Sunday, September 14, 2014

Recent Quay West Sales in Brisbane

Quay West is a great apartment building, overlooking the Botanical Gardens on Alice Street.  A one bedroom apartment in this building is over 70 sqm in total.

Recent sales of one bed apartments (some of these are fully furnished when sold):

Apt 803 - $440,000 Sold in July
Apt 405 - $460,000 Sold in June
Apt 504 - $460,000 Sold in April
Apt 1603 - $510,000 Sold in April
Apt 1705 - $510,000 Sold in April

Apt 605 is currently listed at $465,000, fully furnished, which looks like a good deal.

Spice Apartments at South Brisbane

The Spice Apartments development at South Brisbane is currently being sold off-the-plan.  According to the agents selling these apartments, most have sold.

It is a 14 level development, with two towers sharing a common podium.  The complex overlooks the onramp and tolling infrastructure for the Go-Between Bridge.  It is river front, sort of, with trees and and bikeway between the apartments and the river.  Many of the apartments will have no views, or will only have views of a busy road or industrial buildings (that will probably get redeveloped into apartment or office towers.)  Any city views are likely to be built out.

Example prices:
  • One bedroom on level 2 with car space, 54 sqm internal, with balcony and court yard, so total 78 sqm.  No view.  $429,000.
  • One bed, one bath, level 2, 49 sqm internal, with balcony and court yard, total 77 sqm, $420,000.
  • Two bed, one bath, 1 car, level 12, internal - 63 sqm, total 76 sqm, one bedroom is internal with no windows (so this is really a one bed plus study) - $526,000
  • Two bed, two bath, 1 car, level 3, internal - 83 sqm, total 101 sqm - $585,000
In my opinion, these are expensive prices for small apartments that are in a poor location.  Even though only 15 minutes walk to the city, there is not much currently in this area.  It is a long walk to South Bank, even though the sale brochure for the development has lots of South Bank photos.

The body corp fees for the first year are low, around the $3,000 a year mark.  My guess is that these are likely to increase substantially in subsequent years.

Rents for unfurnished apartments are provided by the developer:
  • 1 bed - $410 to $480 a week
  • 2 bed, 2 bath - $550 to $640 a week
  • 3 bed, 2 bath - $850 to $950 a week.
It will be interesting to see if these rents are actually achieved.  You can rent a 110 sqm two bed, two bath apartment at South Bank, with river and park views, fully furnished for $690, so it is hard to see how these rents are possible.

Before buying, I would suggest looking at Vue Apartments, which are diagonally opposite the bridge and river.  Compare actual sales prices and actual rents for similar apartments, and look at this building's financial performance.

Saturday, September 6, 2014

Brisbane still under performs

RP Data reports that the Brisbane property market has under performed the combined capitals average since 2008 but is gathering some momentum.

Economic Data remains mixed - RP Data

RP Data reports the following:

Mortgage demand has started to level recently
  • The RP Data Mortgage Index (RMI) shows that mortgage demand has begun to level over the past couple of months.
  • ABS housing finance data shows a similar trend with the market largely driven by upgraders and investors.
Economic data flows remains mixed
  • Population growth is winding down but remains high on an historic basis.
  • Dwelling approvals have shifted much higher over the past year and are at their highest ever level on an annual basis.
  • With population growth slowing and building approvals remaining high (despite the recent fall) we may see a better relationship between approvals and population growth over the coming years.
  • Consumer sentiment has been weak since the Federal Budget but is slowly increasing.
  • The unemployment rate has hit 6.4% with employment growth quite slow.
  • Mortgage rates remain low with banks competing hard for their share of the home loan business.

W Hotels on old court site

It is reported that W Hotels will manage a new hotel that will soon be developed on part of the old State Courts site on George Street.  The three tower development will include residential apartments. Some may remember that Westin Hotels (a sister company) was to manage a proposed new apartment and hotel development on nearby Elizabeth Street, called Empire Square, that never went ahead.

Rental Pain

The Courier Mail has an article today about potential pain for rental property owners.  "A flood of new apartments being built in Brisbane spells bad news for property investors as rents are likely to soften in the competitive market.  New data from Urbis shows nearly 9000 new apartments will settle in Brisbane between now and 2017."  Confusingly, the article states that not all planned apartments will be built (so how could Urbis predict settlement of such apartments?).  Urbis goes on to say "So we are being cautious about predicting too much supply."

According to the article, Brisbane's inner north is by far the busiest precinct, with 1129 apartments predicted to settle in 2014 and a further 926 apartments next year.  It is claimed that 41% of apartments sold int he inner north in the June quarter were one bedroom apartments.

In my view, one must be careful to generalise here.  There may be many new apartments in certain areas, such as Bowen Hills, but few new apartments in other areas, such as downtown Brisbane or St Lucia.  There may be too many small apartments, and not enough 3 bedroom apartments.  So the oversupply may impact some and not others.

I would be careful buying in the Brisbane Showgrounds redevelopment area.  Although reasonably close to the city and the RBH hospital, there is not much within walking distance.  And there is a huge supply pipeline.  This weekend, Lendlease will release The Yards, the next stage of this redevelopment.  The development does not include any large parks, schools, kindergartens, supermarkets or the like.

Project Aparment

The Australian newspaper has a lift out regarding buying and investing in new apartments.  See ProjectApartment.

Friday, September 5, 2014

Housing Boom No Big Economic Threat

From the AFR on Friday, 5 September 2014, p. 17:  "Rising housing prices in Australia require monitoring by regulators but the risk posed to the financial system, are nowhere near as great as in the UK, which is approaching bubble territory.  That's the view of Charles Dallara, who is chairman of the Americas region for the Partners Group.  ... The housing market in Australia is relatively self contained."

Tuesday, September 2, 2014

Which Properties to Avoid

This is a good article by Yardney that sets out which types of investment properties to avoid.  I agree with his lists:  Know Which Properties to Avoid.

Monday, September 1, 2014

Sunland's Toowong Proposal - Grace

Sunland (who developed Q1 and Circle on Cavill on the Gold Coast, and who is developing Abian in  Alice Street) has released pictures showing three towers on its Toowong site.  This is the old ABC studio site.   The development is to be called Sunland's Grace.  (I would have thought that Sunland's Graceland would have been a better name.)

The three towers are a little out of place in Toowong in my opinion.

They are mostly apartments:

Tower A
  • 1 Bedrooms: 20
  • 2 Bedrooms: 66
  • 3 Bedrooms: 40
Tower B will be the same as Tower A.

Tower C 
  • 1 Bedroom - 130
  • 2 Bedrooms - 104

Brisbane Apartment Prices Down Slightly in August

From RP Data's months report for August 2014:

According to today’s results, with rental rates rising at a slower pace than dwelling values RP Data expects to see a compression in rental yields across each of the capital cities. The only regions where yields have moved higher over the past 12 months have been across the Adelaide and Hobart apartment markets.

Across the combined capital cities, the typical gross yield on a house has reduced from 4.1 per cent to 3.7 per cent over the past twelve months. Mr Lawless said the most significant yield compression is taking place in Sydney and Melbourne.

Investors are currently comprising their largest proportion of new mortgage commitments since late 2003. In fact, investor loan commitments have accounted for more than 38 per cent of all mortgage lending for nine consecutive months, the longest period ever that investment lending has held above that level.

“Investors are mostly concentrated across the Sydney and Melbourne apartment markets where capital gains have been strong but yields have been pushed very low. Potentially there are better investment returns to be had in the smaller capital cities where the growth trend is less mature and yields are also healthier.” Mr Lawless said.

Brisbane apartment prices (to 31 August 2014):
August 2014 - down 0.5%
Quarter - up 1.6%
Year to Date - up 2.6%
Year on Year - up 5.6%
Median price based on settled sales of Brisbane apartments over the quarter - $389,250

The Milton

FKP's The Milton development is growing over Milton Station.  Workmen tell me you get a good view of the train line and the XXXX brewery from the apartments.  This is being marketed as a luxury development, but I wonder what residents will think when they move in.