Saturday, August 31, 2013

Targeting the Chinese

You know when a developer is targeting foreign buyers when they produce a brochure in Chinese.  Here is a very nice brochure for Botanica, a development by Aria, in South Brisbane.  It will be located on the corner of Boundary Street and Edmondstone Street.  One and two bedroom apartments.

Friday, August 30, 2013

Infinity Part Opened

The tall Infinity building has partly opened, even though it is still under construction with a crane on top.  Meriton has opened its serviced apartment section, on the lower floors.  There are 10 apartments per floor.  I looked at a one bedroom.  It has good storage space, and a reasonable finish.  No balcony.  But strange design, because the living room is triangular in shape.  With the kitchen space in the living room, you have a nice view of your kitchen sink when trying to watch TV.  I felt like I was in a prison cell for white collar criminals.

The Brisbane Market

There is a lot of talk about how well the Sydney property market is doing, and also the property market in general.  But this does not appear to apply to Brisbane.  From what I can tell, the Brisbane market is holding steady, and not rising, and definitely not booming.  Have a look at the charts here, and the information below.  Despite what is happening in Sydney, there is no property boom in Brisbane.

Cheapest Units within 10 km of Brisbane downtown

RP Data released a report today, showing the suburbs with the lowest median price for units within 10km of Brisbane's city centre.  The results are here and here.  The three cheapest suburbs were:
  • Chelmer
  • Zillmere
  • Kedron

Thursday, August 29, 2013

Different ways to measure size of apartments

"Apartment buyers in Victoria are routinely being led to believe by developers and agents that their purchases are more than 5 per cent larger than the same place is anywhere else in Australia, according to industry experts.

Different ways of measuring and allowing inclusion of balconies, car parks and storage cages has allowed marketing material to claim bigger sizes than appear on property titles, they claim.

"It creates a big risk for valuers that report to banks who use the information about how much to lend," warned Angela Schooneman, head of real estate for law company Minter Ellison. "In tough times valuations can be looked at quite closely – and these are tough times."

Concern that measurements are confusing the industry and misleading buyers has caused the Australian Property Institute to try and bring the state in line with the rest of the nation by urging the introduction of uniform standards within the next 12 months.

"When valuers check measurements of apartments the outcomes are often different to what buyers think they are getting," said David Way, API apartments spokesman and joint management director of Knight Frank Valuations."

Full Story in AFR

I have seem developers and real estate agents in Brisbane, when giving apartment sizes in sqm, include storage cages and even car parks.  So take care!

Wednesday, August 28, 2013

Foreign Investors

Foreign buyers snapped up one in every eight new properties built this year - up from one in 20 properties in 2011, National Australia Bank research reveals.

Australia's foreign investment rules ban foreigners from buying established homes, and developers can sell half their properties to foreign investors before they are built.

Colliers International's managing director of residential property in Australia, Peter Chittenden, yesterday said Asian buyers were purchasing 60 per cent of units being sold off-the-plan in big developments.

He said overseas buyers had snapped up two in every three of the 588 luxury apartments in the Singaporean-owned Tower Melbourne development - being constructed as the city's tallest building.

Foreign investors have bought 15 to 20 per cent of the 710 apartments being built by Pearls Australasia and Metro Property Development in three towers in the inner-Brisbane suburbs of Bowen Hills and Fortitude Valley.  Pearls Australasia executive director David Higgins said Asian buyers were more likely to buy the more expensive apartments - costing more than $600,000 - with extra space or views.

Source:  Courier Mail

"According to research from LandMark White, of the 27 apartment projects completed in the inner-city precinct between 2011 and 2012, the vast majority were rental properties.  "Anecdotal evidence reports circa 40% to 50% of these investors are Asian buyers," it reports.  "Current conditions indicate investment in the inner apartment market remains robust due to strong rental growth and tight vacancy."

Source:  Courier Mail, Saturday August 24, 2013, p.33

See also: Property Observer: Trends

Tuesday, August 27, 2013

Apartment Body Corporate Fees

"Apartment buyers should avoid paying for lifestyle amenities already on their doorstep.  Minimising strata fees is increasingly a priority for apartment buyers eager to make sure the quarterly payments for the upkeep of their buildings don't take too much of a chunk out of their income.  So where there's a public gym or pool near a block, developers will often avoid including them in their plans for the complex to keep costs down."
Source:  Domain Advertorial

Here are some example body corporate levies for a random selection of apartments in Brisbane and the Sunshine Coast:
  • City, one bed - $5,200 a year
  • South Bank, two bed - $6,000 a year
  • City, two bed - $7,000 a year
  • City, two bed - $5,800 a year
  • Suburbs, one bed - $4,400 a year
  • Suburbs, two bed - $4,000 a year
  • Suburbs, two bed - $4,900 a year
  • Noosa, one bed - $5,129 a year
  • Mooloolaba, two bed - $11,820 a year

Monday, August 26, 2013

Rents and Vacancies

A number of onsite managers have reported to me that they are taking much longer than expected to fill vacancies, and that rents are going down, even when a tenant renews.

Sunday, August 25, 2013

Friday, August 16, 2013

Guaranteed Losses if you pay too much

If you pay too much to a developer when buying off the plan, no matter how good the location, and how good the development, you will loose money.  Often, developers will show you beautiful brochures of the facilities in the location (all true) and tell you rents are higher in this location than others (again true) and that it is a popular, closely held area (true again), and then try to sell you an apartment that is 20% above market value.  If this happens, you will likely suffer a capital loss.  See this story for example about capital losses in a bullet proof area.  Investors looking at SouthPoint at SouthBank, which is a brilliant location and looks to be a quality development, should take notice of this warning, particularly when prices are more than $10,000 a square metre.

Thursday, August 15, 2013

Rental Increases

In Australia, rental yields for apartments are 4.9%, according to RP Data.

Wednesday, August 14, 2013

Barangaroo Sydney receiving great interest

New harbour-side apartments in downtown Sydney, at Barangaroo, are generating great interest.  Lend Lease must be happy.

Alex Perry Residential Struggling?

Alex Perry Residential in the Valley launched with great hype, and, according to hits on this blog, was of great interest to people looking to buy an apartment.  The dreams and promises of 2011 may not come true.  According to Property Observer:

"... the much touted Alex Perry Residential development, which hit the market more than two years ago complete with supermodels and paparazzi, continues to struggle with developer Chrome Property providing no update on off-the-plan sales to Colliers International.  Colliers International records 40 apartments sold to date out of 143 for a project which was first marketed in May 2011 and is now being managed by property development services group Xede, after being re-jigged with three-bedroom apartments replaced with one bedroom apartments and more than half of the 143 apartments to be sold to investors as serviced apartments.

Xede managing director Rod Fiddler told Property Observer the project had received development approval with a builder appointed.

“Sales are continuing and we are progressing towards financiers’ pre-sales targets.  We are not in the business of publicly declaring sales results as these are too often manipulated or misinterpreted," he said.  “Construction is targeted to commence this side of Christmas with demolition as early as September 2013,” he said.

Metro Property Group - A remarkable marketing machine

Last week, Ken Woodley, marketing director of Metro Property Group, zoomed past me in his Jaguar.  He was leaving his Mirvac penthouse and heading in the direction of the Valley.  He must be super happy with the sales of Metro's off-the-plan apartments in the Valley.  As reported today in Property Observer, Metro has been hugely successful in its Valley developments.  Although they are marketed as luxury apartments, in my view, they are small, basic apartments, targeted at foreign investors who cannot buy existing apartments due to FIRB rules.

"Devine’s Metro Property Development group recorded 67 off-the-plan sales over the March quarter for Cambridge Towers, the first stage of its $450 million Central Village development in Fortitude Valley making it the top seller by some margin, according to the latest inner Brisbane apartment update from Colliers International.  Now under construction, Metro had sold 92 out of 165 units in the development as of the end of the March quarter.  In a release earlier this month, Metro said it had sold 80% of the 160 apartments in Oxford Towers, stage two of the project, with one and two bedroom apartments ranging from $275,000 to $575,000.  On completion Central Village will comprise five towers and approximately 970 apartments. The project is expected to take approximately five years to complete."

Tuesday, August 13, 2013

Vendor activity steady

Property owners in Australia do not appear to be rushing to sell, according to RP Data.

Monday, August 12, 2013

Comparison: Apartments and Houses

According to RP Data, when looking at the median price of properties sold in the 3 months to July 2013, apartments in Brisbane are $75,000 more affordable than houses.

Sunday, August 11, 2013

Milton off-the-plan apartments

There are two competing apartment developments in Milton, currently being developed.

  • The Milton, being developed by FKP, at 55 Railway Terrace.  FKP has announced recently that it will be focusing on retirement properties, rather than residential developments.
  • Westmark Milton, being developed by Lang Walker from Melbourne, at Railway Terrace between Walsh and Manning Streets.
FKP's renderings show a park across the road from its development.  What FKP does not show is any illustration with the Westmark building, that will (I suspect) block out any river or city views that residents of The Milton may have been expecting.

Due to the railway, both buildings should have uninterrupted views of the XXXX brewery.

The Milton -- but where exactly is the green space that is shown?

Across the road is Westmark

Saturday, August 10, 2013

Less Apartments Being Sold in Brisbane

The number of apartments being sold in Brisbane are less than the number sold in the same three month period last year.

Rental Returns

I have conducted a review across about 20 apartment rental properties in Brisbane and S.E. Queensland, comparing the 12/13 FY with the previous financial year.  The analysis is done before depreciation and tax is taken into account.  Some of my conclusions, from this limited review:
  • rent increases in the past year have been minimal, and I suspect below inflation
  • vacancy periods between tenants have increased slightly
  • body corporate fees have increased dramatically, and well more than rents and inflation
  • council charges and water rates are slightly higher
  • long term rental properties do much better than vacation or short term rental properties
  • net returns, before interest, have decreased compared to the previous financial year (mostly due to body corporate increases being more than rent increases)
  • fees and charges from rental agents are high, especially when considering the work done and value received -- self managed properties do better than agent managed properties for this reason,  even if the rent received is slightly below market rent
  • if interest rates had not decreased, then the overall picture would not have been rosy.  
  • because of decreases in interest rates, the overall cash position (not taking into account depreciation and tax) improved in the 12/13 FY compared with the previous financial year.

Friday, August 9, 2013

Buyers Retuning to the Market?

Real estate agents are reporting that buyers are coming back to the market in Brisbane, and that prices achieved are increasing.  For example, two bedroom apartments in higher quality city apartments that, at the height of the boom achieved above $800,000, and then dropped to the mid $600,000 range, are now selling in the $700,000 plus range, and sometimes more.  This includes a two bedroom apartment in Quay West, sold for about $700,000; a two bedroom in Admiralty Towers Two sold above $750,000 and a two bedroom in Saville at Southbank for more than $800,000.  In fact, another two bedroom at Saville is now listed for sale in the $900,000 range.

Investors appear to be returning to the market, due to lower interest rates.  Owner-occuppiers are looking for larger apartments, and there are not many high quality larger apartments available for sale (partly because developers have been focusing on building very small apartments that have been sold to foreign investors).  With interest rates low, many investors who currently own property are not selling, because these properties are now becoming positively geared -- why sell, unless the price offered is high?  There is a shortage of apartments for sale for owner-occuppiers; and a shortage of existing apartments (compared with off-the-plan apartments) for investors.

Towers like Infinity, aimed at Chinese investors, do not provide what local Brisbane buyers want in my view.

Photo of Infinity, under construction on the right.  Evolution Apartments is the smaller building in the middle of the photo.  The Supreme Court building is on the right in the foreground; the Magistrates Court building on the left in the foreground.  400 George St is the taller building on the left.

Saturday, August 3, 2013

Valuer's View

From the HTW Month in Review, recently published:

"Our valuers are reporting anecdotally that confidence is reasonably good around south east Queensland, but job security is the big concern. It’s hard to pay your mortgage or rent without dollars coming in the door. Some certainty in the economy would be nice with a few observers saying a post-federal election surge is on the cards. We wouldn’t be so bold as to make that prediction, but politics and instability have played a hand in making the population uneasy on a number of fronts.

While there is some confidence in our markets,buyers are uncertain where fair market value lays in plenty of cases. There has been an increase in the number of pre-purchase valuations being requested by buyers. This is a sign to some degree that buyers want to purchase rather than just tire kick or hope to jag an absolute steal.

The sector seeing the best performance is probably the trade up market. Family size homes in the $1 million to $2 million range are being keenly sought. Buyers want large blocks and sizable homes.  Location is important too. Competition is toughest within 8 kilometres of the CBD, but this should come as no surprise. This sort of real estate is generally blue-chip and will offer the best chance of capital growth in the coming years.

So our call is that sectors where fundamentals are good are the ones that will perform the best in the foreseeable future. It’s no longer fair to say every sector is a buyers’ market. Our expectation for the rest of this year is one of quiet confidence. Assuming there are no unforeseen shocks, everything is pointing towards a steady-asshe-goes time in the market with modest gains to be made for those willing to buy and wait."

Thursday, August 1, 2013

Brisbane Units Still Going Backwards

According to RP Data, Brisbane apartment values are still declining.  From an RP Data release:

"RP Data and Rismark International today released its July housing market results which shows that capital city dwelling values increased by 1.6 per cent over the month of July after posting a solid 1.9 per cent capital gain in June. These latest monthly results now takes the cumulative recovery to 6.5 per cent since dwelling values found their trough at the end of May last year.

The July results also take the rolling quarterly change in capital city dwelling values to +2.3 per cent over the three months ending July and values are 4.9 per cent higher over the past twelve months.

According to RP Data research director Tim Lawless, despite the strong headline, the market remains somewhat of a mixed bag.

“The housing market is being buoyed by very positive conditions in Sydney, Perth and to a lesser extent Melbourne, with residential values in these cities now 3.7 per cent, 4.4 per cent and 2.4 per cent respectively higher over the past three months alone. At the other end of the scale you have cities like Adelaide, Brisbane and more recently Darwin where conditions are more sedate with dwelling values slipping lower over the past quarter.” 

Brisbane apartment prices (to 31 July 2013):
July 2013 - down 0.5%
Quarter - down 3.5%
Year on Year - down 0.3%
Year to Date - down 0.7%
Median price based on settled sales of Brisbane apartments over the quarter - $373,500.