Monday, December 26, 2016

Short term letting and Airbnb

It appears that in Queensland, it is difficult, if not impossible, to prevent lot owners in a strata titled building from renting their apartments via short term rental services such as Airbnb.

A recent decision of Lynkim Lodge [2016] QBCCMCmr 419 (14 September 2016) supports this.  See decision here.

However, most residential buildings prohibit the use of lots for commercial or business purposes.  When does renting an apartment on Airbnb stop being a residential purpose and become a commercial purpose?

In NSW, there is an action group trying to protect residents of apartment buildings from the dangers of short term rentals.  See NeighboursNotStrangers.  See also here.  They report that apartments in buildings with high short term rentals will drop in value and that there are higher body corporate costs.

Friday, December 16, 2016

Big Discounts to Lure Chinese

On page 3 of the Australian Financial Review on 15 December 2016 is a story titled "Big discounts to lure Chinese unit buyers."  It says that property developers are discretely offering discounts on new apartments in Brisbane and elsewhere to Chinese buyers, in a sign that lending restrictions and oversupply are beginning to affect prices.

Price discounts of up to 7% are being offered on Chinese property website

An example is given of discounts on apartments in the Brisbane One complex near South Bank.  For a two bedroom apartment of 86 sqm, there is a $40,000 discount, so that the price is now $675,000.  To me, that discounted price seems to be over-priced!

"The market has slowed down a lot over the past six months and recently the only deals that are moving are those with big incentives."

A real estate agent reported that a number of his clients in Shanghai had been unable to obtain finance and therefore could not settle, and so lost their deposit.

Thursday, October 13, 2016

Air Space and Common Property

A recent High Court decision supports a decision by a body corporate that did not allow an owner of an apartment in Noosa to join two balconies.  Doing so would appropriate air space which is common property.  The law in Queensland requires such an appropriation of common property to be approved by a vote of all owners without dissent.  If the body corporate in a vote denies that approval, and such a decision is unreasonable, then it can be overturned.  Here, the High Court said it was not unreasonable to deny an application by an owner to appropriate common property air space.

See High Court decision and this good article.

In contrast, see this recent decision where a body corporate's denial was found to be unreasonable.

Sunday, October 9, 2016

Brisbane Rental Yields

The resale market for apartments in Brisbane at present is slow.  There are bargains if you are buying, and it is taking a long time to sell if you are a seller, and often the seller is disappointed with the sales price. 

At present, for apartments in Brisbane that are being sold resale (that is, not by the developer off the plan), the sales prices are decreasing.  Rents are also decreasing, as there is an oversupply.  This is a generalisation, and does not apply to all apartment types or all areas.

I have recently studied the Indooroopilly area.  The gross rental yields are good.  For reasonable quality 2 bedroom apartments, prices have dropped about 10 to 15%.  So apartment that were selling for $485K to $530K last year are now selling in the range of $425K to $500K, with most sales being about $450K to $465K.  Some vendors are selling for more than $100,000 less than what they paid.  The rents for these apartments have dropped from a range of $520 to $560 a week to $480 to $510 a week.  New developments with smaller but modern apartments are doing promotions such as 4 weeks free rent.  On an apartment that I own in Indooroopilly, I am getting a gross yield of 5.7% , where the lease was signed last week.  

Small city apartments are struggling, esp those that are rented in short term rental pools.  I have seen one apartment building in an Accor rental pool where net returns (after rates and body corporates etc) on large one bedroom furnished apartments have dropped from $13,000 a year to less than $5,000 a year. 

Friday, September 9, 2016

Declining Apartment Market in Brisbane

The September HTW Month-in-Review report suggests that for Brisbane, it is time to selling apartments and buy houses.  I have noticed that prices for apartments being resold are soft.  An above average apartment that was sold off the plan in 2007 for $550,000 is lucky to sell today for $470,000.

See attached from HTW (click on image to enlarge)

Monday, June 6, 2016

Brisbane Apartment Prices Up Slightly: RP Data CoreLogic report for May 2016

Brisbane apartment prices (to 31 May 2016):
May 2016 - up 1.3%
Quarter - up 0.8%
Year to Date - up 2.3%
Year on Year - up 2.4%  (Sydney is up 15%, Melbourne up 8%)
Median price based on settled sales of Brisbane apartments over the quarter - $385,000

Sunday, June 5, 2016

Brisbane real estate agents say "sell now!"

I receive many newsletters and emails from real estate agents in Brisbane, especially those who specialise in Brisbane apartment resales.  All are advising that now is the time to sell, not the time to buy.  Some examples:

Position Property, Brad Munro:, Autumn 2016 newsletter
  • "There is no denying that there are concerns over just how many apartments are being built across Brisbane."
  • "The concern I have is that many of these developments are being sold anywhere from 80% to 100% to inventors.  Many of these buildings have 200-300 or more apartments -- there needs to be a lot of tenants to fill them all."
  • "Rental prices will decrease which then affects the investment return for the investor.  Even now, with only a limited number of these developments being finished, the rental prices are down from what the investor was promised.  I believe there is more pain to come."
  • "There are fewer buyers in the market."
  • "I am really concerned as to what the next 3 years has in store."
  • "I have no doubt that selling in the next 6 months is going to achieve a better result than waiting until next year."
Tessa Residential CBD Market Overview
  • "We anticipate a stable and consistent market place in 2016..."
  • Oversupply "is a reality throughout suburbs such as Newstead, Bowen Hills, South Brisbane and West End and as a result is having an impact on the rental market with rents across the City starting to soften."
  • "We believe 2016 will represent the optimum time for sellers who are considering cashing in on the improved market, which has continued to grow since June 2013."
So sell now if you are thinking of selling in the next 3 years, but don't buy now -- wait till next year!

Saturday, June 4, 2016

Brisbane apartment oversupply?

Will there be an oversupply of apartments in Brisbane?  In certain geographic areas, and for certain styles of apartments, I think that the answer will be yes.  Some clear reasons for oversupply include:
  • extremely high level of construction of high rise apartments in some areas, many with a large number of small apartments
  • low population growth
  • apartments targeted at investors, not owner occupiers, so a more limited market segment of buyers and renters
  • apartments being constructed in second and third tier areas.
However, I don't think that all the apartments currently "in progress" will actually be built.  This includes apartment projects that have good pre-sales and where "construction has started".  This is because:
  • some developers are unable to obtain the level of finance needed to commence the project
  • construction costs have increased dramatically, especially for union built projects, and so the project is no longer viable, even if the project is sold out
  • simply because the site has been cleared, and some work has started, does not mean the that project is underway -- it may never be built.
  • the number and percentage of presales in a development is often overstated by the developer in advertising and market surveys, and so the developer will not in fact be able to obtain finance at all.
So I think that the level of oversupply may be overstated.  There will still be oversupply, just not as bad as some people are predicting.

There are other risks in the high-rise apartment market:
  • off-the-plan buyers may have trouble settling, because valuations may be lower than contract price, because banks are not lending to offshore buyers, and because banks are requiring a higher cash contribution.
  • rents are likely to fall, which means that valuations will fall
  • some projects are overpriced, and it is likely that after settlement sales prices will be less than  the contract price
  • some constructions companies are in financial difficulties, and so are cutting corners -- the end product many be different, and lower quality, to what is expected by the buyer
  • many buildings are being built close to other buildings, impacting light, view and ventilation
  • foreign buyers may evaporate.
The question in my mind is whether this will impact the high quality buildings in good locations that have large apartments with good aspect?

Friday, June 3, 2016

HTW view on Brisbane apartment market

There has been a lot of talk about our inner city unit market with an oversupply situation that’s graduated from 'looming' to 'inevitable'. This sector is a huge concern. There are still heaps of projects that are yet to come online or are in the planning phase. They are also predominantly investor driven and this could be a recipe for a lot of heartache – particularly as a large percentage of buyers are interstate and international investors. Add to this the tighter restrictions on lending to foreign investors and you can see where it might all be heading. As we’ve been saying for some time – in terms of inner city units, the best per formers are, and will continue to be, those projects designed with owner-occupiers in mind.

If you’re wondering how tenant demand is tracking, we can con rm current data shows vacancy rates for houses at 2.5% and units at 3.2% (unit vacancy increased by 0.3% year-on-year). The combined  vacancy rate for all property types is 2.7%. The general rule is any result below 2% demonstrates an under supply of rentals, 2% to 3% seems balance, and over 3% represents oversupply. From the numbers above, it’s easy to recognise where the weak sector is in the market.

See June Month in Review

Sunday, March 20, 2016

Glut of one bedroom apartments?

Many of the new apartment buildings have a large number of small one bedroom apartments, that have been sold to investors.  These investors are hoping to rent them.  In the past, a one bedroom apartment gives a good rental return relative to purchase price.

However, at present, there is a problem.  There are too many one bedroom apartments.  Owner-occupiers prefer two bedroom  (or larger) apartments or houses.  There is less demand for short term rentals at present, where a one bedroom apartment was a good alternative to a hotel room.  And most young Brisbane renters prefer to share and rent large apartments or houses.

Some one bedrooms are sold without a car park, making them even less attractive.  In my view, a one bed with no car that is 60sqm or less in size is worth about $310,000.

If rents go down, which they will, then capital values will fall.

There may be one exception here.  Some of the riverfront older apartments, which have larger apartments (e.g. a one bedroom over 70sqm) seem to be holding up well.  See for example this apartment and this apartment in Admiralty Towers

Monday, March 14, 2016

Recent Apartment Sales in Brisbane 4000

Here are some recent sales (all early 2016) with actual sales prices of apartments in Brisbane Postcode 4000.  These are all B and C quality buildings, and so expect to pay more for A quality:
  • Skyline, Apt 91, 30 Macrossan Street, 3 bedrooms, 2 bathrooms, 1 car - $747,000
  • Skyline, Apt 261, 30 Macrossan Street, 3 bedrooms, 2 bathrooms, 2 cars - $800,000
  • Skyline, Apt 41, 30 Macrossan Street, 3 bedrooms, 2 bathrooms, 1 car - $731,500
  • Festival Towers, Apt 3605, 2 bed, 2 bath, 1 car - $529,000
  • Festival Towers, Apt 4006, 2 bed, 2 bath, 1 car - $570,000
  • Festival Towers, Apt 1805, 1 bed, 1 bath, no car - $342,500
  • Festival Towers, Apt 2503, 2 bed, 1 bath, 1 car - $499,000
  • Charlotte Towers, Apt 508, 1 bed, 1 bath, no car - $350,000
  • Charlotte Towers, Apt 2902, 2 bed, 2 bath, 1 car - $540,000
  • M on Mary, Apt 3204, 1 bed, 1 bath, no car - $356,000
  • M on Mary, Apt 607, 1 bed, 1 bath, no car - $360,000
  • M on Mary, Apt 2609, 1 bed, 1 bath, no car - $327,000
  • Felix, Apt 303, 2 bed, 2 bath, 1 car - $600,000
  • Meriton Herschel St (Infinity), 2 bed, 2 bath, no car - $580,000
  • Meriton Soleil - 2 bed, 2 bath, 1 car - $575,000
  • Vue, 92 Quay St, Apt 2301, 2 bed, 2 bath, 1 car - $460,000
  • Vue, 92 Quay St, Apt 2602, 2 bed, 2 bath, 1 car - $437,500

Sunday, March 13, 2016

Has the Brisbane new apartment crash started?

On 10 March, the AFR reported that there will be a "very messy end" to the apartment boom.  See AFR story here.  It says:

""In Melbourne the oversupply will be significant, in Brisbane it will be worse. It is an accident waiting to happen," said BIS-Shrapnel managing director Robert Mellor at the group's six-monthly Building Forecasting Conference."

Has the end already started?

Let's look at a recent apartment project in Brisbane, that recently completed -- The Milton at 55 Railway Terrace, Milton.  Some examples of the disaster there:
  • Apartment 1302 is listed for sale for 10% below in the initial price, at $365,000.  For a one bedroom apartment, looking West, which has a 55 sqm internal floor space, and a main bedroom that is only 3m by 3m, and no car space, $365,000 is expensive.  Rent is estimated by the selling agent to be $450 to $460 per week unfurnished, which seems to be optimistic.
  • Apartment 2901 - one bedroom, is not even listed at a price -- "make an offer"
  • Apartment 2709, which is four bedrooms, if it sells at all, will sell for a huge amount less than the current owner has paid
  • Apartment 2005 is listed at $1.1M, which is very high for a 3 bedroom apartment in Brisbane that is only 123 sqm -- you can buy luxury two bedroom apartments elsewhere that are this size and at a lower price, and it only has a narrow tandem carpark
  • Apartment 2311, is not listed with a price
  • Apt 2609 is two bedrooms, "bring me offers"
  • Apartment 3008, a top floor two bedroom, 91 sqm in total, is listed unpriced
  • Apartment 3009, also a top floor two bedroom, is listed for $849,000 -- are they dreaming?
  • Apartment 2511, 2 bedrooms, listed at $659,000 is said to be under offer
  • Apartment 2007, 1 bedroom, is listed at $490,000
  • Apt 502, 2 bedroom, 74 sqm internal, is listed at $499,000
  • The list goes on.
The onsite agents, Mint Residential, have a large number of apartments for rent.  And so do offsite agents.  The following are rent ranges, depending on floor, car parking etc:
  • 3 bedrooms, from $650 per week to $800 per week
  • 2 bedrooms, from $570 per week to $720 per week
  • 1 bedrooms, from $370 per week to $490 per week
  • A fully furnished two bedroom is listed at $640 per week
  • Some apartments have 4 weeks free rent, which (for example) in effect reduces the rent per week of a $500 a week apartment to $460 a week over a yearly lease.
The Milton won my award for the wildest advertising claims of 2010.  See this prior post.  In that post, I said:  "They have a sheet of paper showing investment returns for a 2 bed, 1 bath apartment listed at $650,000. The prediction is that this apartment will be worth $807,500 on completion of the project in 2013, and will be worth over $1M by 2016. The predicted rent is over $720 a week in 2013."

As can be seen from the above, this was in fact wildly inaccurate.  

The Milton has a host of problems, not simply that it was sold for prices that are way above market price.  The development is on a train line, with half the apartments looking west and close to a brewery.  The river views are distant, and will be blocked by construction of apartments in front.  Body corporate for a 2 bedroom is about $4,800 a year.  See comments in prior posts.  It is very dangerous buying off the plan in Brisbane.

Compare the above to a 2 bedroom, 2 bathroom, 1 car apartment, 106 sqm, with direct river views, for $700,000.

If The Milton is representative, then we are in for a very rough ride.

Saturday, March 12, 2016

Selling without an agent

A new service has just launched, to allow property owners to sell without an agent.  Some real estate agents are so hopeless, and don't return buyers calls, so there is some appeal here if you know what you are doing.  See

Friday, March 11, 2016

Will Brisbane Prices Increase This Year?

CoreLogic recently reported:

"The trend in home value growth is showing signs of increasing in those markets that have previously underperformed. These include Brisbane, Adelaide, Hobart and Canberra. Affordability constraints as apparent in these cities and rental yields been compressed to the same extent as what they have in Melbourne or Sydney. Home values increased in Brisbane by 5.5% over the past year, which is the fastest annual rate of value growth in a year."

The above 5.5% included houses and apartments.  Below is the information just for apartments, which is not as good.  The question is whether Brisbane will have capital appreciation across the board, or whether it will be limited to certain suburbs, or to houses (not apartments), or to houses and older apartments in better locations.  There appears to be great oversupply of new smaller apartments, in locations such as Newstead and South Brisbane, so capital appreciation of this dwelling type seems doubtful.

Brisbane apartment prices (to 29 February 2016):
February 2016 - down 1%
Quarter - up 0.9%
Year to Date - up 1.5%
Year on Year - up 3%
Median price based on settled sales of Brisbane apartments over the quarter - $391,000 (which is less than reported for the quarter ending May 2015).

Wednesday, March 9, 2016

Property Prices Double Every 10 years?

I have been to seminars by property agents and promotors, where they say that property is a sure investment because property prices double every 7 to 10 years.  CoreLogic debunks that "rule".

"Melbourne is the only capital city housing market in which home values have doubled over the past decade.  In fact, many cities are a long way from having doubled with values in Brisbane, Adelaide, Perth, Hobart and Canberra having all increased by less than 50% over the past decade."

See CoreLogic Report

Monday, March 7, 2016

Off the plan risks

Two stories in the AFR today are worth reading, both on page 33.

The first is titled "Industry warns of settlements failure".  It has a chart that shows that the average number of completed apartments in Brisbane for the period 2007 to 2014 was less than 2,500 a year.  For 2016, it is predicted to be more than 5,000 in the year.  For 2017, it is closer to 10,000, or more than 3 times the past average.

"The settlement risk will occur in places where prices are slowing and the market's getting harder."

"Banks are not only cutting back their LVRs, they are also taking a more conservative approach to valuing completed apartments, and in the case of at least one retail bank, this meaning between 15 and 23 per cent below the purchase price."

So if you are buying off the plan, and have paid a 10% deposit, you may need to stump up 40% of the contract price, because the Banks may only lend in effect 50% of the purchase price.

The second article is titled "Lenders nervous about incentives to apartment buyers".  It states:

"A recent survey by WBP Property sowed nearly half of the off-the-plan sales in the eight months to last August were in negative equity, which means worth less than the purchase price."  And this does not take into account transaction costs, such as stamp duty.

Thursday, February 18, 2016

Apartment lawyer in trouble

Well known lawyer, Michael Teys, has been banned by ASIC from being a director.  Mr Teys often advises body corporate committees in relation to issues with onsite managers.  For example, he advised the committee of Admiralty Towers Two not to accept the assignment of the management rights from bank receivers to a professional manager due to the honesty and business skills of the proposed manager.  Very strange.  The pot calling the kettle black.

I suspect many committees have been unduly influenced by Mr Teys' almost religious like views of management rights. 

Monday, February 8, 2016

Brisbane Vacancy Rate Increases

According to the REIQ, the rental vacancy rate in the inner city of Brisbane is almost double that of the middle ring:

The REIQ Rental Report has revealed a higher vacancy rate in inner Brisbane as the supply of new apartments edges the 0-5km ring into weak territory for the December quarter.
The inner Brisbane vacancy rate reached 3.8%, up from 3.4% in the September quarter.
In contrast, the more affordable middle ring of 5-20kms tightened as the more affordable dwellings attracted residents, going from 2.4% to 2.1%.

Sunday, February 7, 2016

Brisbane Prediction

"Brisbane Avoid: High density apartments in the CBD, West End and Fortitude Valley. Recommend: Character houses in low density, established areas with good schools, transport and lots of renovation activity."

See Property Observer

Thursday, January 21, 2016

China limits cash moves offshore - danger for property settlements

A story in today's Australian Financial Review is titled "China limits cash moves offshore" and show the risks for developers in relation to off-the-plan sales contracts.  The Chinese buyer may not be able to get the cash out of China, and then may not be able to settle the contract on completion of the building.  And try suing the Chinese buyer.  Some buildings under construction in Brisbane have more than 80% offshore buyers, so I suspect that some developers may run into troubles next year.

China limits cash moves offshore
AFR, 21 Jan 2016, p1

Shanghai | Chinese banks are delaying and even blocking some foreign exchange transactions under a decision by the central government to limit capital leaving the country, a move that could hurt demand for foreign assets including Australian property.

At meetings on Monday and Tuesday afternoon senior bank executives were told by the government to toughen up their capital controls.

While they haven't introduced new rules, one executive told The Australian Financial Review banks were using existing measures to slow the amount of money going overseas. The crackdown has seen more stringent checks for both companies and individuals.

"We are now refusing all foreign currency transfers where the documents are not fully complete … previously the requirements were not so strict," said a bank executive in Shanghai who asked not to be named.


An Australian real estate agent based in Shanghai, Scott Kirchner, said the tougher capital controls could "cause problems for Australian developers as clients may not be able to get their money out of China".

"I'm advising people not to sign a contract unless they already have their money outside China," said Mr Kirchner, a director of BellerChina. "There is lots of uncertainty at the moment and that might affect sales."

In China, individuals are restricted to exchanging the equivalent of $US50,000 in foreign currency each year.

American lawyer Dan Harris said on his blog on January 14 that his firm's China office had received more "money problem" calls in one week than it had received for the whole of the past year.

"If there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars," said Mr Harris from Seattle-based firm Harris Moure.  He said it had affected real estate agents and companies waiting for Chinese investment money.

Previously, one option for those interested in buying overseas property was to use the currency quotas of friends and family.

Alternatively, underground channels in Macau or Hong Kong were available to get money out of the country. Both these methods are now under increased scrutiny as the government tries to stabilise the yuan.

"They haven't introduced any new capital controls but the implementation of existing measures has been strengthened," said another executive, who works at one of China's big state-owned banks.

David Olsson, a China Practice Consultant at law firm King & Wood Mallesons, said Chinese banks "have clearly got some direction to look more closely at outbound capital flows particularly around Shanghai and Shenzhen".

He said it was not expected to affect legitimate outbound investment and Australia would continue to be a big beneficiary of Chinese investment in agriculture, services-related sectors and tourism."

Wednesday, January 20, 2016

Failure to settle an off the plan contract was a costly decision

The Queensland Supreme Court recently decided a case involving an off the plan apartment contract in the Soul building at Surfers Paradise.

The case is Juniper Property Holdings No 15 P/L v Caltabiano (No 2) [2016] QSC 005 

Mr Caltabiano purchased the penthouse in Soul in July 2006 for $16.85 million, a lot of money for a 519 sqm apartment.  Mr Caltabiano failed to settle upon completion of the building in 2012.  So the developer forfeited the deposit, and sued Mr Caltabiano for damages.  The developer resold the penthouse in April 2015 for $7M.  So the claim for damages was $8.8M plus interest under the contract for failure to settle for over $3M.

Mr Caltabiano claimed that the sales agent was misleading -- it was claimed that at the request of Mr Caltabiano, the sales agent provided information in an oral discussion regarding supposedly comparable sales in Jade and Q1.  Mr Caltabiano never checked whether this information was correct.

The judge decided that the sales agent did not make the alleged misleading statements.  Even if they were made, they were not relied up by Mr Caltabiano.

  1. "The defendant submits that the fact that he did not obtain external advice as to the value of the Soul penthouse or the prudence of the purchase only serves to emphasise his reliance on the alleged representations. However, in my view, it is commercially illogical and inherently improbable that in deciding upon a $16.85 million purchase the defendant would not have obtained such advice because of reliance on the alleged representations made by the plaintiff’s sales consultant comprising comparisons with properties that the defendant did not know anything about. This is where the defendant’s story is incredible." 

This shows one of the many dangers of buying off the plan.  Values may go down substantially between contract and settlement, but you still have to settle.  And if you don't, then you are in big trouble.

Sunday, January 10, 2016

Response to Reader Comment regarding quality Brisbane apartments

A reader recently posted this comment, in relation to my post below:

"... you are certainly correct that there is a lot of stock under construction that will settle through the end of this year and next. However, with few exceptions most of this is small 1bd and 2bd "investor" stock targeted at the rental market. As you said, this is already leading to increases in vacancy rates and lower rents - at present, this is probably just a return to normal but it will probably over-correct and the rents/vacancy for small 1bd and 2bd stock will be worse than long term trend levels. That said, why do you see this impacting on quality owner occupier buildings such as admiralty, quay west?? The investor stock being constructed at present is vastly different to the owner occupier stock and I doubt there are many occupiers out there tossing up between admiralty and meriton's soleil. I feel the two markets will diverge and the the limited amount of quality owner occupier stock will lead to growth in this market. Do you not agree?"

This is my response.  The over-supply in Brisbane is having an impact on the rental market for the high quality, owner occupied buildings.  Note that many these buildings still have more than 40% of the apartments rented out, usually to long term tenants.  For example, in Admiralty Towers, large three bedroom apartments that rented for about $1,400 a week at the top of the rental market boom are now renting for less than $1,000 a week.  An excellent large one bedroom apartment with river views, fully furnished, has been vacant for months, at an asking rent of less than $600 a week.  This apartment would have rented quickly at about $640 a week two years ago.  For some reason, some tenants prefer smaller apartments in newer buildings.

The rental market in quality buildings is being impacted by a number of factors, and not just new apartments being completed.  These factors include:
  • the end of the mining boom, so less executive rentals
  • a rental boom, that probably caused rents to increase too much
  • short term rental apartments not achieving good returns, and so these are re-entering the long term rental market
  • lower population growth
  • no income growth
  • younger people having different views as to what is a trendy apartment
  • more choice in more inner city locations
Prices seem to be holding up at present, partly because interest rates are so low.  I recently locked in an investor loan fixed for 3 years at 4.09%.  Even at a reduced rent, this property is cash flow positive today.  So why sell?

I agree that owner-occupiers still have little choice for quality apartments in Brisbane.  If you are looking for a large two or three bedroom apartment in a quality building in a good location, there is still not much choice.  Very few of the new buildings would be suitable if you are looking for a long term residence.

Monday, January 4, 2016

Brisbane apartment market looking grim

According to the CoreLogic RP Data Home Value Index, dwelling values were absolutely flat across the combined capitals during December, with negative movements in Sydney, Adelaide and Canberra being offset by a rise in dwelling values across the remaining five capital cities. The Sydney housing market was the main drag on the December results, with dwelling values down 1.2%, while values were down 1.5% in Adelaide and 1.1% in Canberra, and down 0.5% for Brisbane apartments.

See full report here.

Brisbane apartment prices (to 31 December 2015):
December 2015 - down 0.5%
Quarter - no change
Year on Year - up 1.8%
Median price based on settled sales of Brisbane apartments over the quarter - $390,000

This is not a good result for the Brisbane apartment market for 2015.

The long term view for the Brisbane apartment market looks very uncertain.

There are a huge number of apartments being constructed.  There are also a number of new hotels opening, which impacts the short term rental markets (for example,  negatively impacting rents in apartment buildings such as Charlotte Towers, Aurora, Felix, Casino Towers and Festival Towers).  At present, from my informal survey, rents are decreasing in Brisbane and vacancy periods are significantly increasing.  This will only get worse.  I am not the only one say this.  See AFR article.

It is likely that valuations for new apartments sold off the plan in Brisbane will come in lower than the contract price, which may impact whether non-cash buyers will be able to settle.

My prediction for 2016 is that we may see values fall in 2nd tier buildings and remain flat in prestige buildings.  Rents will likely continue to decrease.  It looks grim.  What happened to the Gold Coast about 5 years ago (remember, Soul, Hilton and Oracle) may happen in Brisbane this year or next.