Rental Demand in Brisbane

Demand for rental properties continues to strengthen with vacancy rates tightening across the State, according to the Real Estate Institute of Queensland (REIQ). The REIQ March residential vacancy rates, released today, show the majority of regions experiencing strong demand from tenants with vacancy rates in many areas now below 3 per cent. A vacancy rate of 3 per cent is generally considered to be the equilibrium point of supply and demand. REIQ CEO Anton Kardash said the tightening rental market was a result of the slower sales market over the past 12 months in particular.

In Brisbane, the vacancy rate has reduced to 1.7 per cent, from 2.3 per cent in December last year. Brisbane’s inner-city recorded a vacancy rate of 1.4 per cent, down from 1.9 per cent in December. Agents from REIQ inner Brisbane accredited agencies report supply levels remaining limited as tenants stay put, students are settled for the year, and potential first home buyers still opt for a wait-and-see approach. Investment properties currently up for sale are largely being bought by owner-occupiers which is also contributing to less rental stock overall.
Source:  REIQ Press Release

I have been monitoring availability of unfurnished two bedroom apartments in the Brisbane downtown area.  Let me say that there are not many of such apartments available for rent.

Limited but real competition

"So how have things actually faired in the last four months? agents report patchy progress, but on balance they have been more encouraged since we hit the new year. many described their 'best months for some time' during February and March. the upshot seems to be this – vendors have reached their bottom price and buyers are now willing to meet them. most sellers who had to get out of the market come-what-may have done so. If not, they have found alternative strategies and decided to hold onto their dirt until the next upswing. Buyers who were putting in substantially discounted offers on properties are finding there is now limited but real competition. as a result if they want to secure some real estate, they do have go beyond their ridiculously low dream price and get a little dose of reality. the outcome has been more sales volume but prices remain flat. For example, sub $1m in good locations is doing just fine and if you’re a first home buyer within 10 to 15km of the CBD, then you’ll probably find there is a little more competition to secure some real estate."
HTW Month in Review

Unemployment

I like this quote from the Chief Economist from Morgan Stanley:
"Traditionally what has hurt people has not been rising (interest) rates but rising unemployment. I don't care what rate you're paying, if you have a mortgage five times your income and you lose your job, you're toast.''
See Daily Telegraph from 2009.
Easy credit followed by high unemployment rates is a good indicator of whether there will be a residential property bust.  Look at Spain, with 25% unemployment for example.  So at present, Queensland should be safe.  But if the mining and construction boom ends....

Units the Way to Go: RP Data

"Within a 10-kilometre radius of each city centre the opportunities to purchase units below $500,000 are much more abundant than they are to purchase detached houses. Across all cities, 69% of suburbs within 10 kilometres of the city centre have a median unit price below $500,000 and each individual city has at least 20% of suburbs with a median price below $500,000."
Source
Table showing Median Unit Prices

111+222 Hole plus 103 Mary Street

Photo today of the 111+222 hole (still with water) and the demolition site for 103 Mary Street.  You can see 212 Margaret Street in the background and River Park Central to the right.

Devine bullish about Brisbane

“We are very bullish in a market people are saying is the worst they have seen in 20 years," Devine says.

“Brisbane is in the doldrums in terms of the property market, but not in the doldrums for Metro. We know what we are doing and there are people out there who love what we are doing."

See Brisbane Business News

111+222 in Brisbane

The 111+222 development appears to be moving forward, with the smaller tower (commercial office space at 111 Mary Street) being built first it seems.

The large tower will be 90 storeys, located at 222 Margaret Street.  The plans are for a hotel from level 5 to level 21, and apartments from level 24 to level 88.  
See www.111plus222.com

Dog Allowed, Yet Again

"Based on the material presented, I am not satisfied the committee’s decision to deny the applicant’s pet request was reasonable in the circumstances. This is particularly the case given that no evidence has been provided to suggest the dog barks excessively or otherwise causes a nuisance which interferes with other owners use and enjoyment of a lot or common property. Accordingly, I consider the applicant should be granted permission to keep her dog in her unit pursuant to by-law 11. "

See Gateway Gardens Decision

Kurv in Newstead

A proposed new development in Newstead, called Kurv.  It is located at 31 Longland Street, Newstead.

• Ground floor restaurant and offices.
• Five levels of 55 apartments
• 25 – studio apartments
• 30 – two bedroom apartments

Macrossan Residences Sale

I bet well-known Brisbane solicitor and Labor Party identity Con Sciacca is not happy.  He purchased an apartment off-the-plan in 2008 in Macrossan Apartments for $1,835,000.  The developer went bankrupt, and the remaining apartments have been bought by an investor, who is listing them for resale at "Almost $1 million below what they cost."
"Were Selling for up to $3M, Now Priced from $1.395M to $1.575M"

(I suspect that the real estate agent is exaggerating slightly - I doubt that the same apartment that Con purchased would sell for less than $1M.  So the million dollar discount is a bit of a stretch.  Video here.)

These discounts make it hard for an original buyer to resell without making a huge loss.

In any event, even these discounted prices are high for a 3 bedroom apartment that is not riverfront and that is sandwiched by Skyline and Soleil.

Readjustment of contribution schedule lot entitlements

"Much of the animosity between the applicant and the body corporate committee has arisen following his submission to the committee of a motion to reverse contribution lot entitlements to the “pre-adjustment level”. Based on advice that it had obtained from MBA Legal, the committee declined to lodge a new community management statement reflecting “pre adjustment lot entitlements”. As a result, the applicant issued a number of circulars to other lot owners regarding his request for a reversion of lot entitlements.

Within bodies corporate, few issues have been more polarising than the adjustment and/ or readjustment of contribution schedule lot entitlements (CSLE’s) which set the proportion each owner contributes to body corporate expenses. The Body Corporate and Community Management Act 1997 previously provided that in certain circumstances, an owner could apply to the District Court or a specialist adjudicator for an order to have the original entitlements adjusted. Where such an order was made, levies payable by some owners decreased while others increased.

In November 2010 the Minister for Tourism and Fair Trading introduced into parliament a bill to amend the Body Corporate and Community Management Act 1997. This bill was passed by parliament in early 2011 and changed the criteria for adjustment of contribution lot entitlements. These amendments also include a procedure for certain owners to seek a reversal of previous adjustment orders. Except in limited circumstances, such as where the adjustment order merely formalized an agreement made by the parties, or there has been a material change such as further subdivision, the body corporate is obliged by the legislation to lodge a new community management statement reflecting the original lot entitlements. Where such action is taken, levies payable by some owners decrease while others increase.

Given that all lot owners are members of the body corporate, it is important that they have an opportunity to air any grievances and have input into the management of the scheme. Owners often have opposing views on various matters, but in my view robust discussion and debate is an important part of body corporate decision-making. This requires that, within reason, all owners feel free to express their point of view without unreasonable threats of defamation proceedings."

See Q1 Decision

Another Big Loss For Off-The-Plan Buyer

Many buyers in Niecon's The Oracle development at Broadbeach purchased off the plan and failed to settle.  A recent court decision shows the losses that an off-the-plan buyer may suffer if the buyer does not settle.

Purchase price for apartment 601 - $1,010,000
Plus holding costs & interest from settlement until court judgment - $196,631
Less estimated net proceeds if sold today - $700,000
Plus agents fees to sell - $29,645
Plus legal fees to sell - $2,200
Less Deposit - $101,000
Total owed = $437,476, plus interest at 12% until this is paid, plus legal costs of the lawsuit.


So this buyer lost a total of at least $538,476, which is more than 50% of the contract price for the apartment, and didn't get the apartment.  Note that the valuation of the apartment dropped 30%.  Take care when buying off the plan.  (And read this book first!)

Brisbane Not Yet At Bottom

For Apartments:

The Brisbane apartment market fared worse than the house market in the last six months of 2011 and faces an oversupply of this type of property.  REIQ figures for the December quarter 2011 show that rental vacancies in inner Brisbane – where most of the stock is apartments – increased from 1.4% in the September 2011 quarter to 1.9% in the December 2011 quarter while the overall city vacancy rate remained unchanged at 2.3%  

In addition, valuation firm LandMark White is warning that a combination of too many projects and historically low demand could result in an oversupply of new apartments in inner-city Brisbane suburbs like Fortitude Valley and Bowen Hills.

The firm’s property valuers believe affordable “entry-level” apartments within five kilometres of the CBD will continue to appreciate in value but expect values in prestige units in new complexes to continue to fall.

“We have seen demand for prestige units decline again, with extended marketing periods or heavy price reductions,” says WBP.

On the other hand, “entry-level units are being purchased by single professionals who require affordable housing and access to the Brisbane CBD. We have recently seen volumes of sub-$400,000 unit sales increase.”

Michael Yardney is very bearish about Brisbane units, placing the market in the relatively early stages of a property downturn at three o’clock.

“There are a large number of off-the-plan apartments available in the Brisbane CBD and surrounding suburbs. Many of these remain unsold, and this oversupply of properties will put downward pressure on prices and rentals,” he says.  “Many of the apartments that have been sold off the plan are coming on stream in the next few years and have been purchased by investors.  Some will have difficulty getting finance and settling their purchase. Others will be disappointed to see the end value of their properties is less than their purchase price,” Yardney says.

“There will be an oversupply of inner-CBD and near-CBD apartments in Brisbane for a few years, causing prices to fall slightly.”

See Report Here

For houses:

As the house price growth figures from RP Data show, Brisbane’s housing market continues to fall.

House prices were flat over the final quarter of 2011, according to figures compiled the Real Estate Institute of Queensland, which says that one year on from the floods, the housing market is showing signs of stabilising.

Michael Yardney, Louis Christopher and Charles Tarbey all believe Brisbane has some way to go before it bottoms out.

“House prices in Brisbane have dropped for the last two years. Brisbane buyers are lacking confidence to re-enter the market and are sitting on the sidelines waiting for signs that the market has bottomed before they make a purchase,” says Yardney.  “This may occur later this year as Brisbane prices stabilise. Prices are unlikely to start rising until the second half of this year or 2013.”

See Report Here

ANZ lift interest rates, after 5pm on Friday

In a bad sign for property owners, ANZ has announced it will lift rates by 0.06%.  Effective 20 April 2012, ANZ’s new standard variable mortgage rate will be 7.42%pa.

If you are a customer, probably a good idea to leave ANZ.

Malaysians Big Buyers of Brisbane property

See Courier Mail story.  Property developer are pushing sales in Asia.

Midwood Report - Brisbane OK

"The outlook for the new Brisbane apartments market remains healthy with supply and demand evenly matched, but the Gold Coast market continues to struggle with sales of new apartments still at post-GFC lows, according to the latest Midwood Report.

Unconditional sales of new Brisbane units increased from 74 in the November quarter 2011 to 186 in the February 2012 quarter. Stock levels have declined to 1,446 from a peak of 1,683 in May last year, which equates to two-and-a-half years’ worth of supply at current sales rates.

Investors have been spurred on by rising rental returns, with one-bedroom inner-Brisbane flats registering rental growth over the past 12 months of 9% to a median of $300 per week, with a smaller 4% increase in two-bedroom flats ($380).

The strongest-selling project was David Devine’s Metro Property Madison Heights development in Bowen Hills, which clocked up 57 sales with prices ranging from $350,000 for a one-bedroom apartment to $434,000 to $556,000 for a two-bedroom apartment. Madison Heights features 296 apartments, with 200 sold since launch of the project in March 2011. There were also 15 sales at Metro Property’s The Chelsea development also in Bowen Hills, with 190 out of 195 apartments now sold in the project. Prices range from $355,000 for a one-bedroom apartment to $546,000 for a two-bedroom apartment, and there were 20 sales recorded for Brooklyn on Brookes in Fortitude Valley, Metro’s joint development with Indian-based developer Pearls. The other strong performer was Meriton’s 81-storey Infinity Tower, currently under construction, with 34 sales recorded and prices ranging from $470,000 for a one-bedroom apartment to $650,000 for a two-bedroom unit. To date 123 out of the 287 apartments in the tower have been sold."

Full article here at Property Observer.

Domain or RealEstate.Com.Au ?

When looking for a property to buy or rent, it is worth looking at both Domain and REA.  Note that for REA, advertisements can only be placed by real estate agents.  If an individual landlord or seller wishes to advertise, then only Domain will accept the advertisement.  Accordingly, Domain will have different (and possibly more) listings than REA, and often at a better price or rent (because agents fees are not being paid.)

Roma Street Parklands - Recent Sales

Here are some recent sales of apartments in the Roma St Parklands complex in Brisbane, which was developed by Pradella in around 2002 to 2006:

• Apt 3006, 3 bed, $520,000
• Apt 3093, 1 bed, $360,000 
• Apt 3107, 1 bed, $370,000
• Apt 7046, 2 bed, $621,000
• Apt 6039, 3 bed, $1,475,000
• Apt 3081, 3 bed, $590,000
• Apt 6028, 3 bed, $1,300,000
• Apt 3120, 2 bed, $637,000

What is interesting here is that of the eight resales listed above, only 1 was less than the purchase price that the seller originally paid.  Also, at least 5 were sales to owner occupiers, and one was a sale to a super fund.  All apartments seem to have Parklands views.

RP Data March 2012 Report

From an RP Data press release:
    Australia's housing market is showing signs of stabilising after home values rose 0.2 per cent in March. Not only has the market remained unchanged for the quarter ending 31 March 2012, it is also level with the 31 November 2011 home values across the combined capital cities. The flat result over the quarter is the strongest result since March 2011 when values increased by 0.7 per cent.
    According to the managing director of Rismark International, Ben Skilbeck, “While the housing market remains soft, the zero per cent change over the first quarter of 2012 demonstrates that it is consolidating its position following the decline seen in calendar year 2011. This month it was the resource rich states which delivered the strongest gains with Perth, Darwin and Brisbane up 1.4 per cent, 1.1 per cent and 0.8 per cent respectively”.
    Other market metrics are also showing some improvement. “The number of properties available for sale is continuing to moderate from the historic highs which peaked late last year and auction clearance rates have been holding above 50 per cent for most of 2012,” Mr Lawless said.
    See:  RP Data Press Release .  See also Property Observer. 
    Brisbane apartment prices are up 0.7% for the month, but down 2.3% year on year.

Decision Making Tips

When buying or selling an apartment, it often gets down to a negotiation on price, with the agent repeatedly ringing buyer and seller, trying to get an increase in the offer or decrease in price. It is not uncommon for the agent to bully, flatter and confuse both parties to get a deal done.  Research shows that in such circumstances, a person may get decision fatigue, and make a bad decision.  My practice is not to make a buying or selling decision after lunch, but to sleep on it, and decide in the morning, without influence from the agent.

The more decisions you make, the worse they get to a marked degree -- you are more likely to make crucial mistakes or, put off a decision and miss an opportunity. One solution is an unbending set of investing rules, which minimise the need to make decisions.  Making fewer decisions improves willpower so much that it should have a major effect on investing performance.

For the same reason, decisions made earlier in the day are much better than those made later.  Rather than implying that you should hurry decisions, however, this indicates that in investing, you should get better results from a systematic process of studying an investment until you have enough evidence, then actually making the decision the next morning. The "sleep on it" principle.

In today's market, there should be no rush for a buyer to close a deal.
See article in NY Times Magazine.

Apartment Sun

When buying or renting an apartment in Queensland, it is a good idea to understand which way the apartment faces, and to view the apartment in the morning and afternoon.  The sun will shine in, and with the trend for large windows, this makes the apartment bright but potentially hot.  Below are some photos of apartments at the Roma Street Parklands (Pradella's development), including the expensive Pinnacle building.  Notice that the blinds are drawn in the penthouse apartments.  Even though these apartments have a great view, and do not face west, that is not much use if the blinds are always closed.

Surfers Paradise

I visited Surfers Paradise this weekend to look at the Hilton and Soul apartment buildings.  The local area was no paradise.  The beach was great, but the built environment was horrid.  Closed or run down shops.  Poor quality shopping.  Fast food restaurants.  Topless bars.  Bad street-cape.  Not a nice place to visit with the family or for a romantic vacation.  No wonder prices have fallen, and according to Matusik, they still have a way to go to reach bottom.  Hilton tower illustrated above.

Kickstart coming, or not?

Comment from a reader on a prior post and newspaper story from this week:

Referring to the extract from the AFR: Qld Property Due for Kick Start:

One contributor to that article states in para 4: Quote:  “Because of the huge influx from the resources companies in the office towers, I think what is going to happen within six months is people will have to pay three months’ to six months’ rent in advance to secure an apartment,” Woodley says. “There really aren’t many being built.” Unquote.

According to and as reported in Australian Property Investor Magazine, January 2012 issue, (page 109) there were 5,957 units on the market for sale in Brisbane as of October 2011, not Queensland, BRISBANE!   

Repeat Quote: “There really aren’t many being built.” Unquote.  I find that statement very puzzling.  In excess of one thousand apartments are in current construction in some form around the Brisbane CBD 2km circle.

Resource workers all already have a home or somewhere to live and if have families, have an existing home, rented or under mortgage or owned outright.  They all know the story of their friends who invested their hard earned cash into Gold Coast Units and lost and the resource unions are already warning  their members about a repeat of this scenario of the 90’s fore-seeing harder times to come in that industry as China winds back just as the Japanese did in the early 90’s despite the upbeat talk about the mining “boom”.  And the contributor has also over-looked this: Resource workers are all on “contract labour” employed by labour hire companies, not the mining companies themselves. They have no full time job and are employed essentially by the hour only. They can be and are, dismissed with no notice or reason.  The banks will not lend to people in this employment situation.   They are not bankable in this economy.