are in arrears, according to Fitch Ratings – with Logan city rated the worst district in Australia for ‘mortgage delinquency’.

See Brisbane Business News and Brisbane Times


Tuesday, June 14, 2011

Stamp Duty

The decision by the State Government to remove the stamp duty home concession will flatten the struggling Queensland residential property market and cost homebuyers thousands of dollars, according to the Real Estate Institute of Queensland (REIQ).

The government announced today that from 1 August the concession which non-first home buyers receive when buying a new or established home as their principal place of residence will be removed. For a median-priced house in Brisbane, homebuyers will now be hit with more than $15,000 in stamp duty – an increase of more than $7,000.

There will be no change in stamp duty for investors.

Monday, June 13, 2011

Waterfront Pier

I visited Mirvac's Waterfront project at Newstead recently, to see the completed Pier buildings. I was disappointed. The project has a barren, Russian communistic look. The buildings are light grey in colour, and have very little character. Nearby is the older Mariners Reach - it has a much more friendly and Queensland feel.

There is a park area behind Pier. Deserted and windswept. A very poorly designed and uninviting children's playground, with an unfenced pond nearby. A wasteland.

Shortly after, I drove to West End. Full of people, and much more lively.

Update: Mirvac reports that of the 99 apartments in Pier, 57 sold prior to completion. Of these, only 43 settled. That means that 14 buyers or about 25% of off-the-plan purchasers did not settle their contracts. Not good at all. Also, with prices for 3 bedroom apartments over $2 million, but rents only at $1750, not a great investment. That gives less than a 4.6% gross return, when other apartments in Brisbane are getting about 6% gross rental return.

Friday, June 10, 2011

Montague West End Gone?

What has happened to Montague at West End? After a blitz of advertising, it has now seemingly disappeared. The project website has been down for most of this year. Once called "The Wave", maybe this project should now be called "The Muddy Hole".

Soul and Mirvac and Oracle and Hilton

LISTED property trust Mirvac Group will operate a luxury hotel at Juniper Group's Soul apartment complex on the Gold Coast.

It is understood Juniper had been speaking to potential operators about incorporating a hotel/resort in the development which had originally been planned as purely top-end apartments.

Juniper and Mirvac are close to finalising an agreement, industry sources say.

Apartment values on the Gold Coast have fallen by up to 50 per cent due to oversupply of projects, many of which were started before the global financial crisis.

The resort in the Soul complex will compete with Mantra's five-star Peppers Hotel at the newly- built $700 million Oracle Broadbeach tower and also the Hilton Surfers Paradise Hotel and Residences, which was part of a development launched by failed Gold Coast developer Jim Raptis.

There is a total of 20,000 hotel rooms on the Gold Coast.

The Hilton hotel is on the market with price expectations of more than $60m on behalf of receivers acting for ANZ.

Oracle was also placed in voluntary receivership in December by Michael Nikiforides, a director of South Sky Investments, a Niecon-related company.

It was also suggested Mirvac briefly looked at takeover target Oaks Hotels and Resorts, for which Thai-based conglomerate Minor International is now a majority shareholder.

Mirvac was not available for comment yesterday.

It is understood that at least 200 apartments in the Juniper Group's Soul apartment project at Surfers Paradise are due to settle in stages from July.

Industry sources said Juniper had been marketing the Soul apartments in Asia with the promise of three-year rental guarantees on a $2m apartment, equating to $2000 a week. There are still 92 apartments remaining for sale at Soul, according to the Midwood Report, although the group provided no details on sales in the complex during the February quarter.

The yet-to-be-completed 77-level Soul tower fronts both the beach and Surfers' main retail strip, Cavill Mall, on the corner of The Esplanade and Cavill Avenue.

The Australian

INVESTORS who bought into the failed $700 million Oracle Broadbeach development on the Gold Coast have been trying to offload their apartments at auction, but are finding no buyers, according to real estate sources.

It bodes unfavourably for the 200-plus pre-sold apartments in the Juniper Group's Soul apartment project at Surfers Paradise, due to settle in stages from July.

It is understood Juniper has been marketing the Soul apartments in Asia with the promise of three-year rental guarantees on a $2m apartment -- equating to $2000 a week -- and has involved a corporate advisory firm.

Market sources said the apartments at Oracle, on Elizabeth Avenue, Broadbeach, had been put to auction after the investors had settled with the receivers. But the apartments had not sold, mainly because of an expectation receivers would put more stock on the market at steeply discounted prices.

Oracle was placed in voluntary receivership in December by Michael Nikiforides, a director of South Sky Investments, a Niecon-related company. Niecon, of which Con Nikiforides is the chief executive, developed Oracle.

One Oracle apartment owner said then he was aware of people who had bought apartments for $3.5m and had since sold them for $2.5m. As at January, it was believed the developer had secured about $160m from more than 400 pre-sales in the 505-apartment complex, and between October and January about 180 of those had settled.

The value of Gold Coast apartments has typically fallen by 30 per cent since the global financial crisis.

The Oracle project is believed to have cost about $700m, with up to $550m in loans from a syndicate including National Australia Bank, Westpac, Suncorp and Bank of Scotland.

Juniper's Soul, which unlike Oracle is not insolvent, has 92 apartments remaining for sale, according to the latest data from the Midwood Report, although the group provided no details on sales in the complex during the February quarter.

The Australian

China's Property Bubble Deflating?

According to Dragonomics, sales volume in the nine cities it tracks fell by about half since the start of the year.

In Beijing, that has meant rising rents, say real-estate agents.

Zhang Kai, an agent at Home Link in middle-class neighbourhood Tuanjiehu said the number of sales had dropped by half since February and monthly rents for small apartments jumped to about 3000 yuan in June from 2500 yuan a month earlier.

Many apartment owners don't want to sell, he said, because they are waiting for prices to turn around.

The Australian

Buyer's Market

If there's all this great buying to do, where are all the buyers?

Ekka Showgrounds To Become Apartment Getto

The 22-hectare showgrounds will be trimmed. Five and a half hectares will be transformed to residential apartments - 2000 across 12 buildings, with 145,000 square metres of commercial office space across six buildings.

Glen Steedman is the project director of Lend Lease's $2.9 billion project. He said the images of the first apartments - around 300 one and two-bedroom apartments with a small number of three-bedroom apartments - would go to the market in August.

Originally these were going to be in 10-storey apartment blocks, but testing of Brisbane's CBD market found a "courtyard" style with six or seven apartments per storey was more appropriate for the designers, architects Cox Rayner. They will now be offered in six five- and six-storey complexes behind the Jubilee Hotel.

Mr Steedman said Lend Lease is convinced these small changes will suit Brisbane's inner-city market.

"One and two-bedroom apartments react best to the demographic that lives in this area; the professionals, the students who want to live close to the city and close to the Valley," he said.

Mr Steedman believes the 1900 to 2000 units that will eventually be built will house just over 3000 permanent residents and around 12,000 people will work in the area.

Source: Brisbane Times

Expert doubts where the market is heading

"CBRE Brisbane residential projects managing director Paul Barrett admitted the Brisbane market was difficult, with a lack of confidence in off-the-plan purchases. ... Mr Barrett said not all proposed projects would be launched or completed and that only the best, not necessarily the most expensive, would be built. ... 'There's a lot of doubt where the market is heading.'"
(Source: Australian Financial Review, 9 June 2011, page 54.)
This does not surprise me. The pricing for off-the-plan apartments is higher than for relatively new completed apartments. Over the past years, many apartment projects where there were many pre-sales did not eventuate. I am glad I did not put a deposit down on Trilogy, Empire Square, Vision and many others.

Lower Demand Eases Apartment Market

REIQ Press Release:

The Queensland unit and townhouse market has not been immune from this year’s natural disasters and patchy economic conditions, according to the Real Estate Institute of Queensland (REIQ). According to the REIQ’s March quarter Queensland Market Monitor report, median unit and townhouse prices eased across much of South East Queensland during the first three months of 2011.

While a number of regional centres bucked this trend to record positive growth, this was mainly due to the construction of new unit or townhouse developments, or the sale of more expensive existing stock, in these areas over the period. The number of preliminary unit and townhouse sales in Queensland decreased 15 per cent over the March quarter.

“The unit and townhouse market has been impacted by lower numbers of first home buyers and investors, who are the type of buyers usually the most interested in this more affordable segment of the market,” REIQ chairman Pamela Bennett said.

“First home buyers continue to languish at about 15 per cent of the Queensland residential property market, while investors appear to have adopted a wait-and-see approach until a clearer picture emerges on interest rates and the economy. The prestige market is also struggling with the number of preliminary sales of units and townhouses for more than $1 million across Queensland dropping about 40 per cent compared to the December quarter. “

The median unit and townhouse price in Brisbane eased 1.4 per cent to $395,000 over the quarter. On the Gold and Sunshine coasts, the median unit price decreased 2.7 per cent to $355,000 and 2.1 per cent to $350,000 respectively.

“REIQ agents continue to report a significant drop in demand compared to the same period last year, but this is creating wonderful opportunities for buyers with many sellers having to be very realistic about what price they can achieve in the current conditions if they want to make a sale,” Ms Bennett said.

Wednesday, June 8, 2011

Too Much Debt

"These figures show a substantial shift in the indebtedness of Australian borrowers, who are now significantly more sensitive to moves in interest rates than they were 20 years ago," Fitch said.

"For this reason, Fitch believes any downturn could be significantly worse than the recession of 1991, on which the current mortgage default criteria is based.

See Brisbane Times

Mosaic The Valley Adds Hotel

The Mosaic apartment development has added a 41 room hotel component. That is a small hotel. The hotel will be branded as a Grand Chifley hotel, operated by Constellation Hotels (that also appears to have purchased the management rights for the apartment building.) The hotel opening date is expected to be mid-2013. I am not sure if I would be happy with this if I had purchased an off-the-plan apartment in Mosaic prior to this announcement.

Tuesday, June 7, 2011

Joye's Myths

An extract from an article by Chris Joye:

"A third myth is the popular claim that luxury, or more expensive, properties outperform cheaper ones. This is just not supported by the empirical data. Analysis produced by Rismark proves that mid-priced homes have actually delivered stronger capital growth than their dearer counterparts. And this also comes with considerably lower risk.

The luxury end of the market is “illiquid” – that is to say, it only attracts, by definition, a small number of buyers and sellers – and is afflicted by far greater risk or volatility. This is highlighted by RP Data-Rismark’s luxury property index, which is denoted by the red line in the chart below. Observe how during 2009 and 2010 the most expensive homes outperformed the broader market. Yet during the recent soft-landing, it has been this same cohort that has tanked, relatively speaking. ...

My sixth myth is that Australian house prices are massively overvalued and set to fall by 20 to 40%. You may recall that my regular sparring partner, associate professor Steve Keen, famously predicted in 2008 that Aussie house prices were “going to fall by 40% or so in the next few years.” Well, he could not have been more wrong. Dwelling prices in Australia’s capital cities are currently 30% higher than their March 2008 peak, just prior to the GFC hitting our shores.

Put differently, dwelling prices are nearly 70% higher than where Dr Keen expected them to be. My other mate, the economist Rory Robertson, challenged Dr Keen to a bet on this note, which the latter lost. As a result, Dr Keen ended up walking from Canberra to Mount Kosciuszko wearing a T-shirt exclaiming “I was hopelessly wrong on house prices” (or something to that effect). ...

Property Observer

Investors Returning

New mortgage sales figures for May point to investors returning to the Queensland market. More than a third of loans (36.5%) processed in Queensland in May were investment loans, the highest figure for more than a year, according to the latest AFG Mortgage Index.

This is just below the proportion of investment loans processed in Victoria (38.8%) and NSW (37.9%)

Mark Hewitt, general manager of sales and operations at AFG, tells Property Observer the Queensland market has reached a point where house prices have come down in past 12 months, meaning investors are seeing value in the market.

“We are not anticipating a massive rush, but there are positive signs in both Queensland and WA,” Hewitt says. “That there is a lot of stock available, especially on the Gold Coast. Looking at the overall market, Hewitt says property investment has remained at consistent levels throughout the ups and downs of the property cycle, but strengthened significntly in May. It is certainly a buyer’s market right now, and investors looking at rising yields are probably better insulated from the impact of rising interest rates than other types of buyers.”

Discounting is rife

"Discounting was rife across the state, many vendors being forced to accept offers far lower than they would have last year, Mr Christopher said."Put simply, house prices are falling. The figures can't be disputed by real estate optimists any longer," he said.

"Buyers are now well aware of this and are, as they should be, taking full advantage of the situation by offering well below the asking price of a property.

"Vendors are always the last to know and it seems that many have not caught on yet. They are still personally affronted at the offers being made to them but the reality is, if they don't take today's offers, they risk getting even lower ones in a few months' time."

Mr Christopher said the magnitude of the decline differed in each region of Queensland: some areas were suffering a marginal decline, others an acute drop. He listed the Gold and Sunshine Coasts as the worst hit in the state. Property prices in both regions were predicted to drop by almost 25 per cent by the end of the year."

Source: Fairfax's Domain

El Dorado Indooroopilly Tries to Grow

El Dorado Village at Indooroopilly is a development that has been in off-the-plan sales for some time by PCN developers from South Africa. Construction was supposed to start two years ago. No construction has started. Recently, PCN filed a new development application. The building will now have an extra floor, so it will be 14 levels, with 11 levels of apartments. A summary of the proposed change:

"Introduction of development staging; additional of an extra storey and increase to 120 units; other amendments to floor plan configurations and consequential changes to car parking provision"

Monday, June 6, 2011

Mirvac Abandons Tennyson Reach

Mirvac was developing Tennyson Reach, and aimed to have six apartment buildings along the river. Three have been built. They flooded. The apartments have dropped significantly in value (even prior to the floods). Three more apartment buildings were planned. Mirvac has now abandoned Tennyson Reach as a bad dream. No more apartments are to be built. I guess this means that the current owners should be happy that there will be less competition from future development. But it also shows that Mirvac thinks there will be no demand for further apartments in this out-of-the-way location that has few amenities.

Saturday, June 4, 2011

Circa Nundah

A new multi-building apartment development at Nundah, called Circa, is currently being marketed. A colourful brochure has been produced. All up, the 2.5ha Circa Nundah will have 309 apartments, 13,000 sqm of office space and 6500 sqm of retail.

According to the AFR (9 June 2011), in the past three weeks, the marketing has attracted initial holding deposits from 50 potential buyers.

A two bedroom apartment (75 sqm internal, total 93 sqm) is listed at $535,000.

A small two bedroom apartment (70 sqm internal, 30 sqm balcony) is listed at $585,000, which seems to be incredibly expensive for a tiny apartment in Nundah. I would reckon $100,000 less and it may be in the right ballpark.

Valuer's View

Valuers Herron Todd White's recent report says that, for the apartment market, the Brisbane market and the Sunshine Coast markets are both at the bottom of the market, whereas the Gold Coast market is still declining.

Admiralty Two - Doing Well

The Courier Mail reports today that a 3 bedroom apartment in Admiralty Towers Two (Apt 180 on level 32 in the "high rise" section of the building at the Storey Bridge end) was sold for $1.05M. Despite getting water in the basement carparks during the floods, the prices in this prestige riverfront building are holding firm. The body corporate of this building is reportedly installing special plates to stop river water entering the basement through air vents (similar those in Admiralty Quays nearby that did not flood.)

Another 3 bedroom, Apt 119, also sold recently for $1.08 million.

There is a 3 bedroom on the city end on level 30 listed for sale at $1.15M (Apt 166).

There is also a large 116 sqm two bedroom on level 12 for sale in Admiralty Towers Two (Apt 70) for $860,000.

On The House Down 9% on First Day

OntheHouse, which gives away data, listed on the ASX recently by its lawyer founder, and dropped 9% on the first day. I think it would be safer buying real estate than this startup company who has a business aimed at real estate agents. Especially when the number of real estate agents is dropping dramatically - a mass exodus of real estate agents according to the AFR.

Recent Brisbane Auction Results

Just over a week ago, Ray White had an auction where 12 Brisbane inner city apartments went to auction. Only one sold at auction (1201 in UniLodge for just over $100,000). Over a week after the auction, most of the apartments that did not sell at the auction are still listed for sale. Why vendors decide to go to auction in Brisbane amazes me. These apartments are not selling at the prices listed below, so the market must be saying that they are worth less than this. And why buy an off the plan apartment for more than these prices? Some examples of the many apartments that Ray White was unable to sell:
  • Felix, Apt 121, 1 bed, no car - failed to sell at or after auction, now listed for $330,000
  • Felix, Apt 147, 2 bed, 2 bath, 1 car, end apartment - failed to sell at or after auction, now listed for $470,000
  • Charlotte Towers, Apt 605, 1 bed, no car - failed to sell at or after auction, now listed for $315,000
  • Charlotte Towers, Apt 2401, 1 bed, 1 car - failed to sell at or after auction, now listed for at the unrealistic price of $410,000
  • Festival Towers, Apt 906, 1 bed, no car - failed to sell at or after auction, now listed for $320,000
  • River Park Central - Apt 603, 2 bed, 2 bath - failed to sell at or after auction, now listed for $410,000
  • River City, Apt 1803, 2 bed, 2 bath - failed to sell at or after auction, now listed for $433,000
  • Aurora, Apt 626, 3 bed - failed to sell at or after auction, now listed for $1,300,000
  • Grosvenor, Apt 1504, 3 bed - - failed to sell at or after auction, now listed for $1,800,000

Wednesday, June 1, 2011

Soleil Photos

Recent photos of Soleil on Adelaide St in Brisbane, from SkyscraperCity.

How Low Can the US Market Go?

For real estate, some economists say, an end to the seemingly endless decline in housing values might be in sight.

Not immediately. At the moment, prices are still dropping. In 20 large cities, prices fell 0.8 percent in March from the previous month, according to the Standard & Poor’s Case-Shiller Home Price Index released Tuesday. That pushed the closely watched index below its level of two years ago to a new post-bubble low, and put it 33.1 percent under its July 2006 peak.

Few analysts expect housing prices to rebound anytime soon. But quite a few are predicting that the market is close to the moment when things will stop getting worse, which will be a major improvement all by itself.

“By far the bulk of the downturn of housing prices is beyond us,” said Paul Dales of Capital Economics. He expects the market to slip 5 percent further, slightly more than he was expecting a few months ago.

“There are some amazingly favorable signs. Housing is the most undervalued it’s been in 35 years,” Mr. Dales said. “At some point, it’s going to do very well.”


Two Bedrooms Are Back in NY

As the real estate market in New York City shuffles toward recovery, two-bedroom apartments have been the last to rejoin the party.

Sales of studios and one-bedrooms rebounded first after the market crashed in late 2008, followed by three-bedrooms, but it wasn’t until mid-2010 that the two-bedroom market started its comeback. Now, brokers say that the demand for smaller apartments has ebbed and that two-bedroom apartments are all the rage, especially those priced at the lower end of the market.

Alan Nickman, an executive vice president of Bellmarc Realty, says that more buyers have recently come to him looking for apartments between $750,000 and $1.2 million. “That’s basically your starter two-bedrooms,” Mr. Nickman said, adding that the pool of potential buyers included “first-time buyers who are going straight into a two-bedroom,” bypassing smaller units.


RP Data State of the Market

This is information from RP Data.

Prices & Volumes

  • · Prices down 1.5% over the past 12 months across capital cities
  • · Sydney and Canberra have bucked the trend and actually grew
  • · Early signs of sales volumes increasing after a very weak Dec/Jan period
  • · Sydney sales volumes now above a 5 year average
  • · Melbourne sales volumes starting to fall as capital growth slows
  • · Sales volumes in Brisbane at 10 year lows
  • · Premium sector the weakest performer
  • · Rents and yields continue to improve
  • · House and units taking longer to sell, and vendor discounting increasing


  • · The number of properties advertised for sale is at an historic high
  • · Dwelling approvals were reasonably buoyant during 2010 but are now falling sharply
  • · When refinances are excluded finance commitments are extremely subdued
  • · Investors are taking little part in the current market
  • · First home buyers and non-first home buyers relatively inactive at the moment
  • · Although population growth is slowing, the supply of new dwellings has been insufficient