Sunday, April 5, 2015

Supply Greater than Demand in Brisbane

4BC Real Estate Guru Keven Turner has downplayed any risk of undersupply in the Brisbane apartment market despite recent reports of an upcoming boom in demand.
Speaking to Mark Braybook on 4BC Mornings, Mr Turner said that the supply of new units far outweighs recent increases in demand.
"If you look at the number of approvals sort of going forward, we've only got something like 2000 or 1500 to 2000 units in the pipeline which is not even going to meet demand."
Mr Turner said Melbourne is at a far greater risk of oversupply with over 20 000 new units being planned or developed.
However Mr Turner has warned potential buyers in Brisbane to be prepared to hold onto properties well into the long term if they are seeking to make a profit.  
"Developers actually have a huge amount of control over new stock, new development stock, so they pretty much do actually control that market.  If you find that you're buying a unit you're probably gonna have to hold onto it for anything up to five to 10 years to get something value back out of it." 
Source 4BC Radio

Saturday, April 4, 2015

Property is a very long term investment

"Across resales of homes throughout the December 2014 quarter, those homes that were held for only a short period of time proved to be much more susceptible to loss. Although home values increased over the 2014 calendar year, 13.1% of owners who purchased and resold in the same year recorded a gross loss (resales in less than a year accounted for just 1.6% of all resales over the year). Homes resold after being held for between 3 and 5 years were the most likely to record a gross loss (17.1%) followed by those held between 5 and 7 years (15.3%). The data also reiterates the long-term nature of housing investment as well as relatively weaker growth in values over the past decade. Of those homes resold between 10 and 15 years from the previous purchase only 48.4% sold for double their original purchase price with the proportion rising to 95.0% for homes sold after 15 years of ownership."

Source: RP Data Pain Gain Report

 More than 10% of resellers in Brisbane suffered capital losses:

Friday, April 3, 2015

Sydney Strong, Brisbane About to Boom?

"Since mid-2013, the average gross rental yield across Australia’s combined capital cities has reduced from 4.3 per cent down to 3.6 per cent. Gross rental yields are now approaching record lows in both Melbourne and Sydney at 3.3 per cent and 3.6 per cent respectively.
Mr Lawless said the latest housing market data is likely to present a further challenge for the Reserve Bank when they deliberate interest rate settings next week. 
"Despite the headwinds of softer labour markets, very low rental yields, increased oversight on lending conditions and heightened economic uncertainty, historically low mortgage rates appear to be adding further stimulus to the housing market, albeit that stimulus is largely being felt in Sydney."
With Sydney now overpriced, Brisbane looks more promising.
Brisbane apartment prices (to 31 March 2015):
March 2015 - up 1.8%
Quarter - up 2.1%
Year to Date - up 2.1%
Year on Year - up 3%
Median price based on settled sales of Brisbane apartments over the quarter - $380,000

Thursday, April 2, 2015

Start Sounding the Alarm!

Australia will run into a glut of apartments in just two years led by Melbourne and Brisbane - but other cities are also building more than they need, says BIS Shrapnel.

The forecaster, which started warning about an apartment overhang in Melbourne a year ago, is now also ramping up warnings about Brisbane and Adelaide. 

Brisbane's voracious appetite for apartment construction has resulted in a stock surplus that dates back at least to 2006, but that glut is about to triple from 5000 from last financial year to 15,000 by next year, BIS Shrapnel says.

Wednesday, April 1, 2015

No oversupply in Inner Brisbane for Apartments?

"Brisbane's inner-city apartment market is a long way from being oversupplied, according to leading real estate adviser Urbis.
Issuing its detailed inner-city report on Wednesday, the group reported that a record 1500 sales had been made in the December quarter from 111 apartment projects. The September quarter recorded 1400 and such numbers have not been seen since 2007.
Urbis economic and market research director Mal Aikman said future supply was "not an issue" and that investors from Sydney and Melbourne were seeing value in Brisbane.
"Looking forward what we find is that in the first and second quarters of 2015 there are about 5000 apartments available for sale," Mr Aikman said.  "At the current rate of demand, that would equate to a sales rate of about 4000 apartments. So demand is slightly behind, but not significantly, and we're a long way from saying there's an oversupply or a glut."
Urbis noted that the Brisbane central business district had a huge surge in sales almost entirely driven by AMP Capital and Billbergia's Skytower, which saw 415 sales worth $267 million."
In my opinion, Urbis is overly optimistic.  There may be buyers for off the plan apartments, but will there be enough renters?  I suspect that most buyers in Brisbane Skytower are from China.

The Brisbane Times provides this gloss:

He admitted prices for new apartments were highly unlikely to rise in the coming year due to the increased supply and stopped short of guaranteeing they would fall.  However, he indicated tumbling price tags to live in the inner-city were probable.  "Our view is prices aren't likely to rise but whether they will fall really depends on the developers," he said.