Tuesday, February 26, 2013

Recent Brisbane City Apartment Sales

  • Evolution Apartments, 18 Tank Street, Apt 225, 2 bedrooms, 2 bathrooms, sold for $500,000 (previous owner had paid $762,000 off-the-plan from Citimark)
  • Skyline Apartments, 30 Macrossan Street, Apt 333, sold for $750,000 (previous owner had paid $810,000 off-the-plan)
  • Midtown Apartments, 127 Charlotte Street, Apt 1203, sold by developer for $432,500
  • Aurora, 420 Queen Street, Apt 376, 2 bedrooms, 2 bathrooms, 107 sqm, sold for $585,000
  • Riverplace, 82 Boundary Street, Apt 275, 1 bedroom plus study, sold for $481,000 (previous owner had paid $525,000 in 2008).

Monday, February 25, 2013

Asset Price Inflation Coming?

"One important difference in 2001 was that Australia’s household debt-to-disposable income ratio was a substantially lower 95 per cent. By 2006 it had hit 150 per cent, which is about where it is today.

In the early 2000s families could assume more leverage to bolster their purchasing power. They may not be able to do this again.  However, the signs of housing momentum are building. Australia’s largest mortgage broker processed more home loans last month than in any January previously.
RP Data’s CEO, Graham Mirabito, says that his valuation subsidiary, ValEx, which covers 80 to 90 per cent of all loan transactions,, last week mediated more valuation requests than ever before.
The RBA with its policy settings is certainly doing everything possible to fire up the embers. It says rates are not at “emergency lows” but they sure look like it.
During the GFC, the RBA pushed the average discounted home loan rate down to 5.4 per cent. Discount home loan rates today are only 30 basis points higher at 5.7 per cent.
Fixed-rate home loans are cheaper than ever. The average three-year fixed-rate loan in 2009 was 6.6 per cent. Today it is just 5.5 per cent. On Friday, Westpac announced a two-year fixed-rate product for just 4.99 per cent.
It is hard to imagine how these circumstances will not stimulate hearty asset price inflation."

Sunday, February 24, 2013

The Past Year

RP Data reports that Brisbane property prices have increased at a rate of 2.3% over the past year.  This is not keeping up with inflation.

Saturday, February 23, 2013

Bubble Trouble?

"In conclusion, the data presented should provide more than enough evidence to suggest that Australia’s residential property market (specifically land market) is vastly overvalued, driven by debt-financed speculation and the relative non-taxation of land rent. While land bubbles have been a continual feature of the Australian economy, what separates this cycle is the relative enormity of the boom in both land values and private debt. A smaller private debt to GDP ratio during the 1880s and 1920s was enough to produce two devastating depressions, including a number of recessions during the mid-1970s, early 1980s and early 1990s."

See The History of Australian Property Values

A response to this is on Property Observer, plus a debate here.

Echo looking for massive casino site in Brisbane

Echo Entertainment is looking for a massive casino, hotel and ballroom site in Brisbane.  See Seven News.  It will be interesting to see if the plan includes an apartment complex.  The current Treasury location is not big enough.  So the Casino Towers apartment complex may not end up being near the casino.

Arena South Brisbane

Arena at South Brisbane is currently being marketed off-the-plan.  It is located at 9 Edmondstone Street.  The two tower building has an interesting design.  Some pricing is being advertised:

  • Apt 1012, 2 bed, 2 bath, level 2, 86 sqm internal, 27 sqm balcony -- $555,000 (which is $4,911 a sqm).
  • Apt 1058, 2 bed, 1 bath, level 5, 77 sqm - $520,000
There is a nice video from the developer, but it mostly shows South Bank, not South Brisbane.  There is a difference in location, and these apartments are located at South Brisbane, not South Bank.

Mirvac's Park Apartments

Mirvac's Park building at Newstead is complete, and there are a number of new unsold apartments being marketed by Mirvac.  These include:
  • Apt 97 on level 7, 2 bedrooms, 2 bathrooms, 107 sqm - $785,000.  
  • Apt 51 on level 13, 3 bedrooms, 2 bathrooms, 148 sqm - $1,325,000
These apartments are $7,336 and $8,952 a sqm respectively.  This seems outrageously expensive to me.    For example, a larger two bedroom riverfront apartment in Admiralty Tower Two can be bought for around $5,600 a sqm metre.  By way of comparison, a four year old, good quality two bedroom in Indooroopilly sold recently for less than $4,200 a sqm.

Pinnacle Portside

A riverfront apartment building at Portside Hamilton is coming soon it seems.  It is called Pinnacle Portside.

Sunday, February 17, 2013

Investing in Apartments

I have read a number of property books and property blogs recently relating to investing in apartments, and this is a summary of what I have read:

1.  The closer the apartment is to the GPO, the more desirable the apartment will be to renters and buyers.

2.  As a secondary factor, being located near to a rail station, bus way, ferry terminal, University or hospital is also desirable.

3.  The internal size of the apartment matters.  A larger apartment will be more desirable than a smaller apartment of the same configuration.

4.  The number of bathrooms has greater weight in determining value than the number of bedrooms.

5.  Internal layout and design is important.  Does the apartment have good natural light, significant external windows in all rooms, good storage and a good feel?

6. Property values go up and go down.  Property is not a risk free investment.  The whole market may change.  Or the value of property in a particular location may change differently to the market as a whole.  Or the value of a particular apartment may change in the opposite direction to the market (for example, if a building is built nearby that blocks out views.)

7. Employment has a greater weight in determining value and market movement than interest rate changes.

8.  A vacation property or short term rental property is a more risky investment than a CBD or near CBD apartment.  However,  pricing of vacation properties does not take into account this extra risk.

9.  Property investment should be for the long term.  Buying with the intention of owning for less than 5 years is risky.  Transactional costs are high, property is an illiquid investment, and capital gains are often small.  On average, over a period of less than 5 years, a property owner is likely to make a capital loss not a gain.

10.  Financially, for many people, renting is better than buying.  It is also easier to move to where jobs are located if you are not tied to a property.

11.  No one can predict the future.  Many predictions made in the past about property investment have been wrong.  Relying on the advice and predictions of "experts" does not guarantee success.  (Similarly, no one can predict future demand, future interest rates, future unemployment rates, etc.)

12.  Many "independent experts" are not in fact independent.  And many are not experts.  Many say the same thing each year, regardless of the market.  ("It is better to do something than nothing."  "Now is the time to sell."  "Now is the time to buy."  "The property market has bottomed and is on the rise.")

13.  Older apartments are often better value than new apartments. Older apartments are often in better locations and are larger.  When buying from a developer, you are paying for the developer's profit and marketing costs.

14.  There will be future demographic changes as baby boomers retire and die.  This may cause an oversupply of some types of properties or in some areas and an undersupply elsewhere.  But no one really knows what will happen.  (My prediction, for what it is worth, is that older people will prefer apartments to retirement villages where possible, thus creating a greater demand for well located apartments within walking distance of good facilities.  But as mentioned above, many predictions are wrong!)

REIQ is Upbeat

From an REIQ press release issued today regarding Queensland houses (not apartments):

The Queensland real estate market maintained its momentum during the last three months of 2012, according to the Real Estate Institute of Queensland (REIQ).

The REIQ December quarter median house price report, released today, showed sales activity was robust for the historically quieter December quarter.  Compared to the same quarter in 2011 the preliminary numbers of house sales in Queensland increased by 8 per cent in the December quarter last year.

REIQ CEO Anton Kardash said the latest quarterly result demonstrated that the second half of 2012 was one of improvement.  “This is the second consecutive quarter where the market has exceeded expectations.  Historically the December quarter is quieter than the September quarter - and we did have a very strong September quarter last year - but what these figures are showing us is that buyers continue to be more active than the year before.  There is no doubt that the Queensland market is improving due to the low interest rate environment, increasing confidence levels, an element of pent-up demand, as well as a more settled economic outlook here and overseas." 

The Brisbane median house price increased 0.4 per cent to $510,000 over the quarter – the second quarter of positive price growth. The numbers of house sales also increased 8 per cent compared to the same period the year before.

Saturday, February 16, 2013

The Oracle Broadbeach

One trouble with off-the-plan marketing is that the apartments are often oversold.  The Oracle at Broadbeach was marketed as a beach apartment complex, but in fact, is not that close to the beach and many apartments do not have good beach views.  Even though the apartments are large, the values have dropped.  Dramatically.  Two examples:

Apt 2003, 2 bedrooms, now listed for $825,000, originally sold for $1,495,000 off the plan.
Apt 1605, 1 bedroom, sold off the plan for $710,000, resold in January 2012 for $530,000.

Here is another 2 bed listed for $800,000.

New Apartments

RealEstate.com.au has a section that lists new apartments being sold off the plan.  Here it is for The Valley in Brisbane.  Useful if you want a new, overpriced apartment.

Thursday, February 14, 2013

Oversupply of Brisbane Apartments Coming?

BIS predicts an oversupply of apartments in Brisbane beyond 2014.  See article.  There was a similar story in the AFR on Monday, 11 February.   In my view, BIS' predictions often don't come true.  In March 2008, BIS predicted that the Brisbane market would perform the best.  Wrong.  In August 2008, BIS said there would not be a big decline in prices of Brisbane real estate.  Wrong.  So why should their most recent prediction be any better?  How can BIS accurately predict demand for apartments in Brisbane in 2015?  See also this prior post.

Wednesday, February 13, 2013

No Capital Growth for Brisbane Property

As reported by RP Data, on an average annual basis over the past 5 years, Brisbane has not had capital growth in property values.   Taking into account stamp duties and other transactional costs, the losses would be even greater.  It would have been better of investors, on average, to put money in the bank.

Tuesday, February 12, 2013

Brisbane Real Estate Market Summary

The Brisbane real estate market is still about 10% below its peak.  And sales volumes are still down.  I guess that means that there is room for improvement.

Monday, February 11, 2013

Canvas South Brisbane

Pradella is selling Canvas in South Brisbane.  It is about to commence construction.  Some advertised pricing:
  • Apt 1505, 2 bed 2 bath, 75 sqm internal - $710,000
  • Apt 307, 2 bed 2 bath - $595,000
  • Apt 508, 1 bed studio, no car, 44 sqm internal - $346,000
Sounds very expensive to me, for this quality product in this location.

For example, this 90 sqm internal apartment, a high quality Mirvac apartment, in a much better location is being sold for "$580,000 plus".

Sunday, February 10, 2013

The Midtown

The Midtown, on 127 Charlotte Street, has opened, as a short stay "hotel".  See its "apartment hotel" website.  According to the Place Report, see post below, 47 of the 144 apartments have sold.  According to Booking.com, there are 142 apartments (so I guess two are being used for the onsite manager).  According to RP Data, 28 apartments have settled, but this is often a month or two out of date due to the government updating its records.  The unsold apartments are being marketed with a 5% rental guarantee for 2 years. The apartments are very small, so that may explain why there are a number of buyers from China.  A number of the apartments appear to have been purchased by owner occupiers, or at least the purchasers have given the apartment they purchased as their address.  As the comment for the Place Report notes, I also wonder how a hotel can operate with so few rooms?

Festival Towers

I visited Festival Towers recently for an open house.  The building and common facilities are looking tired, the apartment looked worn out, and there were a large crowd of tourists in the small lobby area.  The building is used as a "hotel" by Oaks.  It is a building that is popular for touring escorts.

Values are not holding up.  For example, apartment 3607, on a high floor, has 2 bedrooms 2 bathrooms.  It was sold off the plan in 2006 by Devine (now running Metro Property Group) for $530,000.  It was resold in late December 2012 for $455,000.

The apartment next door, apartment 3608, sold off the plan in 2006 for $546,000.  Two beds, two bathrooms, 2 cars, 103 sqm.  It resold in early December 2012 for $485,300.

Either a good building for bargains, or a building that has long term problems, depending on your view of the world.

End of the Down Cycle

If this chart from RP Data of past performance is any basis for predicting the future, then property values in Australia will start to rise again.  But note from the chart that in recent times, there have been more declining quarters in recent times then 10 to 15 years ago.

Saturday, February 9, 2013

Stelvio Windsor

I received an email from an agent recently who is marketing a new apartment development at Windsor, called Stelvio.  It is a 33 apartment complex.  A colourful brochure (which includes a nice picture of a bird) is here.

The Stelvio complex has two buildings, one with an elevator and the other building is a walk-up.

Two bedroom two bathroom apartments are 85sqm internal, and with the balcony, the total floorspace is 99sqm.  The pricing is $520,000 to $550,000 with 1 car park.  An extra $40,000 for two car parks.  Estimated rents are $475 a week.

This seems to be a very bad investment to me.  But it is being pushed by financial advisors.  According to this website, the project was launched in August 2011, but not year sold out.  (I wonder why?)

Compare Stelvio to an existing apartment complex, not in Windsor (because there are few larger complexes in Windsor) but in Indooroopilly, which in my view is better located.  The complex I selected for the comparison is Ciana, which is about 3 years old, and has a pool and a gym, and a track record of full tenancy occupancy:

Apt 56 in Ciana is for sale, 2 bed, 2 bath, 2 car parks, 89 sqm internal, 109 sqm total, being listed for sale at $495,000, rented at over $520 a week.

Compare Apt 56 to Stelvio.  The apartments are a similar size, but the balcony in Ciana is double the size.  The rent in Ciana is greater.  Stelvio's pricing with 2 car parks is at least $560,000, more than $60,000 more than Apt 56 in Ciana.  Why pay more for a smaller apartment that gets less rent?

Or compare Apt 29 in Ciana, 2 bed, 2 bath, 2 car parks, 164 sqm total area, being sold furnished for $595,000, rented at $750 a week.  Or this apartment, for $450,000.  Or this?

It doesn't seem good value or good financial sense to buy a new Stelvio apartment when comparing it to an existing newish apartment.  So I wonder why financial planners are pushing Stelvio?

Yet Another Milton Development

Following on from FKP's The Milton and Walker Corporation's neighbouring development, there is now Savior Faire Residents at 27 Manning Street.  It will have 65 apartments over 14 levels.  One and two bedroom apartments.  Seems like a lot of new apartments, but with no new facilities planned for the  neighbourhood.  The old character houses in this area are slowly being replaced by high rise.

Walk Score

An interesting website to rate whether a property is located close to amenities is WalkScore (update:  new link:   https://www.redfin.com/how-walk-score-works.  For each address, the site will give you a score between 1 and 100 as to walkability.  Using the StreetSmart Walkscore feature, you can see what routes to take and what types of facilities are nearby.  Here is an example for an apartment complex in Sherwood.  A generalisation: The higher the walk score, the better the location of the property.

Place Projects Apartment Report

Place Projects have released their December Quarter 2012 report on the development and sales for new apartment projects in Brisbane.  The report can be viewed here.  The report looks at 46 different city and inner city apartment developments currently being marketed and sold.  Of these, only 3 are in the downtown CBD area.

Some extracts from the report:

Through the longer term, a ten year period, the average number of unconditional new and off the plan sales has been 307 transactions for the Inner Brisbane marketplace. After five consistent periods whereby quarterly sales for new and off the plan projects were well above this long term average, the December Quarter 2012 saw a slight softening to only just fall short, registering 274 unconditional transactions.

  • A weighted average of $524,544 was recorded during the December 2012 quarter. This result represents a high percentage of one bedroom sales for the quarter and continues the trend recognised through the past three years of an elevated demand for this stock, that is high yield in the short term with the prospect of capital growth as the market recovers. 
  • Inner Brisbane supply tightened slightly during the December 2012 quarter. A total of 1,713 new residential apartments remain for sale across the Inner Brisbane market. Given the softening in sales rate recorded during the September quarter, this translates into a relatively unchanged monthly supply of just over 13 months.

Friday, February 8, 2013

Apartments v. Houses

"With the release of the RP Data-Rismark Home Value Index results earlier this month, we also received the updated information on median selling prices of homes over the three months to January 2013.  This data revealed that the gap between selling prices of houses and units reached a record high over the first month of year."

See RP Data Blog

"Dwelling approvals data which was released by the ABS earlier this week shows that developers are beginning to look to develop a much greater number of units than they have historically. Throughout 2012, 90,144 detached houses were approved for construction and 61,042 units were approved. In comparison to the number of approvals throughout 2011, house approvals have fallen by -4.4% whereas unit approvals are up by 6%."

 See RP Data

Thursday, February 7, 2013

River Point on Ferry and Flow

Stockwell is marketing 50 new apartments at West End, in its River Point development, called River Point on Ferry.  Prices range for $560,000 for a 1 bedroom apartment up to just under $2M.

Nearby, Pradella is marketing apartments in Waters Edge, which has been completed but still has unsold developer stock.  Apt 1606, 2 bedrooms, is listed at $619,000.  Apt 2209, 2 bedrooms, is listed at $699,000.  Apt 1111, 3 bedrooms, is $929,000.  A neighbouring development by Pradella, Flow, also has developer stock for sale.

Wednesday, February 6, 2013

Rental Demand Strong, says REIQ

Extract from REIQ Press Release:

Demand for rental properties remained strong across Queensland during the last three months of 2012, according to the Real Estate Institute of Queensland (REIQ).  Results from the REIQ December vacancy rate survey, released today, found that rates remained tight during what is historically the lowest period for rental demand annually.  REIQ CEO Anton Kardash said Queensland’s rental market had been a story of more demand than supply throughout 2012.

“As the year progressed, it became apparent that the continued robust demand for rental properties was not going to ease anytime soon.  While sales in the property market did begin to improve in the second half of last year, the removal of the First Home Owners Grant in mid-October resulted in a large number of would-be home buyers remaining in the rental market at the tail-end of last year.”

According to the latest Australia Bureau of Statistics (ABS) housing finance figures, the numbers of Queensland first home buyers slumped 33 per cent between October and November last year.

At 2 per cent, the REIQ figures showed that Brisbane’s vacancy rate remained well under the level of a balanced rental market at the end of December. 

Saturday, February 2, 2013

Macquarie Capital's View different to HTW's view

The AFR this week quoted Rod Cornish from Macquarie Capital.  "Mr Cornish expected prices to track sideways in Melbourne for longer, while he said Brisbane prices have not yet bottomed."

In contrast, Valuer Herron Todd White's recent report says that the Brisbane property market is at the beginning of recovery, and has passed bottom.

HTW's report also says:

"If you are a unit buyer we will flog the proverbially expired filly – second hand, good size, ready rentable units as close to the CBD as possible or with good transport links won’t hurt you. It’s exhausting to repeat this advice but they offer great value as long as there are no likely body corporate maintenance and repair surprises coming along.

For new unit buyers the value is in finding some quality mid-rise projects in good locations. The value comes in not just looking at the figure on the page but by actually gazing upon the bricks and mortar itself. Quality fittings, a reasonable living space, facilities close by and all the things that would make owner occupier want to live there as much as tenants. Don’t get too caught up in the hype – shop around! A 1- bedder in the heart of the city is still available for those in the $300,000 price point if you don’t have a car. If the luxury of a carspace is required, maybe $320,000 is all that’s needed after a good search around.

For those at the upper end of the market the joy is limited. The days of easy money are truly behind us so you need the cashflow to service the debt if you’re going to borrow. Quality property is tightly held and the number of buyers able to fork over big dollars appears limited."

School Districts Impact Property Prices

Most people don't realise that many of the good public schools in Brisbane are districted, with enrollment management plans.  A property inside a specific school's catchment area many be worth more, and sell/rent more easily, than a property nearby outside the catchment.  A story in today's paper makes this point, as does this prior post.

See EQ Website for further details.

Capital city dwelling values rebound in January, largely driven by gains across the Brisbane, Sydney, and Perth markets

From an RP Data press release:

Home values across Australia’s capital cities were up 1.2% in January, taking the annual movement in dwelling values back into the black with a 1.8% increase over the past twelve months.  Dwelling values across Australia’s combined capital cities recorded a 1.2 per cent improvement over the month of January, negating the -1.2 per cent drop in values recorded over the final quarter of 2012.

Since bottoming out in May 2012, dwelling values across the combined capital cities have recovered 3.1 per cent.

The year on year results have now moved firmly into positive territory, with capital city dwelling values 1.8 per cent higher over twelve months ending January 31st.

Every capital city, apart from Melbourne (-0.4 per cent), has recorded an increase in dwelling values over the past twelve months. The gains in January were mostly focussed within the Brisbane, Sydney and Perth markets where values were up 2.0 per cent, 1.8 per cent and 1.7 per cent respectively.

According to RP Data’s research director, Tim Lawless, housing market conditions have started the year on a strong footing. “These strong January results are likely to have seen some upwards seasonal bias, however the housing market has been on a clear recovery trend since June last year. Capital gains aren't likely to remain this high over the coming months, however we are likely to see the recovery trend continue through 2013.  Despite the improving market conditions in January, dwelling values across the combined capital cities remain 4.6% below their 2010 peak. The latest housing market data adds weight to the argument that interest rates may be at the bottom of the cycle. The Reserve Bank will be watching the performance of the housing market closely, and the positive trend in housing values will dampen calls for further interest rate cuts,” Mr Lawless said.

Brisbane apartment prices (to 31 January 2013):
January 2013 - up 4.4%
Quarter - up 3.8%
Year on Year - up 3.2%
Median price based on settled sales of Brisbane apartments over the quarter - $350,500.

Capital Loss in Meriton's Soleil

Take care when buying off the plan!  At present, Meriton is marking Infinity, a tall apartment tower in the Roma Street area of Brisbane City.  Let's look at an example of an investor in Meriton's prior apartment tower, Soleil.

Apartment 6003 was purchased by a Sydney investor in September 2010, off the plan, for $640,000.  It is a two bedroom apartment with study, on level 60.  None of the apartments in Soleil (or Infinity) have balconies.  The apartment is 93 sqm, a good size, but faces West.

This apartment has been on the market for a number of months.  Ray White now has it listed for sale, at $575,000.  With stamp duty and agent's fees, a capital loss of at least $80,000 or more than 10%.

This is what Ray White says in an email:

Unit 6003/501 Adelaide Street, Brisbane – 2 bedrooms, 2 bathrooms, study, 1 car + storage
Please see below links to the property internet listing along with a link to the floor plan:
6003/501 Adelaide Street, Brisbane - Internet Link
6003/501 Adelaide Street, Brisbane - Interactive Floor Plan Link
This property is open for inspection today 2nd February 2013 from 1:30-2pm. 
We also have another property on the market in Soleil, Unit 4803/501 Adelaide Street, Brisbane which is a 2 bedroom, 2 bathroom apartment with a study and 1 car space. 
At the end of 2012 we sold Unit 5204/501 Adelaide Street, Brisbane for $570,000 [the vendor had paid $540,000] along with many other sales within the Admiralty Precinct throughout the year.
We currently have buyers that are interested in acquiring quality properties within the Soleil and the Admiralty Precinct.