Will Hamilton Harbour Buyers Settle?

"Hamilton Harbour’s settlement rate should be on the development industry’s “must watch list”. Hamilton Harbour is a litmus test for the Brisbane apartment market – a beachhead, if you will."

All investors in Brisbane apartments should read this note by Matusik.

Mirvac's Foreshore Hamilton

Mirvac has Foreshore Hamilton in pre-release at present. Mirvac sales agents are calling all potential buyers to make sales. Lower floor apartments in the first building, called Foreshore One, are being marketed off-the-plan. The building is about 23 floors, and only the top few floors will have a view. The actual outlook and location, although in the redevelopment area of Hamilton, is not great. The development will be located behind the Portside buildings, and next to a proposed Citimark building, Rivana. So really crowded. (Foreshore One will take away the rear views from the Promenade building being built by Multiplex.)

Many of the apartments are very small. One bedrooms are about 52 sqm to 55 sqm in total, no balcony, priced from $345,000. The two bedrooms range in size from 72 sqm to 105 sqm in total -- the smaller 2 bedrooms do not have a balcony. The larger 2 bedroom is priced from mid $600,000 to low $800,000. Not cheap. Some two bedrooms are priced from $495,000, but these are small.

Mirvac will probably build a quality product (better quality than Promenade and Rivana I suspect) but due to the apartment size, poor location and cost, I am not lining up to buy. Also, there are a huge number of apartments being being built in this area, including Hamilton Harbour by Devine next door, and so there will always be plenty of competition if you ever have to sell or find a tenant.

From a Mirvac email:

This is what will set 'Foreshore - Hamilton' apart in this exciting new urban development.  We will bring to the market 1 and 2 bedroom apartments:  1 bedroom apartments are priced between $345,000 and $525,000 - size range from 50sqm to  58.5sqm  2 bedroom apartments are priced between $495,000 and $975,000 - size range from 73sqm to 104sqm  Completion date will be the later end of 2013.

Mirvac's Hamilton Apartment Project

Mirvac is the next developer to announce an apartment project at Hamilton, called ForeShore Hamilton. Coming soon, a release of 1 and 2 bedroom apartments.

"With a total of 582 apartments throughout three buildings, Foreshore is going to be a major component of Northshore Hamilton which will be the epicentre of cosmopolitan Brisbane living over coming decades"

Hamilton Harbour

Update from Devine:

"Construction at Hamilton Harbour is progressing on schedule; the rise of Brisbane’s newest lifestyle Mecca will be completed by Christmas 2011. With the first tower, Harbour One, already beyond level 20 and internal fit out is occurring from level 1 to 17; and Harbour Two now at level 11 with the internal fit out occurring from level 1 to level 8, excitement is definitely building as the project becomes a reality."

"With construction well under way, the first two residential apartment towers of Hamilton Harbour are on schedule to be completed prior to Christmas 2011.

Riverside Hamilton, the third and final residential stage in prestigious Hamilton, is selling fast and due to commence construction later this year with completion in 2013."

Hamilton Harbour is located on the busy Kingsford Smith Drive, and is not riverfront, but one block back from the river.

A tiny 61 sqm internal two bedroom apartment with views to the airport and not the river is available from $533,000 on level 15, or $485,000 on level 2.

Reminds me of the article about the shrinking apartment size. Clearly, this building is aimed at investors and not residents.

Developments at Portside

The photo shows development sites by Devine, Citimark, Mirvac and Brookfield Multiplex. (Double click on photo for larger view.) An endless supply of apartments, which means values are unlikely to rise significantly.

Mirvac at Portside

Mirvac has lodged plans for development approval for 4 buildings in the Portside Hamilton area. The towers will range in height from 23 levels for Building 1, 18 levels for Building 2, 8 levels for Building 3 and a single level retail building for Building 4. There will be over 500 apartments. The apartments are small. 300 apartments will be only 50 sqm internal, and about half of these will not have a balcony. (Compare Quay West 1 bedrooms by Mirvac, that are 72 sqm including balcony.) About 200 2 bedroom apartments will have an internal area of less than 80 sqm.

This development will add further density to the area, and kills the rear views for the Promenade Apartments from Multiplex.

Devine Half Year Results

Extracts from presentation to investors:

• Strong market response to Hamilton Harbour project with third tower sales progressing well
• Hamilton Harbour (Towers One & Two) construction advancing well, with construction of third tower targeted for mid-2011 commencement
• Hamilton Harbour has continued to attract strong sales and enquiry with: - 92% of apartments in the first two stages at unconditional contract status, and 49% of Stage 3 now sold and unconditional
• Hamilton Harbour Tower One is progressing well with structural cycles completing verticals up to floor 14 and slabs up to floor 12
• Tower Two is close to entering structural cycles which will see the structure advance noticeably from this point in the coming months
• First apartments expected to be completed by December 2011

• New opportunity secured; 107 apartment project in Teneriffe, Brisbane CBD fringe (Commercial Road - 107 apartments (1 and 2 bedroom only), marketing to commence in second half of 2011)
• New project signals Devine’s ability to apply high density residential capabilities to mid-scale, medium density opportunities

Mirvac's Hamilton Project

Listed real estate group Mirvac is set to continue its successful track record of quality residential development on Brisbane in-fill sites after the purchase of a prime 7,637-square-metre former Department of Primary Industry site at Hamilton.

Previous projects by Mirvac on classic in-fill sites in Brisbane include The Arbour On Grey (at South Bank), Quay West, Grosvenor, Waterline Bulimba, Park Hill Village, Mariner’s Reach, Cutters Landing and more recently Waterfront Newstead.

Mirvac’s Queensland CEO Matthew Wallace says the Hamilton site, located in Hercules Street, is six kilometres from the CBD and will likely accommodate more than 500 residences. Its end value will be around $300 million.

“We are very excited about the purchase of this site and while our planning is still in its initial stages at present we will be delivering a residential product that will broaden the price segments in which we operate,” he says. “The site is extremely well located and the same team that has delivered such projects as Cutters Landing, Tennyson Reach and more recently Waterfront Newstead will be behind the Hamilton development.

“The product will be affordable, it will be quality, it meets the State Government and city council’s planning goals of higher density in the CBD fringe and will be a prime example of contemporary urban design.” Wallace says the Hamilton development is a prime example of Mirvac’s national strategy to continually review and refine its product offering in line with demand and opportunities that arise.

...

Wallace says the Hamilton development will leverage off the established amenity within the immediate locale and it is proposed that the urban street environment will integrate with the existing Portside development.

The site is adjacent to the Portside Wharf development and cruise ship terminal, is approximately 500 metres to the City Cat, five minutes to the Gateway Motorway and 10 kilometres south of the Brisbane Airport.

The DPI has recently vacated the site.

“We are planning a range of innovative one and two bedroom product on the site and our research indicates that there will be significant demand for this product and this location,” he says.

“Our plan is to provide affordably priced, high-quality residences to a broad section of the marketplace and our team is excited about turning their minds to a new challenge.

...

Wallace says it is expected that approvals permitting, Mirvac will release the first of the residences at Hamilton next year.

See QBR

Devine Hamilton

The Australian Financial Review included an advertisement last week stating that Devine had received construction finance for Hamilton Harbour.

Devine has also started to market a new building on the same site, Riverside Hamilton.

Talking Up the Top End

"Publicly listed property company Mirvac has also started the decade on a positive note, selling $30 million worth of $1 million-plus apartments around Queensland in the first three months.

Mr Johnston said the exclusive riverfront development at Tennyson Reach had exceeded everyone’s expectations in the current market. "The fact it’s sold so well in a market affected by the GFC is testament to the quality of the product and the prime location," he said.

The Tennyson Reach sales ranged up to $2.845 million for luxury apartments on the riverfront, located close to the new Tennyson Tennis Centre. Mr Johnson said that apart from families with old money, 2010 had seen the return of the investor – and they’re not all mum and dad investors with $600,000 to spend on a three-bed, one-bath inner-city renter.

An increasing number of multi-million dollar sales have been to investors, such as one riverfront apartment Mr Johnston sold for nearly $3 million last month. The investor is planning on renting the apartment out.

Ms Havig said foreign investors and expats were also present in the prestige market.
"They feel that the market is still going to rise considerably and want to get in before it does," she said."

See Brisbane Times for full story.

Extract from Recent Matusik Email

Australian Property Monitors (APM) – a fully owned subsidiary of Fairfax Media – last month published a study which outlined what houses across Queensland (and by suburb) could be worth in three, five and ten years’ time. Needless to say, the projected growth trajectory is almost exponential, rising on average by 11% per annum across Queensland over the next decade. Prices rose by 11.7% each year, across Brisbane for example, during the noughties. Hopefully, APM did more work than just assume that the past will be repeated. But one wonders.

A check on 25 randomly selected Queensland suburbs finds a pretty consistent projected growth pattern, with values expected to rise by 30% in the next three years, then by just 10% between year four and five and then by a whopping 115% between the sixth and tenth year. By 2020, just short of 600 Queensland suburbs are expected to enjoy a median price over $1 million; and 54 areas could be, on average, priced over $2 million. The median Brisbane house price, today, is around $440,000.

What is driving the growth in five years’ time? Why does the growth rate plummet in year four? Surely there is something more than just “demand exceeding supply and strong economic growth, particularly in resources,” as quoted in the accompanying media commentary. Please APM, explain to us your methodology, as it is absent from the published forecasts.

Also puzzling is why Hamilton’s house values are expected to drop 20% over the next three years, whilst neighbouring Ascot’s prices are forecast to rise by 7% over the same period. And why just 7% – isn’t Ascot (and Hamilton for that matter) in a prime spot, with heaps of infrastructure support? Similarly, South Brisbane’s values are to drop by 8% by 2012, but West End’s values will rise by a staggering 33% or $236,000. Ditto for Surfers Paradise, down 36% in three years, versus a projected 20% jump for adjacent Broadbeach. I could go on and on. Please, APM, explain these anomalies as well.

The Gold Coast market, and in particular Surfers Paradise, has been getting a caning of late. According to the latest Queensland government valuations issued in March, ocean-front land has fallen by 30% on the coast, with residential values down 18% in Surfers Paradise since 2007, when land was last valued on the Gold Coast. According to a recent study by the REIQ, median dwelling prices in Surfers Paradise dropped by 30% during 2009.

Now there is no question that the Gold Coast is doing it tougher than the rest, with our data – which is based on cleaned up resales – showing that apartment values fell 9% during 2008 and a further 4% last year. But ocean-front apartment values – in Surfers Paradise at least – and again based on individual resale analysis, actually rose last year. Up by 8.9%!

There are two messages here. Firstly, in order to get a true handle on the residential market it pays dividends to narrow down the sample set and investigate individual resales. Sweeping statements – and especially based on suburb, or worse still, postcode analysis – are nearly always incorrect.

The second message comes in the form of a question. Why does the media (and too many punters, as well) accept these forecasts as if they are gospel? I understand why the Fairfax Media might, but the Murdoch Press? Maybe digging around a bit is too much work for journos these days. A recent study commissioned by crikey.com suggests this is the case, with nearly 55% of the stories published across ten major Australian newspapers late last year being driven by media releases or public relations firms.

So what do I think prices will do over the next decade? In short, my answer is…not as much as they did over the last ten years.

Dwellings are overpriced but not (yet, anyway) oversupplied. The current “boom” is likely to run out of puff within the next twelve months, on the back of rising interest rates and declining affordability. We could “crash and burn” like the US recently did or go through a long, drawn-out adjustment, as happened in the 1990s. The latter means that residential values will be flat until affordability is rebuilt by a combination of gradual increases in household incomes and cyclical declines in interest rates. Given this scenario, growth over 5% per annum would be a strong result.

It’s back to the future, if you ask me.

Source: www.matusik.com.au

No Finance Yet for Hamilton Harbour

Devine still has not obtained finance for its Hamilton Harbour development. The AFR reports that it could take up to two months of further negotiations for Devine to obtain finance. The average price of all apartments sold in this development to 31 December 2009 is just less than $520,000 per apartment. For the first tower, the average price is $539,000 per apartment.

From a report to shareholders this week:

"The company’s mixed-use Hamilton Harbour joint venture with Leighton Properties also continues to progress well with over 90% of the first stage being sold by 31 December 2009 with 233 apartments representing $125.6 million in sales.

Following the success of the first stage, the second stage residential tower was released to the market in October 2009 and this has resulted in total sales to date for the two stages of 377 apartments worth $196.6 million with 317 of these sales unconditional with 10% deposit paid. Devine together with its joint venture partner, Leighton Properties, continue to progress securing funding for the construction phase and are confident that this will be achieved."

Hamilton Harbour Update

"Strong pre-sales of residential units in Hamilton Harbour stage 1 with 89% of 257 units now sold. (This project is also a JV with Leighton Properties) ... Hamilton Harbour and King George Central forecast to commence later this calendar year subject to finance being secured."

Devine Annoucement

"SALES LEVELS ACHIEVED ON STAGE 1 OF THE HAMILTON HARBOUR MIXED-USE RESIDENTIAL, COMMERCIAL AND RETAIL DEVELOPMENT HAVE EXCEEDED OUR EARLIER EXPECTATIONS. ... TOGETHER WITH LEIGHTON PROPERTIES WE HAVE NOW COMMENCED THE PROCESS OF SECURING FUNDING FOR THE CONSTRUCTION PHASE AND, GIVEN THE HIGH LEVEL OF PRESALES ACHIEVED, ARE CONFIDENT OF ACHIEVING THIS TO ALLOW CONSTRUCTION TO COMMENCE SHORTLY."

AGM Speech

Brisbane Development Update

In April 2008, I listed apartments buildings that were planned for Brisbane.

Here is an update of that post. Times have changed!

1. Trilogy Hotel - 192 apartments - being sold off the plan, but project on indefinite hold
2. Trilogy Skyhome Apartments - 109 apartments - on indefinite hold
   
3. Westin Residences (Empire Square) - 104 apartments - project abandoned.
   
4. Waters Edge at West End - 220 apartments in the first 2 buildings to be released - earthworks have started
   
5. Union at Milton - 213 residential apartments and 127 hotel rooms - status unknown
   
6. French Quarter - about 70 apartments and 150 hotel rooms - project abandoned
   
7. Hamilton Harbour - about 250 apartments - stages one and two being sold off-the-plan; construction finance not yet obtained
   
8. Meriton Tower - 200 serviced apartments plus 200 residential apartments - now called Soleil, and all apartments -- no hotel or serviced apartment component.
   
9. The Mill at Albion - likely to be cancelled
   
10. Waterfront Newstead - 631 apartments - two buildings under construction
    

Current off-the-plan buildings being marketed and under construction

1. Vision (400 apartments) - cancelled
   
2. Iceworks at Paddington (47 apartments) - complete
   
3. Parklands at Sherwood (82 apartments for sale now; 211 apartments planned in total) stages one and two complete
   
4. Tennyson Reach (393 apartments) - two buildings complete, and a third building under construction
   
5. SL8 (112 apartments) - complete
   
6. Ciana Indooroopilly (132 apartments) - complete
   
7. Portside Hamilton - three buildings complete, one building in off-the-plan sales
   
8. Riverpoint West End (280 apartments) - under construction
   
9. The Macrossan (42 apartments) - under construction
   
10. SW1 (57 apartments) - complete
    
11. Fresh Toowong (92 apartments) - complete
    

Developer's Profit Margins and Marketing Costs

It is interesting to review the information Devine has published regarding its French Quarter development, that it is in the process of selling. It gives a good idea as to developer profit margins and costs of new apartment developments, such as French Quarter. (The information was not password protected at first, now it is, so you will have to trust me on this.)

For the "Carrington" Building (268 apartments, with 302 car parks).

Revenue for residential apartments - $11,400 per sqm, totalling $411M
Revenue from selling management rights - $2.45M

Total Development costs, including land value at $49M and construction costs at $177M = $310M

Profit - $85M

Interestingly, marketing & commission costs are $22M.
("Marketing Costs allowance 2.0% of Gross Sales Revenue. Commissions of 3.0% of Gross Sales Revenue with 50% paid on unconditional contracts & 10% deposit held.")

So, for a 2 bed, 2 bath apartment (110sqm in size), the average price would have been $1.2M. Of this, about $350,000 is profit, and $60,000 approx is marketing costs and commission for the sales agent.

Hamilton Opposition to River Tower

http://city-north-news.whereilive.com.au/news/story/residents-oppose-river-tower/

HAMILTON: More than 100 Hamilton residents will challenge Brisbane City Council this week to object to a proposed 15-storey riverfront development on Kingsford Smith Drive. Tenants from 101 units at Bretts Wharf Apartment Complex in Harbour Rd have sent submissions to the council. They say the multi-unit dwelling, which features short-term and hotel accommodation, will be inconsistent with the area and create traffic chaos. ``Fifteen storeys is a joke in such a tiny area,’’ Tony Hall, who lives on the eighth storey of Windermere tower, said.

From Devine's Report

French Quarter in Alice Street Brisbane

"Continuing to progress the submission of an application for a development approval for this exciting future redevelopment opportunity."

Hamilton Harbour

"Excellent market response to the first stage of the “Hamilton Harbour” residential development"

"Development approval now received and marketing of first stage of residential commenced March 2009. First stage 86% sold."

"Strong pre-sales of residential units in Hamilton Harbour stage 1 with 86% of 257 units now sold. (This project is also a JV with Leighton Properties)"

Commencement Dec Qtr 2009
Est. Completion Staged development over approximately 5 years

Source

200 Apartments Sold At Hamilton Harbour

"After launching the first residential offering in early March, Hamilton Harbour joint-venture partners Leighton Properties and Devine have achieved their first major milestone – achieving 200 sales.

Selling out more than $100 million worth of apartments in just over four months is a triumph for the developers, which have attributed strong sales to the developments’ Hamilton location.

Devine National Marketing Director Ken Woodley says more than 80 percent of buyers are from Brisbane."

Construction has not yet commenced.

http://www.qbr.com.au/news/articleid/57924.aspx

Top End Not Looking Good

"Discounting by more than 20 per cent is commonplace for some top Gold Coast addresses and many houses and apartments are yet to sell. A property owned by the bankrupt entrepreneur Matthew Perrin sold on Albatross Avenue, in Mermaid Beach, in May for $2.75m after it was purchased for $4.375m in October 2005.

Former Sydney Swans footballer and founder of tourism group Breakfree, Tony Smith, sold his Hedges Avenue house at Mermaid Beach for $28m to IT entrepreneur Daniel Tzvetkoff - less than half the expected $60m. Now the half-finished mansion Mr Tzvetkoff purchased is to be sold after his company BT Projects was placed in administration.

Other prestige properties around the country are set to sell at sharp discounts, with many vendors shaving millions of dollars off the asking price."

See The Australian, photos and chart
The chart shows that people lost money in New Farm, Coronation Drive, Paddington, Hamilton, Hastings Street in Noosa and the Gold Coast.

"The sort of prices that were being paid were not sustainable and now we are back at 2001 and 2002 prices," Mr Fatouros said. He estimated prestige home prices have fallen about 25 per cent from their peak, with another a decrease of 10 per cent to go.

"I don't think we have seen the bottom yet," he said.

But one Gold Coast agent, who declined to be named, said there were more mortgagee sales to come. "The banks don't want to flood the market with pressured sales and are hoping for some recovery in prices," he said.

"They are drip-feeding properties on to the market."

The Australian

Brisbane Vacancy Rate

Vacancy rate for all Brisbane properties (houses and apartments, anywhere in Brisbane) is a low 1.9%

SQM has a good website to look at rental vacancy rates:
Brisbane City (4000 postcode) - 1.7%
South Brisbane area (4101) - 1.6%
Toowong (4066) - 1.4%
St Lucia (4067) - 1.5%
Indooroopilly (4068) - 1.9%
Sherwood area (4075) - 2.6%
Hamilton (4007) - 4.4%
Noosa (4567) - 2.2%
Mooloolaba (4557) - 1.3%

See also story in Courier Mail

"INNER Brisbane rents are increasing at more than 10 per cent a year, with a downturn in new apartments expected to keep vacancies tight.

DTZ Research has shown the biggest growth has been in one-bedroom units in the inner south and inner west suburbs of South Brisbane, West End and Indooroopilly, where rents have risen by up to 20 per cent.

The median rent of a one-bedroom unit in the inner south is now $420 a week, only $10 less than the CBD median price. DTZ director of project marketing Paul Barratt said the strongest growth in the next two years would be in near-city units and middle-ring suburbs with good transport."