What to do in Brisbane?

Travel & Leisure magazine has an interesting blog post about Brisbane.  See post here.

Brisbane the laggard, says Macquarie

"Brisbane is still very much the laggard for this cycle given the sluggish domestic economy, with periodic price falls still common particularly for the Brisbane unit market," Macquarie's latest report noted.

It was in part because Queensland continued to show population growth moderation as the recent mining boom subsided.

The lagging occurs even as prices emerge back into recovery and should exhibit strong price growth into 2015, it noted.

See Property Observer

In my view, another big reason for zero growth in Brisbane is income growth has been negligible, and other costs (especially food and entertainment) have increased faster than salaries.  As a result, rents in Brisbane have basically been flat for two to three years.

No capital growth for Brisbane property over last six years

Most recent property investors in Brisbane are likely to have lost money.

From a recent report from RP Data:

"The next time you hear someone talk of the booming national housing market remember these statistics.  Yes combined capital city home values are rising and this is due to the influence of the Sydney and Melbourne housing markets where values are rising.  Real home values in Brisbane, Adelaide, Perth and Hobart are still lower than they were before the financial crisis and have seen no real growth in more than six years."

Brisbane Still Behind

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

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!

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?

Top Yields

Today's paper had a chart with the top rental yields for inner-city Brisbane.  All were apartments.  A summary of some of the data:

• Spring Hill - based on 170 sales, median sale is $380,000, median asking rent is $485, so indicative gross yield is 6.6%
• Brisbane city - based on 666 sales, median sale of $500,000, rent $600, so a yield of 6.2%
• Woolloongabba - 86 sales, sale price of $400,000, rent $465 so yield of 6%
• The Valley had an indicative yield of 5.6%
• South Brisbane had an indicative yield of 5.4%

These figures are a little rubbery.  The apartments being sold may not be the same apartments listed for rent.  The rent is the asking rent, not the rent achieved.  The figures do not take into account vacancy.  And the sales price does not include stamp duty.

Take the following example, of an apartment sold for $431,000 and then rented furnished for $550 a week.  On a simple calculation using these numbers, the yield is 6.63%.  If stamp duty of $13,510 is added, the real sales price is $444,510, so the yield changes to 6.43%.  Once letting agents fees, body corporate fees and rates are taken into account, the yield drops to 4.5%.  And this does not include vacancies and repairs.

I recommend focusing on net yield, after expenses.  For a one bedroom apartment, you should aim for a net yield of 5%.  For a two bedroom, aim for a net yield of 4.5%.  For a three bedroom, 4%.

Brisbane has under performed, but is gathering momentum

Double click on the above to make bigger.  Source:  RP Data

Bees Nees - A real estate agent's view of the Brisbane property market

"After a number of years of buyers being firmly in control, here's two telltales for us that we have a market on a new, more balanced playing field:

Buyers are calling us back. We know we're real estate salespeople and shouldn't be surprised when some people don't want to talk to us! But it's been a little lonely in recent years... Now the calls are returned, buyers keen to hear what 'freshies' we might have coming up for them.

The second reason? In the past fortnight I've had 3 real estate agents contact me chasing investments for themselves. Like a Charleville grazier can smell the coming rains, these agents get a sense when the market's on the turn.

It's not all one-sided. Despite the competition we've still seen some price sensitivity from buyers. They're well-informed and most are not yet rushed to pay over the odds. They recognise there's a shortage of listings across many inner city markets and prices, but many are still okay to bide their time. There's more balance but it's too early to say it's a sellers market.

With that said, if you've been holding off selling I haven't seen a market as good as this since 2004.  Many are hoping it will continue 'gaining momentum' and those 'green shoots' will sprout into price growth to make Jack’s beanstalk look tiny."

From Bees Nees.

It seems that houses are selling much faster than apartments in Brisbane at present.

Brisbane Update

A video from RP Data regarding the Brisbane property market is here, presented by Tim Lawless.

A valuer's view of Brisbane

From the HTW Month in Review for February 2014:

"... Brisbane is often touted as the next most likely to move after Sydney and Melbourne, and there’s no denying that some of these southern states saw a boom run on many suburban market as 2013 drew to a close.  In the field, agents are telling us that things are looking good. There have been multiple lookers at open homes and some auctions are jagging prices above vendor expectation. The pick locations are, and have always been, close to the CBD. The old story of limited supply and good quality stock plus comparatively high demand mean that as long as you’re appropriately priced, there is definitely a buyer or two out there for your property."

Brisbane off the plan apartment prices expected to soften in 2015/2016

In an article in Property Observer, BIS Shrapnel is forecasting further strengthening of the off the plan apartment market in Brisbane over 2014 and 2015 before a period of softening.

"Senior project manager and report author, Angie Zigomanis, said that the inner Brisbane apartments are increasingly attractive with yields in many of these projects around the 5% mark and above.

“However, with many expecting that the Brisbane market has now bottomed out and the risk of further price declines is dissipating, the impetus to enter the market has increased,” said Zigomanis.

Price growth up until the 2015/2016 peak is expected to be around 5% per annum.

Brisbane Apartment Sales Up

According to RP Data, Brisbane unit and apartment sales (that is, the number of sales) is up 16% than the same three month period a year ago.

(click on image to make bigger)

Based on RP Data’s estimates, there were 9,639 Brisbane house sales over the three months to October 2013 and 3,671 apartment sales.

Brisbane Apartments

A Brisbane real estate agent who sells CBD apartments (Hannah Schuhmann) produced an interesting map that shows some of the larger apartment buildings in Brisbane city.  Those buildings were designed for residents and long term tenants.  However, most of these buildings are now mixed -- the onsite manager is running a short term rental pool, and is pretending to operate a hotel.  (Oaks is the predominate manager of the listed buildings on the map.)

It is interesting that this same real estate agent, who is selling an apartment in Metro 21 states, as a feature of Metro 21:

"No hotel-style accommodation within the building".

Property Losses

Taking into account inflation, property has performed badly in recent times.  See article by RP Data.  Brisbane is down about 17%.  Taking into account transaction costs (e.g., duty) and holding costs (rates, body corporate fees, maintenance and repairs), the situation is very grim for property investors.  And I suspect that inflation is actually higher in Brisbane than the official figures show.

Rental Yields

Brisbane rental yields have increased dramatically over the past five years.  At least one commentator is suggesting that this means Brisbane real estate prices have room to increase.

Brisbane doing poorly

Despite what the newspapers may report, and what real estate agents may tell you, overall the Brisbane property market is doing poorly.  Have a look at these charts published this week by RP Data.  Brisbane is second-last on both charts.  If you purchased at the last peak, like many people did, and sold today, you will have lost about 10% (not including stamp duty and real estate agent selling fees).

Finally, an Apple Store for downtown Brisbane?

There have been a number of reports that Apple will open an Apple store in MacArthur Chambers (corner of Queen St and Edward St) in Brisbane City.  About time!  Rumours that Apple will have a store in the Valley appear to be incorrect.

The Brisbane Market

There is a lot of talk about how well the Sydney property market is doing, and also the property market in general.  But this does not appear to apply to Brisbane.  From what I can tell, the Brisbane market is holding steady, and not rising, and definitely not booming.  Have a look at the charts here, and the information below.  Despite what is happening in Sydney, there is no property boom in Brisbane.