Monday, October 31, 2011

Price Guestimates

OnTheHouse is launching a "Guesstimates" service, to provide an educated guess of property values.  See OnTheHouse.  It will be interesting to see how accurate this service will be for Brisbane apartments.

RP Data - market correction slows in September 2011

Consistent with RP Data and Rismark's forecasts, Australia's housing correction appears to be slowing. In September, capital city home values had their best result in 7 months (down just -0.2 per cent seasonally-adjusted and raw) while regional house values rose +0.1 per cent (s.a.).

Including rents, total returns are +0.7 per cent over the first nine months of 2011 and +0.9 per cent over the 12 months to end September. 

According to the market-leading RP Data-Rismark Home Value Index, which captured nearly 251,000 sales in the first nine months of 2011 alone, Australia's soft housing market may be starting to turn the corner. The RBA's decision tomorrow will determine whether the commencement of any recovery occurs quickly, or is more elongated into 2012. Since 90 per cent of all home loans are variable rate, housing is one of the most interest rate sensitive sectors of the economy.

 In the month of September, capital city dwelling values declined by just -0.2 per cent (both seasonally-adjusted and in actual raw terms). This was the smallest decline since February 2011 and was crucial in reversing a trend of accelerating capital losses since end March 2011.

Over the first 9 months of 2011, capital city home values have now declined by -3.6 per cent. In the 12 months to 30 September, capital city home values were off by -3.4 per cent.

RP Data's research director, Tim Lawless, said, "In the month of September there were wide divergences in the performance of the individual cities. In contrast to recent index results, seasonally-adjusted dwelling values actually rose in Brisbane (+0.4 per cent) and Adelaide (+0.5 per cent). They were flat in Darwin (0.0 per cent) and down just slightly in Perth (-0.1 per cent)."

Rismark executive director, Christopher Joye, added, "With home buyers budgeting on 2-3 rate hikes in 2011 that never eventuated, the housing market has been weighed down by concerns about families' future finances. The RBA's apparent switch to an "easing bias" has taken hikes off the table with the financial markets pricing a high probability of a rate cut on Tuesday.

Rismark forecasts imply that a reduction in interest rates on Tuesday, which could see discounted variable home loan rates fall to as low as 6.6%, would kick-off a recovery in housing activity. Based on our assumption that there were more hikes to come in this cycle, we had been projecting the recovery would commence in around mid 2012. This timing would be brought forward a quarter or two by any decision by the RBA to normalise its cash rate tomorrow."

  Rismark's Christopher Joye commented, "Notwithstanding the extraordinary hysteria whipped about house price bubbles and so forth, the fact is that the gross total return of 0.7 per cent generated by Australian housing in 2011 is very reasonable in the scheme of things. Indeed, it looks positively attractive compared to the extreme volatility, and stunning losses, sharemarket investors have had to endure." 

The number of homes advertised for sale remains high, which RP Data's Tim Lawless suggests is one of the key explanations for the secular softness. "We are counting almost 300,000 homes advertised for sale across Australia, which is more than 30 per cent higher than the same time last year. Melbourne supply is especially plentiful, with listing volumes more than 60 per cent higher than a year ago. The large number of properties available for sale implies buyers will continue to hold the balance-of-power at the negotiation table," he said. 

Source: RP Data Press Release
Brisbane Apartments (for period ending September 2011) - Capital Growth:
  • Month = 3.2%
  • Quarter = 3.2%
  • Year to date =  negative 0.8%
  • Year on year = negative 0.9%
  • Median Price for settled sales of apartments in Brisbane over quarter = $365,000

Sunday, October 30, 2011

Brisbane Sales Volumes

Here are the number of properties sold in the 4000 post code area each year.  This volume includes apartments and houses in the downtown Brisbane area and Spring Hill.  Mostly, it will be apartments.

  • 2007 - 1,342 properties sold
  • 2008 - 729 properties
  • 2009 - 825 properties
  • 2010 - 525 properties
  • 2011 - year to date reported sales - 254

Charlotte Towers - Recent Sales Results

There have been 5 reported sales of apartments in Charlotte Towers in the July 2011 to October 2011 period.  Charlotte Towers was developed by Devine, is managed by Oaks, and is located at 128 Charlotte Street, Brisbane.

All sales have been one bedroom, one bathroom apartments, without a car space for parking.

  • Apt 3101 - sold for $313,000
  • Apt 2605 - sold for $325,000 (purchased off the plan for $326,000; listed for sale at $349,000)
  • Apt 1406 - sold for $306,000 (purchased off the plan for $291,000)
  • Apt 609 - sold for $302,000 (purchased off the plan for $295,000)
  • Apt 3309 - sold for $302,000 (purchased off the plan for $347,000)
Taking into account stamp duty, legal costs, and real estate agent fees, all five of these original owners sold at a loss, and is some cases, for a loss greater than 10% (not taking into account inflation, interest costs and any furniture packages that may be been purchased -- so the overall loss will be somewhat more substantial.)  There are big risks in purchasing off the plan from the developer, and buying an apartment in Brisbane as an investment is not so easy.

Also, note that the highest reported sale for the whole building, for a four month period was $325,000.

With a tower being built across the road, values are unlikely to increase for some time.

Friday, October 28, 2011

Ray White Auction

From Ray White:  "The Urban Living Group auctions were held last Saturday at The Emporium Hotel where 52 properties went up for sale under the hammer.  A great day was had with a crowd of over 200 people attending the event and 79 registered bidders on the day.  The auctions kicked off with a bang selling 7 out of the first 8 properties, with 13 out of the 26 in the first section selling at a 50% success rate. The second section of the day was far tougher with 7 out of the 26 properties selling under the hammer, but with negotiations on multiple properties we believe we will have over 80% sold by the end of next week."

Charlotte Towers
Apt 3101 sold for $313,000 (1 bed, no car)

Apt 236 passed in at $490,000, now listed for sale at $525,000 (2 bed, 2 bath, 1 car)
Apt 458 passed in at $450,000, now listed for sale at $480,000 (2 bed, 1 bath, 1 car)
Apt 534 passed in at $925,000

212 Margaret
Apt 2103 passed in at $340,000, now listed at $375,000 (1 bed, 1 bath, 1 car)

Admiralty Quays
Apt 67 at 32 Macrossan St did not sell at $560,000 (1 bed, 1 bath), but now listed as sold.

Monday, October 24, 2011

New Pradella Development in South Brisbane

Pradella is planning a new off the plan apartment building in South Brisbane.  It is somewhat near the Art Gallery, and according to Pradella, will have "spectacular views at a very attractive price point".  The website does not give much detail.  Completion is forecast for 2014.

Sunday, October 23, 2011

Property Bubble in Australia is a Myth?

"It is true that real estate agents have a vested interest in not wanting to see the market portrayed as total doom and gloom. Such predictions can really be a dampener if you are trying to sell your home.

But are we really about to suffer massive house deflation? It is very unlikely. And it's unlikely because in many places deflation has already occurred and values have steadied. And while it is true that the markets that are rising are few and far between, which suburbs are these big reductions being calculated with? Which houses?

Places like south-east Queensland have certainly been hit hard and not seen increases for years. In prime inner city suburbs in Melbourne and Sydney, to claim that prices will plummet is nonsense - demand is so still so high, that its just not conducive behaviour for a price plunge."

Full story here.

Bidding at Auction Via Skype

"In early October, a potential bidder for a two-bedroom unit at Cathedral Place in Brisbane's Fortitude Valley requested to use Skype from Sydney to see the auction room and observe the atmosphere. The bidder, who had previously inspected the property, ended up buying the apartment under the hammer for $437,000.
While it was a first for Ray White's New Farm office, other agents have been using the web-based PTY Property, which provides an online bidding service that has also racked up recent sales including one of more than $3 million."
I guess this is better than phone bidding -- at least you can try to see if there are any dummy bids and see how many people are actually at the auction.

Friday, October 21, 2011

Call to build "pure hotels"

The AFR on Wednesday had a story quoting Simon Cooper from Marriott Hotels, saying that the Gold Coast needed more pure hotels and less strata titled apartment or condo style serviced apartment buildings.

"Building a condo is all about a high ratio of units to small public space and without that space you don't get the big groups of tourists.  ... they don't provide the benefits brought by the meetings and convention marketing, including the food and beverage offerings."

Take note of this warning if you intend to buy, rent, live or stay in an Oaks building in Brisbane.  It is not a hotel -- it is just a cheaply built apartment complex without hotel facilities, but being misleadingly marketed and sold as a hotel.  Not good for residents.  Not good for people thinking that they are booking a hotel.

Lend Lease Puts On Its Big Show

The headline of a story in the AFR on Thursday:  "Lend Lease Puts On Its Big Show", a story about the Brisbane RNA Showgrounds development, Show Ground Hill.  The first 43 apartments (The Green) will go on sale soon according to the AFR, with the developer using a $2 million sales suite and marketing shows in Sydney, Singapore, HK and KL to drive sales.  It is said to be a 15 year project, with 2000 dwellings, so I guess if you miss out on the first release, you will still have a chance to buy later on.

Prices for the first stage are reported to be $345,000 for a one bedroom apartment without parking to $665,000 for a two bedroom apartment.  This is a higher price than what you can buy today for a three to five year old apartment in a more central location.

CBRE says that "there was little demand for three-bedroom units in the market following a glut of high-end owner-occupier stock was built in the mid 2000s."

Off the plan sales data shows average price points have fallen 50% from the 2007 peak according to the AFR.  This means that cheaper, lower quality apartments are currently being marketed, not that prices for like-for-like apartments being sold off the plan have decreased.

CBRE says "Eventually it has the potential to become its own suburb."  This means that when first being built, there will be little infrastructure or amenity nearby for the initial residents.  In 15 years it may turn out ok, but that is a long time to wait, especially if the average hold period for an apartment is about 5 or 6 years.

CBRE also says:  "The Brisbane market is quite challenging at the moment, but my view is we are at the bottom of the market."

Misleading Conduct By Real Estate Agent

What a surprise.  A real estate agent in Melbourne has been found to have been engaged in illegal misleading practices involving negotiations after an auction.  The real estate agent told the bidder that someone else had made an offer at a certain price, when in fact that was not the case.  See The Age.

I am aware of situations in Queensland were real estate agents working for well known agencies and who are selling apartments engage in similar misleading conduct, even producing fake contracts.

This decision also reminds me of a case from New Zealand where the real estate agent sold the house to a regular "client", who then on sold the house for a profit.  The agent was found not to be acting in the best interest of the seller, and the bird-dog relationship with the buyer was something material that should have been disclosed to the seller.  See decision and article.

Mary Street Development

Demolition work has started on the 103 Mary St apartment hotel development.  It is located next door to the 111 Mary St "hole" that was to be the Vision building.

The 103 Mary Street development is 32 floors high, and will kill the views from the rear apartments in 212 Margaret St and in some of the Devine River City apartments.

In the photo below, 212 Margaret can be seen on the left and River City on the right.

Monday, October 17, 2011

Apartments Better Than Houses

A recent report from the Grattan Institute indicates a growing preference toward apartment-style accommodation in Australia.

The study, aptly entitled The Housing We'd Choose, found that Australians want more apartment-style housing and are moving away from detached housing.

It also found we’re not building enough of the type of accommodation more and more people want. ...

I’m concerned that there will be an oversupply of apartments in the Melbourne CBD and that this will create a severe price correction in that market, especially as many have been bought by investors. Some who won’t be able to settle their purchase and others who won’t be able to find tenants at a time when we have fewer overseas students coming to Australia.

An oversupply of CBD and new near city apartments is also looming in Brisbane.

But in general the high cost of land, council restrictions, the resistance of communities, high development costs and difficulty obtaining funding is stifling new apartment development in many of our inner- and middle-ring suburbs.

Then of course there are the infrastructure constraints to consider – namely public transport access and the capacity for existing roads and public facilities, such as schools and hospitals, to handle the type of rapid growth in resident numbers that higher density housing would create. ...

But as always, you can’t just buy any apartment and hope it makes a good investment.

I’d steer clear of generic, off-the-plan, and in particular, CBD stock. Inherently these lack scarcity and will be more risky in the next few years due to the glut of similar developments coming on line.

Tuesday, October 11, 2011

Price Growth Predicted for Brisbane

"There is solid price growth of 16% tipped for Brisbane" for housing by 2014, according to QBE.

Brisbane Sellers Overpricing For Sale Listings

"Brisbane listings require the highest level of reduction, with a typical 9.6% discount needed against the original asking price, according to Australian Property Monitors."

See Property Observer
So if 9.6% is typical, it means that some buyers are getting a buy price of more than 10% less than the list price.  Thus, in this market, should buyers be offering 25% less than the list price for an offer?

Friday, October 7, 2011

Buying Off The Plan

If you are buying an apartment off the plan in Queensland, whether in Brisbane or on the coast, you want to make sure that you buy the right apartment for you, at the right price.  At present, there are some great off the plan developments at reasonable prices, and there are others that are not so good or are overpriced. Why buying off the plan, get the right advice first.  Buy the ebook from Amazon Buying An Apartment Off The Plan in Queensland - A Guide For Successful Buying.

FKP Releases The Hudson at Albion Mill

Yesterday, FKP released the first stage of the Albion Mill development for sale, off the plan.  Apartments are for sale in the building called The Hudson.  There are 134 apartments in this building.  It is located near the Albion railway station.  The building is about 12 storeys, and looks very much like the El Dorado Village development.

Sunday, October 2, 2011

Metro Property

Metro Property, owned by Pearls from India, David Devine and Ken Woodley (who lives in a Mirvac apartment), will soon launch The Plaza at South Brisbane.  It is a ten story building located on Manning Street, with 165 small apartments.

Metro have sold their 37 Mayne Road development in Bowen Hills.  The rumour is that it was sold to Arden Property Group.

In other news, there is a rumour that Devine/Leighton (no longer associated with David Devine) has sold its Camelot site on the corner of Albert Street and Margaret Street.

Saturday, October 1, 2011

Invest in Brisbane

Shares or property?
  • The Standard & Poor’s 500-stock index was off more than 14 percent for the quarter — and more than 10 percent for the year so far.
  • The Dow ended the quarter down 12 percent and the Nasdaq lost 13 percent.
  • ASX index of shares fell 13% in the September quarter; down over 15% for the year to date.
"The market has fallen over 15 per cent so far in 2011, putting it on course for the second sharpest annual fall in 2 decades and the heightened volatility has led strategists to take a cautious view -- despite historic low valuations."

Real estate investments are far less volatile than shares.

According to RP Data, Brisbane apartment prices increased 3% in the quarter ending August 2011 and prices are flat year to date.  RP Data believes Brisbane real estate is at the bottom of the market.  There is a significant price difference between Brisbane and the Southern capitals.  Rent yields are increasing.  It would appear that now is a good time to buy in Brisbane.

Before buying an investment property in Brisbane, read Investing in Brisbane Apartments - A Guide for Successful Investing.  You can read this ebook using a free Kindle Reading App, or you can buy a Kindle reader for use in Australia.