Sunday, August 31, 2014

Austin on Grey Street

Austin on Grey Street is almost fully built.  The rental campaign has started.  A 2 bed 1 bath apartment on a high floor with "breathtaking views" is listed for rent at $550 a week.  My guess is that this is a bait & switch offer, and that you will not be able to rent an apartment with "breathtaking views" at this rent.  I suspect that the photos in the advertisement are not from this apartment, because the same photos are used for all apartments advertised for rent.  A small two bedroom two bath is listed at "from" $640 a week unfurnished.  This building is very close to a major traffic intersection.

It is worth considering other established buildings, such as Arbour on Grey.  An excellent 3rd level, 2 bed, 2 bath with park & river views is listed for rent fully furnished at $690 a week, much better value in my opinion.

Australians Investing in Brooklyn

I recently came across an article from the NY Times from November 2013, discussing how Australians are investing in residential real estate in Brooklyn, NY.  It is titled G'Day from Bushwick.  It is worth reading.

South Brisbane Redevelopment

If you are thinking of buying in South Brisbane, you should first look at the Kurilpa Urban Renewal Master Plan, published by the Brisbane City Council:
This Plan will have a big impact on views, and it also gives an idea of how many apartments will be built in the next decade in this area.  See video.

Saturday, August 30, 2014

Rent Without An Agent

If you engage a real estate agent to look after your property rental, the costs can be rather high compared with the service actually received.  Typically, the cost is a weeks rent to find a tenant, plus GST, and then 8.8% to collect the rent and do the ongoing management.  On rent of $550 a week, assuming that you have a tenant change once a year, the cost is over $3,000 a year.

If you live near your rental property, and don't mind learning how to legally comply with rental laws (the RTA website has good information), then Rent My Estate is a good service for landlords.  It helps manage the advertising process, and is expanding into other programs for landlords (such as recording rents received).  Readers of this blog will receive a $20 discount via this link shared by a reader - thanks John.  The savings year on year could be substantial, if you are prepared to put in the time yourself to do things properly.  There is also a good blog on that site.

Top Yields

Today's paper had a chart with the top rental yields for inner-city Brisbane.  All were apartments.  A summary of some of the data:

  • Spring Hill - based on 170 sales, median sale is $380,000, median asking rent is $485, so indicative gross yield is 6.6%
  • Brisbane city - based on 666 sales, median sale of $500,000, rent $600, so a yield of 6.2%
  • Woolloongabba - 86 sales, sale price of $400,000, rent $465 so yield of 6%
  • The Valley had an indicative yield of 5.6%
  • South Brisbane had an indicative yield of 5.4%
These figures are a little rubbery.  The apartments being sold may not be the same apartments listed for rent.  The rent is the asking rent, not the rent achieved.  The figures do not take into account vacancy.  And the sales price does not include stamp duty.

Take the following example, of an apartment sold for $431,000 and then rented furnished for $550 a week.  On a simple calculation using these numbers, the yield is 6.63%.  If stamp duty of $13,510 is added, the real sales price is $444,510, so the yield changes to 6.43%.  Once letting agents fees, body corporate fees and rates are taken into account, the yield drops to 4.5%.  And this does not include vacancies and repairs.

I recommend focusing on net yield, after expenses.  For a one bedroom apartment, you should aim for a net yield of 5%.  For a two bedroom, aim for a net yield of 4.5%.  For a three bedroom, 4%.

Blog Statistics

Looking at the number of views of this blog since 2007, December is the month with the lowest number of readers, year on year.  My guess is that less people are doing research or are considering buying an apartment in Brisbane in December.

When should I buy? When should I sell?

The Brisbane inner city apartment market is somewhat strange at present.  Some points to note:
  • I mentioned in a recent post that there were fewer apartments listed for sale than in recent times.  That is the case for resales of existing apartments.
  • There is a large potential increase in the number of inner city apartments, due to a large number of high rise apartments being developed.
  • With spring, more apartment owners are likely to list their apartments for sale.
  • Rents are down, vacancy rates are up.
  • Sydney and Melbourne are or have boomed.  Brisbane has not.  It is still behind its peak 5 years ago.
  • Future capital growth is uncertain, but apartments are currently selling at good prices due to lack of stock available and low interest rates.
  • My prediction is that in 3 months time, prices will decrease slightly.  So now may be a good time to sell, but an uncertain time to buy.

High-rise Brisbane

A newspaper article by Matusik in the Courier Mail today reflected on potential changes to the Brisbane inner city apartment market:

"Brisbane is set for an increase in the supply of new inner-city digs.  Brisbane could well face an oversupply of downtown apartment stock.  And that increase in stock might more resemble a tsunami in terms of its impart on the market and potential investment outcomes.

For the past five years, the Brisbane market has been undersupplied, with an underlying demand of about 9000 new dwellings across Brisbane.  However, when we break down future demand by market segment, going rental demand (those who occupy a significant percentage of inner-city apartments) appears likely to fall.  And Brisbane's future demand will more likely be deriven by the increasing downs and retirement markets.  Those folk are, for the main, not enticed by large, high-rise complexes.

Rents are down, the vacancy rate is increasing and some resales in recently completed inner-city apartment buildings are already selling for losses.

Currently, the vacancy rate in Brisbane city is 4.2%.  Two years ago it was 1.2%.

And there are now 276 properties (as at June) for rent in Brisbane/Spring Hill, compared with just 48 two years ago.  For the first time in five years, rents have fallen."

Tuesday, August 19, 2014

Buyer Misses Out Because Notice sent to real estate agent

A recent Supreme Court of Queensland case shows that it is important to be precise when following contractual provisions.  A buyer and seller sign an REIQ contract of sale.  The contract includes a provision that the buyer must give notice to the seller that the building and pest inspection has been satisfied by 5pm on a particular day, and if such notice is not given by this time, then the seller can terminate.  The contract says that notice can be given by fax to the seller or the seller's solicitor.

The buyer's solicitor gave notice at 4.57pm to the seller's real estate agent, not the seller's solicitor.  So the seller terminated the contract at 5.07pm.  This termination by the seller was considered to be valid.

See Simpson v. Jackson [2014] QSC 191

Wednesday, August 13, 2014

Property Clock

"However I like Brisbane at the moment; it’s the capital city with the strongest potential for capital growth. It’s at about 7.30 on the clock, with plenty of well-priced stock around if you know where to look."

See MRD Partners

Monday, August 11, 2014

Dog v. Body Corporate Committee - Dog Wins Again

Harbour Lights [2014] QBCCMCmr 264 (21 July 2014)


In McKenzie v Body Corporate for Kings Row Centre, the scheme in question was a high rise building. Despite this, the Tribunal found the scheme could prima facie be suitable for the keeping of pets. Following this decision, I am not satisfied the unit in question is inappropriate for the keeping of this dog merely because it is a ‘unit’ (as opposed to a house or other dwelling type) or contained in a high density housing area. Further, I note that no evidence whatsoever has been presented to suggest that the dog in question is too large or otherwise inappropriate to be housed in the applicant’s unit. Accordingly, I am not satisfied these arguments form a reasonable basis to deny the applicant’s pet request.

Sunday, August 10, 2014

Brisbane has under performed, but is gathering momentum

Double click on the above to make bigger.  Source:  RP Data

Arbour on Grey

One of the better buildings in the South Bank / South Brisbane area is Arbour on Grey, located on Grey St and Little Stanley Street.  It was developed by Mirvac, and is a high quality complex.  It has views of South Bank, and apartments on the higher floors can see the river.  (It is only 4 floors high.)

The two bedroom apartments are typically about 90 sqm internally, with a large balcony of about 20 sqm.  So much larger than many off-the-plan two bedroom apartments currently being marketed.

Some recent sales:

Apt 1307, located on level 3 - 2 bedrooms, 2 bathrooms, 1 car, facing the river - $735,000
Apt 1215, located on level 2 - 2 bedrooms, 2 bathrooms, 1 car, facing Grey St - $620,000
Apt 2204, located on level 2 - 1 bedroom, 1 bathroom, 1 car, facing Grey St - $467,250

Some apartments currently for sale in the complex:

Apt 1110, located on level 1 - 1 bedroom, 1 bathroom, 1 car, large apartment facing Grey St
Apt 2218 - under contract
Apt 2312 - under contract
Apt 2214 - 3 bedroom floor-through apartment on level 2

Limited Stock Available for Sale

In Brisbane (and also the Sunshine Coast), there are a limited number of apartments listed for sale by owners (excluding off the plan and developer sales).  Some agents are saying (for the first time in years) that there are more buyers than sellers for apartments.  In some suburbs, there are very few apartments listed for sale, and in some larger buildings, there are no listings at all.  That being said, prices are up, but not dramatically.

One could conclude that:
  • owners don't think it is a good time to sell
  • owners believe that prices will rise soon, following on from the trends in Melbourne and Sydney
  • owners are still underwater, and don't want to sell at a loss, and so are waiting for further price increases before selling
  • interest rates are low, and so holding costs are low -- why sell a cash flow positive property?
  • Brisbane is a good long term investment
  • buyers believe that the Brisbane market will improve
  • off the plan developments are overpriced, and so buyers are looking at existing apartments, which are better value

Saturday, August 9, 2014

Property Indices

RP Data's blog had a post responding to a Fairfax criticism of the RP Data property index,  It is worth reading.  One interesting graph shows property price index v. ASX index is included below.

Sunday, August 3, 2014

The Highgate in Highgate Hill

Pointcorp is marketing The Highgate located in Highgate Hill, next door to the famous Torbreck building.  Looks like it will have great views north to the city.  The complex will have 42 apartments starting at $1.5M.  The developer says that is sees a demand for premium apartments in Brisbane, in the $1M to $2M range.  The AFR below reports 108 sales in Sunland's Abian on Alice Street and good results for SouthPoint and Pinnacle presales.

Recent Brisbane Apartment Sales

iStay River City - 79 Albert St

Apt 1201, 1 bed, 1 bath - sold on 27 July for $335,000

Charlotte Towers - 128 Charlotte St

Apt 2404 - 1 bed, 1 bath, no car - sold on 27 July for $340,000
Apt 1201 - 1 bed, 1 bath, no car - sold on 18 July for $365,000
Apt 4403 - 2 bed, 2 bath, 1 car - sold on 29 May for $650,000
Apt 2803 - 2 bed, 1 bath, 1 car - sold on 2 May for $495,000

Skyline - 30 Macrossan St

Apt 53 - 2 bed, 2 bath, 1 car - sold on 27 July for $603,000
Apt 193 - 2 bed, 2 bath, 1 car - sold on 2 June for $618,500
Apt 31 - sold on 16 May for $750,000

M on Mary - 70 Mary St

Apt 1205 - 1 bed, 1 bath, no car - sold on 2 July for $322,500
Apt 4302 - 5 bed, 3 bath, 3 car - sold on 31 May for $1.9M
Apt 1009  - 1 bed, 1 bath, 1 car - sold on 26 May for $365,000
Apt 506  - 1 bed, 1 bath, no car - sold on 10 May for $395,000

Festival Towers - 108 Albert St

Apt 3807 - 2 bed, 2 bath, 1 car - sold on 30 June for $516,000
Apt 1503 - 2 bed, 1 bath, 1 car - sold on 25 June for $460,000
Apt 4007 - 2 bed, 2 bath, 1 car - sold on 10 June for $541,000
Apt 704 - 1 bed, 1 bath, no car - sold on 5 June for $298,500
Apt 2610 - 1 bed, 1 bath, 1 car - sold on 3 June for $400,000
Apt 905 - 1 bed, 1 bath, no car - sold on 2 June for $319,500
Apt 2510 - 1 bed, 1 bath, no car - sold on 22 May for $350,000
Apt 2301 - 2 bed, 2 bath, 1 car - sold on 9 May for $525,000
Apt 508 - 2 bed, 2 bath, 1 car - sold on 8 May for $475,000

Felix - 26 Felix St

Apt 217 - 2 bed, 2 bath, 1 car - sold on 29 June for $580,000

Riverplace - 82 Boundary St

Apt 92 - 2 bed, 2 bath, 1 car - sold on 27 June for $645,000
Apt 147 - 2 bed, 1 bath, 1 car - sold on 23 June for $551,000
Apt 52 - 2 bed, 1 bath, 2 car - sold on 7 May for $650,000

Admiralty Towers One - 35 Howard St

Apt 44 - 2 bed, 2 bath, 1 car - sold on 8 June for $810,000
Apt 146, 2 bed, 2 bath, 1 car - sold on 12 May for $585,000

Infinity - 43 Herschel St

Apt 3807 - sold on 27 May for $400,000
Apt 4303 - 2 bed, 2 bath, 1 car - sold on 26 May for $630,000
Apt 6304 - 2 bed, 2 bath, 1 car - sold on 20 May for $640,000

212 Margaret St

Apt 82 - 2 bed, 2 bath, 1 car - sold on 26 May for $555,000

Admiralty Quays - 32 Macrossan St

Apt 137 - 3 bed, 2 bath, 2 cars - sold on 12 May for $1,100,000
Apt 34 - 2 bed, 2 bath, 1 car - sold on 2 May for $850,000

Riparian - 71 Eagle St

Apt 4302 - 1 bed, 2 bath, 2 car - sold on 8 May for $1.5M

Admiralty Towers Two - 501 Queen St

Apt 166 - 3 bed, 2 bath, 2 car sold on 28 April for $979,900

Aurora - 420 Queen St

Apt 301 - 2 bed, 2 bath, 1 car - sold on 26 April for $627,500

Quay West - 132 Alice St

Apt 103 - 1 bed, 1 bath, 1 car - sold on 24 April for $510,000

Saturday, August 2, 2014

Meriton Soleil Resales - Some up, some down

It is interesting to see how resales have gone for off-the-plan purchasers in Meriton's Soleil (501 Adelaide St, Brisbane).  Some original buyers have profited, and some have lost.  I am not convinced that the risk in buying off-the-plan, when you can't see the view or quality or feel of the apartment, is worth it, when it seems that there is a good chance that you can buy the same apartment when complete for less.

Apt 5304 - Sold off-the plan in June 2009 for $543,000, resold in June 2014 for the same price.  This is a loss, because of stamp duty and agent's selling fees.

Apt 2403 - Sold off-the plan in August 2012 for $493,725, resold in April 2014 for $525,000.

Apt 5505 - Sold off-the plan in August 2009 for $669,240, resold in April 2014 for $600,000.

Apt 5604 - Sold off-the plan in November 11 for $586,000, resold in April 2014 for $565,000.

Apt 4404 - Sold off-the plan in April 2012 for $485,000, resold in April 2014 for $572,000.

Apt 4004 - Sold off-the plan in March 2009 for $502,000, resold in March 2014 for $570,000.

Brisbane Apartments outperforming Brisbane Houses

According to RP Data:

"Capital city dwelling values were 1.1 per cent higher over the three months ending July, taking the aggregate capital gain to 5.0 per cent for the year to date across the combined capital cities. The gain was mostly centred in Sydney, Melbourne and Canberra where dwelling values rose 2.0 per cent, 1.8 per cent and 2.1 per cent respectively over the rolling quarter to offset the falls recorded in other capital cities. The Darwin market also recorded a capital gain over the past three months (+0.8%) while the remaining capital cities all recorded a drop in values (Brisbane -0.4%, Adelaide -2.6%, Perth -0.1%, Hobart - 1.2%)."

However, looking at the breakdown of the statistics, Brisbane apartments are doing much better than Brisbane houses.

Brisbane apartment prices (to 31 July 2014):
July 2014 - up 1.3%
Quarter - up 0.8%
Year to Date - up 3%
Year on Year - up 7.4%
Median price based on settled sales of Brisbane apartments over the quarter - $390,000

Lawsuit over carpark

A long running lawsuit about a car parking space reached conclusion recently, with a decision from the Queensland Court of Appeals.
See Hadgelias Holdings and Waight v Seirlis & Ors [2014] QCA 177
A person purchased an expensive apartment, and was told that there were 3 car parks, but in fact, there were only 2 carparks plus a storage space.  Damages were awarded in favour of the purchaser.

An interesting calculation quoted in the judgment, where it was stated that the value of the apartment at the time was falling at a rate of $45,000 month, independent of the car park issue:

"Using apartment 4404 as a basis for valuing the Seirlis apartment in April 2010, he deducted the following amounts from its January 2010 sale price of $2.65 million: $135,000, to represent the three months which had elapsed to April 2010; $50,000 for its superior fit-out; $60,000 for its additional two floors in height; and $100,000 as the estimated value of the third car space. That brought him to a figure of $2.305 million for the value of Mrs Seirlis’ apartment. From the sale price of apartment 4804 in October 2009, $2.9 million, he deducted $270,000 to represent the passage of six months, $180,000 to reflect the six floor difference, $50,000 for its superior fit out and $50,000 for the value of its storage facility. That gave a value for Mrs Seirlis’ apartment of $2.35 million as at the date of

Interest Rates and Housing Bubble in Australia?

Interest rates for residential housing are at lifetime record lows.  Banks are awash in cheap cash that they want to lend.  Lending standards have deteriorated, and money is being loaned out willy nilly.  Good established properties in Brisbane are selling quickly at good prices.  Those wanting to invest are turning to off-the-plan apartment developments, where it is an easier process to sell and buy -- but at higher than market prices.  Is housing price growth solid and sustainable, or a bubble?

When buying, questions to consider:
  • What will happen when quantitative easing ends in the USA?
  • Will there be inflation?
  • What is the risk of the Australian government removing negative gearing, and what impact will this have on property prices?
  • What will happen if China property prices collapse?  What will happen if Chinese buyers stop buying in Australia?
  • In a year, will all off-the-plan buyers be able to settle?
  • Why are off-the-plan prices for apartments much higher than similar properties that the developers have sold, and the first owner is reselling?
An interesting article re the possible bubble is here.

Friday, August 1, 2014

Housing Price Supply and Demand

From the AFR on 30 July 2014, p. 28

"Recent house price appreciation has been driven by more than simply a strongly growing population.  Low interest rates have encouraged domestic investors to allocate assets into housing.  Foreign investors have also been buying.  A reduced rental return on housing would eventually discourage domestic investors but probably comes with a lag.

The apparent equalisation between an undersupply of housing versus strong demand for dwellings in major metropolitan areas comes as the official cash rate remains at a record low of 2.5%, and as the major banks lower their fixed rate home loans in an attempt to entire more people to borrow more."

This article applies more to the Sydney and Melbourne markets than Brisbane.  It is important to look at individual markets, and not take southern trends and blindly apply them to Brisbane.