Showing posts with label FIRB. Show all posts
Showing posts with label FIRB. Show all posts

Sunday, October 5, 2014

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

Saturday, June 14, 2014

China Impact

Four recent articles in the AFR are of interest in relation to the impact of China on Australian property.

"Spike in approvals for foreign investment in housing" (AFR, 12 June 2014, p. 36): The FIRB has approved a big jump in applications to buy Australian housing.  In dollar terms, the investment approved is up 67%.

"Chinese buyers key to market: Triguboff" (AFR, 12 June 2014, p. 36):  Meriton raised the issue of whether those who were allowed to buy homes because they were temporary residents, sold them when they ceased to be Australian residents.  In the 2012-13 year, 43.7% of FIRB approvals were for temporary residents to buy established dwellings, because foreign buyers who do not have permanent residency, can only buy new homes.  Meriton pointed out that the annual report of the FIRB did not report on compliance.

"We are part of the Chinese market.  The buyers compare me [Meriton] with the prices in Shanghai and Beijing.  If the price falls in China, that will affect us," Mr Triguboff said.

"China's housing vacancies signal property bubble" (AFR, 12 June 2014, p. 10): A report estimates that there are 49 million vacant homes in China, resulting in a vacancy rate of 22.4%.  "Once expectations change, the high vacancy rate will puts lots of pressure on prices and we could see them collapse."

"President targets naked civil servants" (AFR, 11 June 2014, p. 14): A group of Chinese bureaucrats, dubbed the luoguan or naked officials have become the latest target of President Xi Jinping.  They move their families and money to foreign countries.  "No one know how much this new approach will affect universities and real estate markets in favoured destinations like Australia as the numbers are hard to pin down.  But they are not small."  There are estimated to be about 1.2 million naked officials at the end of 2012.

"House prices second highest in the world" (AFR, 12 June 2014, p. 5): Australia may have the world's second-most expensive housing market behind Belgium, according to the IMF.

Wednesday, August 28, 2013

Foreign Investors

Foreign buyers snapped up one in every eight new properties built this year - up from one in 20 properties in 2011, National Australia Bank research reveals.

Australia's foreign investment rules ban foreigners from buying established homes, and developers can sell half their properties to foreign investors before they are built.

Colliers International's managing director of residential property in Australia, Peter Chittenden, yesterday said Asian buyers were purchasing 60 per cent of units being sold off-the-plan in big developments.

He said overseas buyers had snapped up two in every three of the 588 luxury apartments in the Singaporean-owned Tower Melbourne development - being constructed as the city's tallest building.

Foreign investors have bought 15 to 20 per cent of the 710 apartments being built by Pearls Australasia and Metro Property Development in three towers in the inner-Brisbane suburbs of Bowen Hills and Fortitude Valley.  Pearls Australasia executive director David Higgins said Asian buyers were more likely to buy the more expensive apartments - costing more than $600,000 - with extra space or views.

Source:  Courier Mail

"According to research from LandMark White, of the 27 apartment projects completed in the inner-city precinct between 2011 and 2012, the vast majority were rental properties.  "Anecdotal evidence reports circa 40% to 50% of these investors are Asian buyers," it reports.  "Current conditions indicate investment in the inner apartment market remains robust due to strong rental growth and tight vacancy."

Source:  Courier Mail, Saturday August 24, 2013, p.33

See also: Property Observer: Trends

Thursday, July 25, 2013

Outlook for Property on a Weaker Dollar

The AFR had a story on Wednesday titled "Outlook for property on a weaker dollar."

An abstract from ABIX is as follows:

"While it is pointless trying to accurately forecast the future changes in the Australian dollar's value after a decline of about a tenth during the six months to July 2013, it is worth considering the effects this has on real estate investors. Those with existing overseas assets are seeing a boost to the income streams, while those only now starting to allocate funds to the segment will have to pay more. Foreign investors looking to buy off-the-plan properties in Australia, the only option available to them, will find this easier to finance and demand should increase. However these investors account for only 3% of the market. Meanwhile local real estate buyers may feel the impact of inflation, but in general the fallout from the foreign exchange rate fluctuations will be moderate."

Some quotes from the article:

"A lower Australian dollar may increase the attraction of Australian property to overseas investors - particularly new or off-the-plan property, given that FIRB rules exclude non-residents from buying established property."

"The reality is that inward investment flows into Australian residential property are modest, and represent a very small proportion of the total market.   According to FITB, in 2011-12, around $15.5billion was invested in off-the-plan developments, either by overseas buyers or by development companies marketing to overseas buyers.  Compare this to the $500 billion in mortgage financing for property purchases recorded by the ABS in the year to November 2012 -- overseas buyers represent just 3% of the residential property market.   The most significant issue for property investors emanating from a weaker dollar is the potential flow-on for inflation and mortgage rates.

"Unless there is a precipitous decline in the Australian dollar, there is little to worry local property investors.  But large declines do happen from time to time."