Friday, October 31, 2014

Brisbane rental market

From an REIQ press release that was issued today:

Rental markets remain tight in southeast Queensland and the state’s major tourism centres according to the latest REIQ Residential Rental Survey, conducted at the end of September.

REIQ CEO Antonia Mercorella said the survey showed vacancy rates remained relatively steady across most parts of the state, with improvements in some key regional markets.  Ms Mercorella said only four of the 16 major regions in Queensland recorded a significant change in vacancy rates, with something of a two-tier affect still evident in the State’s rental market.

Ms Mercorella said at the end of September, the Brisbane City local government area (LGA) recorded a vacancy rate of 2.3 per cent, relatively unchanged since the end of June.

“Brisbane’s middle to outer suburbs – those 5-to-20km from the CBD - recorded a slight easing in vacancy levels, up 0.2 percentage points to two per cent at the end of September.  The city’s inner suburbs, on the other hand, recorded a vacancy level of 2.9 per cent, down from 3.4 per cent at the end of June.  Median weekly rents from the Residential Tenancy Authority (RTA) for the September quarter show relatively steady rents across the Brisbane City LGA.”

Ms Mercorella said Queensland’s tourism centres continued to record tight rental conditions.

“On the Sunshine Coast, the vacancy rate is at one per cent, the lowest of any major region in the state,” she said.  “Population growth and a lack of investor activity are contributing to these tight conditions, particularly in hinterland areas where agents are struggling to find enough rental properties to meet demand.

Monday, October 27, 2014

Admiralty Towers 2 sales

Some recent sales in Admiralty Two, a tower on the Brisbane riverfront, at 501 Queen Street.  One of the better buildings in the city, which large apartments all with riverfront views that cannot be built out.  The building has two swimming pools, and direct access to the river boardwalk.

Reported sales since January 2014, with most recent sales listed first.

Apt 166, about level 29, 3 bedrooms, $979,900
Apt 58, 2 bedrooms, 2 bathrooms (116 sqm) - $785,000
Apt 19, 2 bedrooms, 2 bathrooms (116 sqm) - $770,000
Apt 115, 2 bedrooms, 2 bathrooms (116 sqm) - $755,000
Apt 127, 2 bedrooms, 2 bathrooms (116 sqm) - $750,000

The average price so far this year for the larger two bedroom apartment in this building is $765,000, or $6,594 a sqm.  If you are buying off the plan, you may wish to measure against this sqm price for comparison.

Sunday, October 26, 2014

What does the future hold for Brisbane apartments?

My advice to those considering buying in a high-rise apartment block in Brisbane -- don't buy off the plan and don't buy for two years.  Why -- prices are likely to fall.  My reasoning:
  • There are a very large number of new apartments being built, which will settle in about two years.
  • Interest rates are likely to increase by then.
  • Rental vacancies will increase and rents will decrease as these new apartments come on to the market.
  • Banks will make it hard to get a loan.  My guess is that they will only fund 70% of the valuation.
  • The valuations are likely to be less than contract price.
  • Many people will be unable to settle.
  • Prices will therefore decrease, at least from the prices that new off-the-plan apartments are currently being sold for.
  • Second tier second hand apartments will be impacted as a result.  Why buy a old apartment in Charlotte Towers or Festival Towers, that have few redeeming features, when you can buy a similar sized apartment with a similar view in a new building for a similar price?
  • Apartments in some locations, and in some buildings (e.g., direct riverfront, larger apartments),  will suffer less negative impact.

Brisbane Skytower

Pre-marketing has commenced for Brisbane Skytower, said to be the tallest residential tower in Brisbane when it is completed.

It is being developed by Billbergia on the old Vision tower site (now called 111 + 222).

It has four sections, a downtown section, an uptown section, a skycity section and a skyrise section.  The starting price for what I guess is a one bedroom apartment starts at $425,000 in the downtown section and increases to a minimum of $595,000 in the skyrise section.

In less than a city block, there are more than 2,000 apartments coming online.  There are three towers, Skytower (at 222 Margaret Street), Abian (on the corner of Alice and Albert) and Camelot (on the corner of Albert and Margaret).  Seems like a glut to me.

Saturday, October 25, 2014

Win an apartment in Soleil

RSL Art Unions are giving away, in an art union, apartment 5304 in Soleil.  This is a 2 bedroom, 2 bath apartment, no balcony, at 83 sqm, located on level 53.

RSL Art Unions paid $570,000 for this apartment in June 2014.  They have included about $40,000 of furniture.  They estimate rental returns of $39,000 a year, which is $750 a week -- that is a little high in my view.

Monday, October 20, 2014

Ray White Market Update for Brisbane City apartments

From Ray White CBD:

"The third quarter has seen prices remain stable after the growth of the first two quarters on 2014. Falling rents across the inner city in the last two months have halted price growth as large developments in nearby suburbs such as South Brisbane, Bowen Hills and Fortitude Valley have been completed. This has resulted in an over supply of rental accommodation causing rents to plunge.  With over 8,000 apartments approved for the city's inner suburbs rents look certain to remain soft for the next few years.

Michael Matusik released an article on his Linkedin page this week on the rental situation that has seen the rents for 1 bedroom units drop by $60 a week in recent months and 2 bedroom units drop by over $100 a week. and following is a recent article in The Courier Mail 

With the outlook for rents continuing to fall next year as more and more buildings are completed, it is doubtful prices will remain at their current levels.  Should you be considering selling, now is the time to do so."

Sounds like Ray White is saying now is not a good time to buy a Brisbane apartment.  Prices to fall!

Sunday, October 19, 2014

Brisbane Still Behind

Chart from RP Data.  Brisbane market has under performed the combined capitals average since 2008.

Friday, October 17, 2014

Rental Report

RP Data has recently released its quarterly rental review.  It shows that Brisbane apartment rents are flat.  My sources tell me that rents are declining.
  • Vacancy rates are longer.  My rough rule of thumb is that for every week a property is vacant, that is approximately $10 a week off the rent for a one year period.
  • Rental periods (e.g. 1 year, 6 months) are tending to be shorter, with tenants turning over more often
  • Actual rents are flat, or decreasing slightly.
  • New apartment buildings that have many empty apartments are offering rent free periods, which in effect is a rent reduction.  For example, if the weekly rent is $500 a week, but the landlord offers four weeks for free, then the effective rent for the year is $461 a week.  But the RP Data report will show the rent as $500 a week.

Invest in Brisbane

This report suggests that Brisbane is the best place to invest in property at present.

"Overall, it’s a decent set of numbers with promising signs of strength in new home loans and construction – the desired “rebalancing” – but owner occupier activity has highlighted the possibility of softening almost everywhere except for Brisbane and Queensland."

Student Accommodation and Serviced Apartments - Good Investments?

"In summary, it’s difficult to recommend pursuing an investment in either a serviced apartment or student accommodation. While they both provide good cash flow, investors are likely to encounter resistance in obtaining finance, plenty of fees, a weak aftermarket and a need for ongoing in investment."

See AFR article - the type of property to be wary of

At present in Brisbane, there is an oversupply of apartments built for investors to rent to students.  Rents are decreasing, vacancy rates are increasing, and there are less students looking for such accommodation.   And non-students are not interested in living in or buying such apartments.  Take care!

Another South Brisbane Apartment Complex

Opera, another apartment complex is South Brisbane, is being marketed off the plan.

One bedrooms from $385,000 and two bedrooms from $580,000.

South City Square in Woolloongabba

A new apartment development in Woolloongabba has been launched, called South City Square.  It is located on Logan Road.

Over 1,000 apartments, across 7 towers, are planned.  Pellicano are involved in this development.

See article here.

Legal Claim Against Meriton

A Meriton construction company is being sued by a body corporate for building defects.

"BILLIONAIRE developer Harry Triguboff is at the centre of a legal battle with a body corporate over who should foot a $2 million repair bill for one of his Southport residential high rises."

Meriton is also the developer of the Infinity and Soleil towers in Brisbane.

See Gold Coast Business News

Thursday, October 16, 2014

Index funds

There is often a debate whether it is best to buy shares or property.  My investment focus has been property.  When investing in shares, it seems that index funds (sometimes called exchange traded funds or EFTs) are the way to go.  See recent AFR article on this topic.

Wednesday, October 15, 2014

Brooklyn or Brisbane?

I can buy a two bedroom apartment in Brooklyn NYC for about the same price as a two bedroom apartment in Brisbane city.  See this listing for example.  Does that make sense?

Buy or Rent?

The AFR recently had an article on whether you are better off renting or buying property.  See article here.

For many people, I believe that renting is better than buying.  These are my reasons:
  • known fixed cost per week for renters
  • no cost for repairs, rates, property insurance or body corporate fees for rentals
  • flexibility and mobility for renters - too many times have I seen people stuck in a property type or location that they don't want any more.  Ownership also makes it harder to move to where better jobs are located.
  • purchasing property is for the long term (that is, seven years or more), and many people should not be committing to a property type or location for that period of time
  • entry and exit costs are high for purchasing (i.e., stamp duty and agent's commission)
  • you get a better property if you rent compared with buying, all outgoings and costs being equal (another way to say this is that most landlords are making a loss, or negatively gearing, and so you are better off than your landlord)
  • currently many good choices for renters, and competition by landlords is high
  • owners spend more time and effort wasting time and money on repairs, improvements, renovations and gardens, which are rarely recovered on sale; renters have more leisure time

Tuesday, October 14, 2014

Pain Report - Capital Losses

From RP Data:

The RP Data Pain & Gain report is a quarterly assessment of realised gross profit and loss based on dwelling re-sales over the June quarter of 2014.

  • 9% recorded a gross loss from the original purchase price.
  • Gross value of the losses associated with these loss making re-sales totalled $398.3 million
  • 91% of all June 2014 quarter re-sales recorded a gross profit relative to their original purchase price. The gross profit from these re-sales equated to $14.4 billion.
  • 9% of all homes that resold over the second quarter of 2014 recorded a gross loss compared with original purchase price - down from 9.7% at the end of the first quarter of 2014 and much lower than the 11.5% recorded over the June 2013 quarter.
  • The gross value of losses on homes re-sold over the quarter was recorded at $398.3 million
  • The average gross loss per loss making transaction was $63,097.
  • 91% of all re-sales over the June quarter of 2013 transacted at a gross profit, with 30.5% of all re-sales at least doubling their money compared with their original purchase price.
  • Gross profit on resales was $14.4 billion
  • Average gross profit per profit making transaction was $225,830.
  • Download the Pain & Gain report.

Thursday, October 9, 2014

High Court said builder not liable to body corporate

The High Court has unanimously held that listed developer Brookfield ­Multiplex, the builder of the $60 million Chelsea apartment tower in ­Chatswood Sydney, did not owe a duty of care to the Owners Corporation (in Queensland terminology -- the body corporate) which lost money from defects.  The Owners Corporation, which includes Mantra, appealed an earlier decision in the Court of Appeal in the Supreme Court of NSW and had won.  However, the full bench of the High Court has overturned that decision.

Lawyer Emanuel Confos, for Brookfield Multiplex, said the result would have significant consequences for the building industry.  "This is a landmark decision for the construction industry because it ­clarifies an issue that has been around for many years and that is whether a builder owes a duty in contract and tort for a commercial development," Mr Confos said.  "And I believe the High Court has unanimously decided that no duty in tort is required only duty in contract," he said.

Decision is here.

Spire at 550 Queen Street

After it failed to sell the land, Consolidated Properties has announced that it will be developing a 39 level tower at 550 Queen Street, called Spire.  It will have 340 apartments, which appear to be small one and two bed apartments.

Previously, an office building was planned for the site.  See SMH.

Sunday, October 5, 2014

Large number of off-the-plan apartments being marketed in Brisbane

There are a large number of new apartments being marketed by developers in Brisbane at present.  Buyers beware!  Here is a list of just some of them.

Cinque at Kelvin Grove
FV in the Valley (Flatiron Valley?)
Light and Co at West End
CP Residences at Indooroopilly (Central Park Residences)
Arbor at West End
The Highgate at Highgate Hill
Mode at Newstead
Unison at Newstead
Rivers Edge at Breakfast Creek
Habitat West End
Citro at West End
Abian Skyhomes on Alice Street
Spire in the City
Grace on Coronation at Toowong
Boggo Road
The Hudson, at Albion
Spice Apartments, South Brisbane
The Milton
Skyring at Newstead
Newstead Towers
Broadway on Ann in the Valley
Central Village, the Valley
New World Towers in South Brisbane
Riverview Towers at Kangaroo Point
South Point in South Brisbane
Liberte, Kangaroo Point
Yungaba, Kangaroo Point
Hamilton Reach
Proximity Hamilton
Canopy at Bardon
Circa at Nundah
Basse at South Brisbane
Hope Street at South Brisbane
Soda at South Brisbane
Botanica at South Brisbane
Jade at Albion
OneBrisbane at Bowen Hills
The Yards at Bowen Hills
Keynote at West End
River Le at West End
Art House at South Brisbane
Opera at South Brisbane
Hercules at Hamilton

Oversupply of Brisbane Units

There have been a number of articles this year regarding an oversupply of apartments in Brisbane, especially new high-rise in areas close to the city.  A large number of apartment buildings have completed recently, but there are many more on the way.  Most of the new apartments are being sold to foreign investors, and will be rented.

At present, a higher than usual number of apartments are available for rent in Brisbane.  Agents are reporting that it is taking a long time to rent apartments, and that rents are falling.  For example, a very nice riverfront apartment was without a tenant for 4 weeks, and finally rented for $50 a week below the asking rent.  Some owners are offering 4 weeks free rent.  For third-tier apartments, the rents have dropped dramatically.  The situation is not likely to improve any time soon.

When the foreign investors come to sell, they will not be able to sell to other foreigners.  So the pool of potential buyers will be much smaller.  This will cause significant price decreases for resales of apartments.  Currently, many apartments that are not being sold by developers (i.e., not new apartments that have FIRB approval) are taking a long time to sell in Brisbane.

Some articles of note:
Bubble Deflating
Warning on Brisbane apartment boom
Not pretty
High-rise Oversupply?
Prices Down Due to Oversupply
Areas to Avoid
Yield Compression
Mixed Outlook
Prices Plunge

Friday, October 3, 2014

Poor Urban Design for South Brisbane and West End

As previously reported, the government has released a "master plan" for South Brisbane.

The plan has been widely criticised.  In my view, it is a risk buying off-the-plan in South Brisbane and West End at present.