Sunday, October 28, 2012

Portside at Hamilton

The Portside Promenade apartment building is now complete.  The developer is advertising that 80% is sold, with the remaining 20% up for sale.  The developer is providing a discount of $20,000 off the list price, but I guess the discount will be higher if a cash offer is made.

Thursday, October 25, 2012

Trouble In Paradise - Soul

The Soul apartment development in Surfers Paradise went into receivership today, most likely due to a large number of unsold apartments, pre-completion off the plan contracts that did not settle, and a falling Gold Coast market.  This is not a surprise.  The Oracle development at Broadbeach went into receivership last year.  At Soul, receivers were appointed over a number of Juniper companies.  Graeme Juniper, who developed a number of apartment complexes on the Sunshine Coast, bit off more than he could chew and got his timing wrong.  See Soul in Receivership

Monday, October 22, 2012

M&A Update

The M&A (McLachlan & Ann) mixed use development is under construction on Ann Street in the Valley.  The commercial tower has topped out, and is currently being fitted out for commercial tenants, with a move-in date expected in March 2013.  The residential tower is up to level 8 out of 21 levels, and is reported to be on schedule for completion in late 2013.  From the photo below, it can be seen that the towers are in a commercial area of the Valley, so it will be interesting to see how a residential development changes the character of this area.  It also appears that the residential adjoins the commercial tower in an L-shaped configuration, which blocks some of the aspect from some of the apartments.

Friday, October 19, 2012

Low Vacancy Rate in Brisbane

Residential rental vacancy rates have remained tight across Queensland, according to the latest REIQ data.  Findings from the Institute’s September Residential Rental Vacancy Rate Survey, compiled from information and data by REIQ accredited real estate agencies, showed most major regions posting vacancy rates of 2.5 per cent or less in September.

According to REIQ, a vacancy rate of three per cent is considered to be the equilibrium point of supply and demand.

REIQ CEO Anton Kardash said vacancy rates were continuing to trend into undersupply territory as investor activity slowly swings back into life. 

"The rental market across Queensland has been constricted for more than two years now,’’ Mr Kardash said.  "The reasons for this have been the low numbers of investors in the marketplace as well as the generally slow property sales market over the period.  With the reduction in the numbers of properties being added to the rental pool, we are seeing more demand for a much smaller supply of properties."

The survey found the vacancy rate for Brisbane at the end of September was 1.7 per cent - down from 2.1 per cent three months before.  Inner Brisbane’s vacancy rate was 1.5 per cent – down from 1.6 per cent. Property managers from REIQ accredited agencies said that market activity was slower over the period as was the case historically. Interest was also highest for new properties.

Barefoot's Advice

From the BareFoot Investor email:

"You say that it's not good to be in too much debt. That makes a lot of sense to me, because I have two properties and I've just had a baby and I am in a huge amount of debt ... and ..."

And that was all she could get out before she started sobbing uncontrollably.

Turns out she works as an analyst at a major financial institution, and earns around $120,000 a year (i.e. she's not dumb, because dumb people generally don't earn six figures.)  Turns out she went to one of those property-flogging seminars I'm always warning you about - and ended up drawing the equity out of her home and buying a two-bedroom apartment in the currently deodorised armpit of Brisbane, for $490,000. Turns out that, after she signed the contract and bought the joint, she discovered she was pregnant. She wasn't in a committed relationship, but she'd made a commitment to her unborn child. She recognised that the financial stress was a danger to her pregnancy, so she decided to sell the property.

And guess what her half-a-million-buck apartment got passed in for at auction earlier this year?  $250,000.

This young woman is all alone. She has a two-month-old baby. She's scared about their future. And there's no fairytale ending coming her way. Despite improving property conditions, she's been stitched up good and proper.

Lang Walker's View - No risk of housing bubble

From the AFR on 17 October, page 43:  A story about property developer and investor, Lang Walker.

"I saw that one of the guys from the Reserve Bank came out and was worried about a bubble.  He mustn't get out of his office.  We're definitely not at any risk of a bubble.  It's almost the opposition."

On page 23, it was reported that Bank of Queensland, which lends to many Queenslanders, increased its bad and doubtful debt write-offs.  An Deutsche Bank analyst is reported as saying: "It is clear that conditions in SE Qld remain challenging and we believe that the bad debt environment for the banks over the next 12-24 months is likely to deteriorate."

Woolloongabba Doubt

Plans to sell and redevelop 10 hectares of prime Brisbane government-owned real estate have stalled in anticipation of a firm announcement about the Cross River Rail project. The Newman government has rejected the previous Labor government's plan to sell the valuable Goprint site at Woolloongabba to make way for a massive inner-suburb development. The site's future is now in limbo, with no decision on its redevelopment expected until the viability of Brisbane's proposed underground rail project is determined. See Brisbane Times

Thursday, October 18, 2012

Prices to Recover in Brisbane?

According to BIS Shrapnel, Brisbane will have housing price growth of 3.9% in FY 2013, 7.8% in FY 2014, and 6.2% in FY 2015.

This is a very bullish prediction.  It is interesting to look back on past BIS Shrapnel predictions to see how accurate they are.  See e.g.:  Report from two years ago, that predicted 5.3% growth for July 2011 to June 2012 for Brisbane -- way out!

Below is an extract from the current report.

No Queensland Housing Shortage

Queensland does not have a significant undersupply of housing, according to Landmark White.  Demand was estimated at 154,000 homes against a supply of 150,000 homes, in the four years to 2010.  "There appear to be no short term concerns of a residential housing shortage" says Ms McDade in a report to clients.

Contrast the National Housing Supply Council's State of Supply Report.

Sunday, October 14, 2012

Brisbane or Spain?

"Mar de Canet’s 308 units were sold in less than 30 days last spring, mostly gobbled up by eager Spaniards finally getting a deal they could not resist: choice holiday homes for less than half the price of similar properties on the market. ...

So many people showed up on the first day the Canet apartments went on sale here that Jesús Martínez and his wife, who were at work and planning to look the next day, called their parents to rush over and lay a claim for them. The couple bought a two-bedroom unit with a terrace and a parking place for $92,000."

See Spaniards Grab Deals in Bank Sell-off of Homes

Saturday, October 13, 2012

Infinity Retreats to Serviced Apartments

Meriton Apartments builds more than 1,000 units a year – recently it has shifted its attention to serviced apartments, holding back nearly half of the apartments in its 81-storey Infinity tower in the Brisbane CBD to be offered as serviced apartments.

Meriton boss Harry Triguboff says Chinese buyers are retreating from the market due to the high Australian dollar and uncertainty in China as its economy cools.  Triguboff says that in the last three months Chinese buying has subsided, replaced (in Sydney) by first-home buyers taking advantage of new state government handouts.

No one is sure why Brisbane did not immediately respond but it would seem that the severity of the state government cuts and the fears about what will happen to coal mining would have played a role. Again it is early days and addition a large part of the Brisbane building skills base is employed constructing the mines.

See Property Observer and Business Spectator

Smaller May Have Big Future

The headline in a story today in the Courier Mail property advertorial section:  "Smaller may have big future".  Some points made in this article:
  • Buyer demand for new apartments in Brisbane is for smaller apartments
  • Owner-occupiers prefer larger apartments
  • But in the current market, most of the new apartment buyers are investors (about 85% of buyers) and investors are very price sensitive at present.
  • "With no desire to live in the property they are buying, they are purely looking at the return, and the best returns can currently be found in one-bedroom apartments."
  • In the current market, one bedroom apartments range from 45 sqm to 52 sqm and are priced from $345,000 to $425,000.
  • "The ideal mix [for a new development] is 70% one bedroom apartments and 30% two bedroom apartment."
My strategy is never to buy an apartment that I would not live in myself.  I would not live in an apartment that was less than 70 sqm.  When owner occupiers decide to buy, there will be a shortage of larger two bedroom and three bedroom apartments in Brisbane.

In another article today, Matusik says that Brisbane's CBD has 24% few apartments on the market compared with this time last year.

Friday, October 12, 2012

Recent Brisbane Apartment Sales

Recent sales:
  • Riparian, 71 Eagle Street, 3 bedrooms on level 44, sold for $2.3 million
  • Charlotte Towers, 128 Charlotte St, Apt 1903, 2 bedrooms, 1 bathroom, sold for $465,000 (after being on the market for some time)
  • River City, 79 Albert St, Apt 2706, 2 bedrooms, 1 bathroom, sold for $420,000
  • River City, 79 Albert St, Apt 2106, 2 bedrooms, 1 bathroom, sold for $430,000
  • Admiralty Towers One, 35 Howard Street, Lot 110, 2 bedrooms, 2 bathrooms, sold for $535,000
  • Roma Street Parklands, Apt 6008, 3 bedrooms, sold for $1,220,000
  • Riverplace, 82 Boundary Street, Apt 82, 2 bedrooms, sold for $645,000
  • Casino Towers, 151 George Street, Apt 1604, 1 bedroom, sold for $347,000
  • Festival Towers, 108 Albert St, Apt 3402, 2 bedrooms, 2 bathrooms, $495,000
  • Aurora Towers, 420 Queen St, Apt 568, 2 bedrooms, $750,000

Tuesday, October 9, 2012

Gold Coast Down

HOUSE and apartment sales levels on the Gold Coast have dropped to the lowest level in more than two decades. The city's residential property market continues to endure "a relentless downturn" in the wake of the global financial crisis, according to a 30-year market review by PRD Nationwide.

See Gold Coast Bulliten

Sunday, October 7, 2012

The Capitol Apartments

Forrester Properties is marketing The Capitol Apartments at South Brisbane.  Construction is under way, and according to documents provided by the sales agent, 70 of the 77 apartments have sold.

The development is located at 35 Peel Street, and backs right onto the rail line.  Peel Street is a busy access street for the Grey Street Bridge, and is not a residential neighbourhood.  So this is a pretty poor location in South Brisbane.

Although it is being sold as an apartment building, it is already being marketed as a hotel.  The sales agent says the the apartments are designed to be hotel rooms.  For example, looking at apartment 408, this is 68 sqm internal, and is a 2 bed 2 bath dual key apartment (i.e., a hotel room and a studio with a kitchen area along the wall).  One of the bedrooms does not have windows -- it is the back of the apartment, but as it is a hotel room, that probably doesn't really matter.  Although dual key, there is only one car park.  It is on level 4 and looks onto Peel Street.  If buying, care should be taken, because some banks will not lend for hotel room purchases.

Apat 408 is listed for sale at $608,000, including furniture.  This seems to be extremely expensive.  Better located better quality larger two bedrooms can be bought in near new buildings for about $100,000 less.

This apartment has a rental guarantee of $37,370 a year after agents fees, but before rates and body corporate.  So a net of about $31,500, or a return of 5% once stamp duty is taken into account.  (The developer misleadingly says that the net return is 6.15%, but ignores stamp duty, body corporate and rates when calculating the net return!)  At today's interest rates, this is still a loss.  And once the rental guarantee expires, I doubt that this small apartment will have a gross rent of more than $800 a week, which is what will be needed to accomplish similar returns to the rental guarantee.  (One can rent a furnished luxury 2 bedroom apartment at Saville/Mantra, which is 120 sqm, with river and city views, for less than $800 a week today.)

But it seems that Forrester did a good job marketing The Capitol Apartments, if 70 have been sold to date -- poorly located, small apartments that are really nondescript unbranded hotel  rooms for high prices.

Ugly Brisbane

Chris Joye had APM (a division of Fairfax) conduct an analysis to determine in which markets most buyers have lost or made money.  APM looked at all properties sold since January 2009, and conducted an EVR (electronic valuation) on each of these properties to determine if the current valuation was more or less than the purchase price.  In Brisbane 71% of properties sold since January 2009 were now worth less than the purchase price, according to APM's valuations.  Who says that you can't have a capital loss when buying property?

From my brief review of the property market in Brisbane (e.g., looking at listings and actual sales, talking with agents, making offers on properties, etc.) it seems to me that the situation in Brisbane is somewhat dire.  And it may not improve soon, and could get worse.  Even though interest rates are falling, a more important factor is employment -- and unemployment in Brisbane is on the increase.

See Chris Joye's Another Cut article.

Soul's Last Legs?

Juniper agents are doing the ring around, with the "price has dropped" call for Soul at Surfers Paradise. Sounds like signs of desperation.  How long until Soul goes the way of Hilton and Oracle, and heads into receivership?

Saturday, October 6, 2012

Protest over Lot Entitlements Change

GOLD Coast association Voice of Unit Battlers is marshalling its troops to ensure the Newman Government hears the concerns of unit-owners about its community-title Bill.
President Philip Williams said the Bill "has the potential to make small units almost worthless" and their owners needed to make a stand.The organisation last week staged meetings at the Pinnacle and Q1 towers to encourage unit-owners to make submissions on the Bill to parliament's legal affairs committee.
See Article and Prior Post

Friday, October 5, 2012

RP Data update

If you are buying or selling in Brisbane, is your real estate agent telling you how bad the market actually is?  And it may not improve.  And it may get worse!  Click on slides above for bigger view.

Harry Dent says Brisbane is Biggest Bubble

"The greatest bubble in developed-country cities starts with Brisbane, Australia at 210% followed by 180% in Miami, 170% in L.A. and 165% in Vancouver. There are many cities that could see real estate drop 70% to 85%!"

See Forbes

Apartments v. Houses

"The apartment market is not just more affordable to enter than the detached housing market but apartments are growing in prevalence in inner city areas and along the transport spines of many large cities. These unit markets are typically located close to major working nodes and nearby to entertainment and dining facilities as well as being close to public transport amenity. This week’s Property Pulse looks at the median ‘value’ of houses and units across suburbs nationally and determines the suburbs where you can make the greatest savings if you choose to purchase a unit rather than a house."

Wednesday, October 3, 2012

Brisbane Apartment Prices Still Going Backwards

Australian capital city home values continue to rise with a 1.4% jump in September.

The September RP Data Rismark Home Value Index results marked the fourth consecutive month-on-month rise in home values, further cementing the fact that a housing market recovery is underway.

Capital city dwelling values rose by 1.4 per cent over the month of September, the largest month-on-month rise recorded since March 2010.  Adelaide led the way with the strongest results where values were up 2.4 per cent, followed by Perth at 1.6 per cent over the month, Sydney at 1.5 per cent, Melbourne at 1.4 per cent and Brisbane values up 1.1 per cent.

Highlights over the quarter
Best performing capital city: Darwin
Weakest performing capital city: Hobart
Highest rental yields: Darwin houses with gross rental yield of 6% and Darwin Units at 6%
Lowest rental yields: Melbourne houses with gross rental yields of 3.6% and Melbourne units at 4.3%
Most expensive city: Sydney with a median dwelling price of $522,000

However, Brisbane apartments did not do so well.

Brisbane apartment prices:
September 2012 - down 0.8%
Quarter - down 0.8%
Year to Date - down 2.7
Year on Year - down 4.5%
Median price based on settled sales of Brisbane apartments over the quarter - $385,000.