Friday, December 24, 2010
Capital Growth
Sunday, October 31, 2010
Risks With Short Term Rental Buildings
When I am looking to buy an apartment in Brisbane, I look at Trip Advisor to see if there are reviews about the apartment building and the onsite manager. As a general rule, if the apartment building is listed with TripAdvisor, I will only buy if I am seeking a non-residental investment. There is limited resale opportunities for short term non-residential buildings.
Example Reviews:
- 212 Margaret
- Casino Towers
- Aurora
- Charlotte Towers
- RiverCity
- M on Mary
- Evolution
- Felix
- Festival Towers
- Skyline
Many reviews highlight the problems -- these buildings were designed for residential apartment living, not as hotels. People ask for adjoining rooms, and don't get them (of course). Items from rooms are stolen. Linen trolleys and food trays are left in hallways, as there are no service cupboards or service rooms for hotel staff. Furniture breaks, as the apartments were furnished for residents, not using hotel quality furniture. No minibars. Parking problems. I wonder what the owners of these apartments think about their real estate agents who are managing their investment -- a real estate agent pretending to be a hotel company.
I love this recent review for Evolution: "What a disaster. We never new accomadation could be so foul .. so many light bulbs broken, Filthy carpets, No drinking glasses (even when you ring & ask a certain staff member who couldn't have been any more passive agressive they still don't come) We changed rooms which was even worse, kitchen tap fell off in our hand, no shower door as it had broken off, huge rip in the lounge, even filthier carpets, rug all ripped, more light bulbs out, TV not tuned so most of the channels hissed at you a lot like most of the staff.. broken light shades, blind pullies broken. When we checked in they held on our credit card $200 for breakages.. there was nothing left TO BREAK!! This place is not rateable unless there is a minus."
Why would anyone want to buy in this building?
Saturday, October 9, 2010
Brisbane Skyline
Monday, May 24, 2010
Recent Sales
- MacArthur Chambers - 2 beds, 2 bath, Apt 609, 229 Queen Street, sold for $790,000 and now listed for rent at $730 per week furnished.
- Aurora Towers - 2 beds, 1 bath, Apt 365, 420 Queen Street, sold for $490,500
- River Park Central, 2 bed, 2 bath, Apt 1102, 120 Mary Street, sold for $420,000
Saturday, January 23, 2010
Will Brisbane Apartment Prices Rise or Fall in 2010?
I do not know! The messages are mixed at present. My predication is that some buildings will have average price growth, while other buildings (e.g., those with a large number and % of investor apartments -- e.g. Aurora and Charlotte Towers -- or those that were aggressively sold off the plan during the boom -- e.g. Evolution) will have no price growth or price decreases.
- increased migration to Brisbane
- mining sector likely to remain strong
- few large new apartment buildings being completed in the next 18 months
- net returns of 5% or better for some apartments
- likely interest rate increases in 2010
- rents unlikely to increase significantly in 2010, and may even decrease for some buildings/areas
- lack of first home buyers, many of whom purchase apartments
- investors only purchasing when the price is right or the seller is desperate
- difficulties for investors getting loans
- banks are requiring a higher % of down payment, so investors have less to spend
- valuations are more conservative, making it harder for investors to obtain highly geared loans
- difficulties redrawing against existing loans to invest, because property prices have not increased significantly in recent times
- foreign students loosing interest in Brisbane or Australia -- as they make up a significant percentage of renters
- wages stagnate -- affordability (% of wages spent on property) already stretched, so unless wages increase, it is unlikely that property prices will increase significantly
- council rates increasing
- body corporate levies are already high (over $6,000 a year in some buildings), and may increase more this year
- federal government limiting or removing ability to negatively gear or claim depreciation
- unemployment increases
Monday, August 31, 2009
Oaks 08/09 Results
Oaks Hotels & Resorts Ltd net profit was down 33.3% to $9.8 million in the year to June 30, 2009, on revenue up 11.5% to $120.9 million.
- 38 properties under management
- 4,788 serviced rooms under management (12% increase over last FY)
- occupancy rate down 2.11% to 84.38 for CBD properties
- average room rate $151 for CBD properties
- new central reservations team -- I wonder what owners are being charged for this?
Saturday, August 1, 2009
Oaks "Hotels"
Example Reviews:
Aurora
212 Margaret
Festival Towers
Casino Towers
Charlotte Towers
Felix
Lexicon
River City
Similar issues for M on Mary.
Monday, June 8, 2009
Comment from a Reader re Oaks and Aurora
A reader kindly sent me this note, in response to a prior posting:
I am concerned about trends in the industry, whereby the Oaks are flouting the law by operating a hotel in a Classification 2 building. The Oaks has more money than any Owner’s Corporation, and they know as long as Brisbane City Council and the State Government of Queensland turn a blind eye to them, they can out spend any Body Corporate in our legal system.
I went to a recent auction run by LJ Hooker in Aurora, and the agent was late because he could not get up and down the lift (the Oaks closes two of their five lifts down between 10:00 am and 2:00 pm). When we finally got into the building, there were hotel guests unpacking and repacking their bags in the lobby. The lifts were crowded with students, overnight stays ....
It is no surprise to me that the auction of a $1.1 Million plus unit did not attract any bids. The vendor made a bid of $725,000, and about 12 people stood around, hands in pockets. After the auctioneer consulted with the owner and got instruction, the vendor’s bid was lifted to $770,000 and again no bids. I don’t know if this property ever sold. It was passed in on the day.
The presence of any hotel group, in my opinion devalues the units and lowers the general feel and look of a residential building and diminishes the lifestyle of resident owners. Other factors to consider are:
Don’t Owners get Higher Rents for Hotel Guests/Short Term?
Your committee and the Manager might try to tell investors that they will earn more money. Yes, their rents might be a bit higher, but that is only part of the story. With higher rents, come higher risks, such as risk of vacancy, more tenant churn, more wear and tear on common property and much higher Management Fees.
The Oaks tend to return to investors about 48% to 50% of the total rent collected, when the high management fees, charge-on costs and miscellaneous costs are all taken into account. I believe this to be in line with any other hotel group’s figures. Perhaps someone from the Oaks could confirm these figures.
Rental Pools – How do they work?As an investor in a ‘hotel’, your unit is most likely going to go in a ‘rental pool’. It is impossible to tell how often your unit is let out, as the agreement entitles you only to a portion of the total pooled funds. That means that if your unit is a superior one, and is let fully, you will be subsidizing other units which may be inferior and not let out fully.
There are lots of hidden costs to any investor from their hotel manager. One horror story involves an owner who double checked his statements, and each month they would be buying ashtray, glasses, microwave, mattress protector, etc. The Managers did not need to give any proof that the item was damaged or broken, they simply went ahead and bought these items, added a hefty commission and merrily went about spending the owners’ money, despite instruction from the owner that she would replace any items in the unit herself. Another horror story involves a man who went straight to the manager’s desk and asked if there were any vacancies. Yes, the manager said, just go to that phone over there and ring this number. The unassuming man went over and used the phone, the manager answered and earned 30% commission (out of the owner’s pocket) for the exercise. There are more stories where these come from. This is just scratching the surface.
Fire Regulations?As indicated already, regulations appear to mean nothing to the Oaks. They run a hotel in Aurora, which is a Classification 2 Building, with inferior fire safety protection for the occupants.
How do Hotel Groups and bad Managers devalue units?
There are many drawbacks to a hotel group taking control of a residential building. Investors need to be aware that although it may seem that rents increase, their net income will drop. Aurora has shown us that units will be significantly devalued by the presence of the Oaks, or any other hotel group. Colin Archer was recently quoted at the Unit Owner’s Conference as saying that “if owners want to buy into a hotel, they should buy a hotel. If they don’t wish to live in a hotel, don’t buy in a residential building managed by any hotel group”, because he well knows the massive and negative impact a hotel operation has on the permanent, resident owners. One owner stood up and asked Colin Archer what owners in Aurora could do to protect themselves, because the Management Rights were sold to a Hotel Group to the detriment of owners. He started squirming in his seat. He is a director of the Oaks, and he was sitting on the panel with Michael Teys who sold him the Management Rights. They seemed to think it was quite a funny joke. After some good natured squirming, Colin Archer said that owners need to ensure a bylaw is in place with a three month limit on leases. To his credit (I think he wants to retain his right to practice law), Michael Teys stood up and corrected Colin Archer. He told the crowd that such a bylaw would offer absolutely no protection to owners.
Take also into account that backpackers, suitcases and crowds in the lobby negatively impact on any residential home. In Aurora, I believe that two of the five lifts are closed off to residents because of the cleaners activity between 10:00 am and 2:00 pm. Cleaners block not only the lifts, but the corridors of all of those unfortunate souls who live on the ‘hotel’ level. There is more wear and tear on common property, and the end result is that all owners pay a price – investors pay the financial price and resident owners pay the price of a diminished lifestyle.
Is there any upside to a Hotel?No, not that I can see. Hotel Management Rights are there for the sole benefit of the managers, and to the detriment of both investor owners and resident owners. If someone can convince me that the Oaks have increased the value of the units in Aurora, or enhanced the lifestyle of all occupants, I will happily listen. Until I hear a good case for owners, I won’t be changing my mind anytime soon.
Sunday, June 7, 2009
Oaks Sells Out - To Brother!
At the recent Oaks AGM, there were reports that angry Aurora owners questioned the CEO of Oaks, and that he could not provide sensible answers.
See ASX Release and follow-up.
Sunday, April 19, 2009
Aurora No Sale
Sunday, April 5, 2009
Brisbane Unit Auction Results
- Breeze at Indooroopilly,41/8 Belgrave Road: 3 bed, highest bid at auction was $400,000, auctioneers bid of $780,000, passed in, now listed for $900,000
- Admiralty Quays, 144/32 Macrossan Street, Brisbane, 3 bed, sold for $1,885,000
- Skyline, 62/30 Macrossan Street, 2 bed, passed in at $563,000, now listed at $600,000
- Dockside Hotel, 601/44 Ferry St, Kangaroo Point, 2 bed, no bid
- Dockside Hotel, 510/44 Ferry St, Kangaroo Point, 2 bed, no bid
- MacArthur Chambers, 104/229 Queen Street, 2 bed, 2 cars, passed in at $720,000, now listed at $790,000
- 95/260 Vulture Street, South Brisbane, 2 bed, passed in at $645,000, now listed at $675,000
- Aurora, 117/420 Queen Street, 2 bed 1 bath, sold for $395,000
- 7/146 Macquarie Street, St Lucia, 2 bed 1 bath, sold for $500,000
Friday, April 3, 2009
Body Corporate Levy Defaults
Thursday, March 19, 2009
Recent Apartment Sales in Brisbane City
Aurora - Apartment 439 - Level 43 - Two bedrooms - $460,000
Club Lodge - Apartment 51 - Two beds, two cars - $440,000
Vue - Apartment 2409 - Two beds - $445,000
River City - Apartment 3802 - Two beds - $403,220
Flow West End - Apartment 80 - Four beds - failed to sell at auction
Monday, October 20, 2008
Ray White Sunday Auction Results
- Felix: 342/26 Felix St, 2 bed, 2 bath, sold for $495,000.
- Festival Towers, 1901/108 Albert St, passed in $450,000
- Festival Towers, 3508/108 Albert St sold prior to auction, reported at $555,000 or $445,000??
- Charlotte Towers, 1502/128 Charlotte St, 2 bed 2 bath, passed in on vendor’s bid of $420,000
- River Place River Terrace House: 1/82 Boundary St was passed in at $1.35 million, now listed at $1.5M
- Skyline, 12/30 Macrossan St, three bedroom unit passed in at $900,000, now listed at $1,240,000
- Aurora Tower Penthouse: 651 and 656/420 Queen St passed in at $2.4 million, now listed at $2.6M
- Soho, 416/8 Cordelia St, 1 bed, South Brisbane was passed in at $280,000
- SoHo, 615/8 Cordelia St was passed in for $465,000, looking for offers above $500,000
- SoHo, 108/8 Cordelia St passed in at $505,000
- Euro, 1308-2-6 Manning St, South Brisbane, 2 bed 2 bath, passed in at $400,000
- Trilogy, 336/51 Hope Street, Spring Hill, 2 bed, 2 bath passed in at $540,000, sold after for $550,000 (vendor was off the plan owner who had paid $595,000)
- Stradbroke Tower, 74/2 Goodwin St, Kangaroo Point passed in at $875,000
- 1/24 Brisbane Street, St Lucia, sold for $414,000
- 6/211 Baroona Rd Paddington, 2 bed, 1 bath, sold for $431,000
- LeftBank, 64/35 Buchanan St, West End, passed in at $1.15 million
"Hundreds turned out to the convention centre on Sunday to see 80 properties offered for sale as part of the Ray White Property Auction Spectacular. There was a wide range of units and houses was on offer but properties sold under the hammer for prices well below what would have been expected six months ago.
Chief auctioneer Philip Parker said he pleased with the lacklustre clearance rate of almost 30 percent but said those who sold at auction realised they were not going to get what they thought their property was worth before the economic downturn. He said while no-one was happy with the current economic climate, sellers realised if they wanted to move a property they had to meet the market.
``Out of those that sold today, only one buyer didn’t go down on their original (minimum) price,’’ Mr Parker said.
He said the vendors who didn’t budge, didn’t get a sale. Negotiations are continuing on several properties offered for sale." http://blogs.news.com.au/couriermail/publicproperty/index.php
Saturday, October 11, 2008
Future Brisbane Apartment Developments
There is likely to be a shortage of apartments in Brisbane in the near future. (This statement assumes that that is not massive unemployment in Brisbane.) There are few developments under construction, and so very little new stock will come onto the market in the next three years. What new stock remains unsold is either overpriced or poor quality.
Downtown Apartments
- M on Mary - completed - mostly poor quality 1 bedroom apartments, mostly unsold. Developer has ceased sales campaign and is running this building as short term accommodation
- Evolution - completed - about 20 apartments unsold - small and overpriced
- Skyline - completed - about 20 apartments unsold - building surrounded by other buildings, and generally overpriced
- Aurora - completed
- Empire Square - cancelled
- Trilogy Tower - status uncertain - in presales, with planned completion in 2012 - both hotel rooms and expensive apartments
- Vision - status uncertain - in presales, with completion not before 2012
- Soleil Tower - soon to start presales - 403 apartments, with completion about 2011
- French Quarter - early days, no planning approval
- Flow (West End) - completed - about 5 remain unsold, will negotiate on price to sell
- Koko (West End) - completed - about 5 remain unsold, will negotiate on price to sell
- Tempo (West End) - completed - about 5 remain unsold, will negotiate on price to sell
- IceWorks (Paddington) - almost complete - about 6 apartments remain unsold
- SL8 (West End) - under construction, with completion expected in April 2009, poor location
- Waters Edge (West End) - off-the-plan selling, overpriced and selling poorly, completion in 2010
- Ciana (Indooroopilly) - almost complete - about 25 out of 130 apartments remain unsold - good value
- Tennyson Reach - 2 buildings nearing completion, 1 building not far behind, 3 more buildings planned
- Newstead Waterfront - 2 buildings selling well off-the-plan
- The Mill at Albion - almost sold out, relatively expensive
- El Dorado Village - to be launched to the marketing in October 2008, completion likely in 2011
- Milton Union - received planning approval
Sunday, September 21, 2008
Sales and Auction Results for Brisbane Apartments
Saturday, August 23, 2008
Brisbane Apartment Auction Results
- River City Apartments, Apt 2105, 2 bedroom, 2 bathroom, 1 car, sold at auction for $375,000
- Aurora Skyhome, Apt 547, three bedrooms, passed in at auction with highest bid of $740,000
- Charlotte Towers, Apt 1810, passed in at auction with highest bid of $290,000
- Charlotte Towers, Apt 3811, passed in at auction with highest bid of $310,000
- Festival Towers, Apt 2806, 1 bed, 1 bath, 1 car - no bid at auction
Saturday, July 12, 2008
Recent Sales in City
Aurora, Apartment 419, level 41, 2 bedrooms, 1 bathroom, 1 car, great views, sold for $485,000
Sunday, July 6, 2008
More Construction in Brisbane
Always be careful th at your view will not be blocked out! Some recent photos:
Three bedroom apartments in Skyline will be impacted by Macrossan being built next door:
Recent Sales
Aurora, Apartment 419, level 41, 2 bedrooms, 1 bathroom, 1 car, great views, sold for $485,000