Chinese buying up Australian apartments: They are cheap!

See story in SMH
Meriton chief Harry Triguboff said 80 per cent of his customers are Chinese.  One reason is that foreign buyers can buy an unlimited number of apartments off-the-plan.  A good reason to avoid off-the-plan apartments today.

Midwood Report - Brisbane OK

"The outlook for the new Brisbane apartments market remains healthy with supply and demand evenly matched, but the Gold Coast market continues to struggle with sales of new apartments still at post-GFC lows, according to the latest Midwood Report.

Unconditional sales of new Brisbane units increased from 74 in the November quarter 2011 to 186 in the February 2012 quarter. Stock levels have declined to 1,446 from a peak of 1,683 in May last year, which equates to two-and-a-half years’ worth of supply at current sales rates.

Investors have been spurred on by rising rental returns, with one-bedroom inner-Brisbane flats registering rental growth over the past 12 months of 9% to a median of $300 per week, with a smaller 4% increase in two-bedroom flats ($380).

The strongest-selling project was David Devine’s Metro Property Madison Heights development in Bowen Hills, which clocked up 57 sales with prices ranging from $350,000 for a one-bedroom apartment to $434,000 to $556,000 for a two-bedroom apartment. Madison Heights features 296 apartments, with 200 sold since launch of the project in March 2011. There were also 15 sales at Metro Property’s The Chelsea development also in Bowen Hills, with 190 out of 195 apartments now sold in the project. Prices range from $355,000 for a one-bedroom apartment to $546,000 for a two-bedroom apartment, and there were 20 sales recorded for Brooklyn on Brookes in Fortitude Valley, Metro’s joint development with Indian-based developer Pearls. The other strong performer was Meriton’s 81-storey Infinity Tower, currently under construction, with 34 sales recorded and prices ranging from $470,000 for a one-bedroom apartment to $650,000 for a two-bedroom unit. To date 123 out of the 287 apartments in the tower have been sold."

Full article here at Property Observer.

Soleil Review

I recently visited an apartment in Soleil, which is in the Meriton pool.  Meriton is running a short term rental business out of Soleil, and so the ground floor lobby looked more like that of a cheap hotel than a residential apartment building.

I visited a one bedroom apartment.  It was very small.  Basically, two rooms.  A small bedroom, and a living room with a kitchen along the wall.  So really, a bedroom and a kitchen.  The kitchen/living room/dining room was very crowded even with the minimal hotel furniture.  You were sitting very close to the TV when on the sofa.

There are no balconies, and the windows only partly open.

No ducted airconditioning.  There is a split system, with an ugly head-end in the living room.

There were strange bangs and mysterious deep noises coming from the walls and the common hallway areas.  I could not determine what these noises were, but they were very annoying.

Overall, my opinion is not positive.  I was very unimpressed.

The building has a Facebook page, if you want to become friends with this apartment building.

Chinese Retreat

"Australia’s largest apartment developer, Harry Triguboff, has confirmed that Chinese buying of inner-Sydney apartments has halved in the last month. The China squeeze on its property market and fears about the level of our dollar are now having a direct effect on the Australian dwelling market. 

Triguboff believes that the sharp cutback in Chinese apartment demand will probably reduce apartment prices in Sydney by about 10%, but the prices will not collapse. He believes that a fall in apartment prices will flow on to the whole dwelling market in Sydney."
Full story here.
Harry Triguboff is the owner of Meriton, that is developing  two massive apartment towers in Brisbane, Soleil and Infinity, where most of the buyers are reported to be Chinese.  It is uncertain what impact China will have on the Brisbane apartment market.

Soleil's Pricing Not Holding Up?

Meriton's Soleil is partly completed, with settlements reportedly having occurred on the lower floors.  The top part of the building is still under construction.

Another blog reports that Meriton's list prices for Soleil are decreasing (I have not verified these numbers):

"1 July
Studio $350,000
1 Bedroom $380,000

25 July
Studio $340,000
1 Bedroom $375,000

11 August
Studio $330,000
1 Bedroom $365,000

1 November
STUDIO $306,000 - $325,000
1 BEDROOM $325,000 - $445,000
2 BEDROOM + CAR SPACE $565,000 - $818,000
2 BED + STUDY + CAR SPACE $653,000 - $689,000
3 BEDROOM + 2 CAR SPACES $750,000 - $877,000

4.5% Vendor Finance
$10,000 QLD Building Boost
$17,000 First Home Owner Bonus"


Listed on Domain today:

• 1 bed, no carpark - $403,000
• 2 bed, 2 bath, 1 carpark - $569,000 to $818,000
• resale by overseas buyer: Apt 5204, 2 bed, 2 bath, 1 car: $590,000 negotiable
• resale by overseas buyer: Apt 4803, 2 bed, 2 bath, 1 car: $630,000

As stated in a prior blog post, most buyers appear to be offshore buyers from China, and at the current sales rate, it will take 2 to 3 years for Meriton to sell all its stock in this building.

Meriton Soleil to operate as hotel

Tonight is the official opening of Meriton's Soleil apartment building in Brisbane.  It is going to be run as a hotel, with short stay guests, not as a residential apartment building.  It is aimed at both business travellers and holiday makers. I feel sorry for people who purchased apartments here to live in full time.  The hotel opens next week.

"Meriton Serviced Apartments will launch our in-demand and much anticipated hotel-style accommodation in Brisbane City in September 2011. Meriton Apartments two high-rise developments will change the Brisbane skyline and our serviced apartments will bring a fresh and much needed option to the city for both business and leisure travelers."
See Meriton website

Infinity

According to an advertorial in this Saturday's Courier Mail, Meriton's Infinity apartment building has about 200 residential apartments remaining for sale, out of a total of 548 apartments.  That sounds too good to be true to me.  One bedrooms are priced from $380,000; two bedrooms from $550,000; three bedrooms from $949,000.   According to the newspaper, many buyers are from Sydney and China.  Meriton staff are currently attending property seminars in China to promote this building.

Completion is expected in late 2013 or early 2014.  Construction is underway, with the seven level underground carpark complete, and work up to level 1 above ground.

Soleil Update

Meriton's Soleil building in Adelaide Street, Brisbane, appears to have reached full height. It is tall and skinny. The building is 74 floors, 234 metres, and has 464 apartments. Meriton is not selling the top 10 floors or so, and will rent them out (I suspect on a short term basis).

I have looked at the sales board, and tried to work out the number of apartments for sale. This is my estimate:

Studios - 27 in total, 12 remaining for sale

One bedrooms - 234 in total, 132 remaining for sale

Two bedrooms - 168 in total, 45 remaining for sale

Three bedrooms - 35 in total, 17 remaining for sale

Thus, in total, there are 206 out of 464 remaining for sale, or 44%.

(These numbers assume that the top 10 floors, or 42 apartments, are not for sale.)

So one can conclude that since the launch of the selling campaign for this building in October 2008, 46% of the apartments in the building have sold. At this selling rate, it will take another 2 to 3 years to sell the available unsold apartments in this building. Anyone who buys off-the-plan and needs to sell soon will be competing with the developer selling new stock for some time to come.

The building has some downsides. Having so many apartments, there will always be apartments for sale or rent. The facilities, such as the gym, will have to service a huge number of residents. Image trying to book the 12 seat theatre or the meeting room, when you are competing with 460 other apartments. Also, are there enough elevators? Also, there is no ducted air-conditioning -- there are split system air-conditioning units, with headends in some rooms, and the fan unit located in a service area on the floor.

Example pricing:

• Apt 1802, 1 bed, 51 sqm = $402,000
• Apt 2207, 1 bed, 51 sqm = $426,000
• Apt 2703, 2 bed, 70 sqm = $572,000
• Apt 5701, 2 bed, 80 sqm = $807,000
• Apt 5002, 3 bed, 103 sqm = $852,000

In my view, for this size and quality apartment, the pricing is expensive.

Harry is Happy about Soleil

"FOR "high-rise" Harry Triguboff, it doesn't get much better than this. Despite the downturn in residential property, especially in once white-hot Brisbane, Mr Triguboff says business has rarely been so brisk.

He explains with more than a hint of satisfaction how the Australian property dream is changing -- trading up, he argues, from the quarter-acre block in the suburbs to an eyrie in the centre of town.

His 74-storey Soleil tower, at 280m, will be Brisbane's tallest building by the time it is completed this year. But its record will stand for only three years, as Mr Triguboff is building an even bigger residential tower on the other side of the Brisbane CBD.

Soleil will be Australia's eighth tallest building when it opens later this year, but there are several within metres of each other. Soleil will be able to house 2000 people, right on the edge of the CBD, while it would take about 500 homes, the equivalent of a small suburb, to house them in detached cottages. The Brisbane inner-city high-rise market, where Mr Triguboff will soon be king, has had two major tower proposals withdrawn in the past few years, with developers unable to get either the finance or the customers. "I think a thing like this should be self-funded, because otherwise you have all these banks worrying and pushing you," he said.

"It's hard to say what the market's like, because you build this building for a few years, so when you start it could be very bad and when you finish it could be a lot better."

Property analysts say that, with the limited number of developments this year, the increasing demand predicted by Mr Triguboff means rental rates for apartments in the inner city are likely to rise."

Full Story in The Australian and video

With 2000 people in Soleil, I hope Harry has included enough elevators!

Soleil Photos

Recent photos of Soleil on Adelaide St in Brisbane, from SkyscraperCity.

Most Popular Posts

One of the most popular posts in recent times has been a short note about Alex Perry Residential. The post is here. I suspect that the developers would be thrilled about the interest this development is generating.

The three most popular posts of all time are (1) a post from May 2008 about the then proposed Soleil Tower from Meriton, and (2) a short post from May 2010 about flood maps, and (3) a post from January 2011 about the Brisbane floods.

This month, this blog passes 200,000 all time page views. Thank you readers for your support and comments.

Infinity Tower

A significant height increase for Meriton's Infinity tower (which is currently under construction) has been proposed. The tower's height which was planned to be 75 levels will now be increased to 81 - a 6 level increase.

Off-the-plan apartment risks

I have previously written about the risks of purchasing off the plan apartments. See this post for example. Others have also written about these risks. See this article for example.

The May edition of Australian Property Investor had a good story about the oversupply of inner city Melbourne high rise, which is also worth reading. See "High on High-rise". One point made is that many of the apartment buildings planned for Melbourne are aimed at being sold to investors, not owner occupiers. This is resulting in the wrong type of apartments being built and the article predicts that these apartments will not grown in value.

A similar issue is revealed in a story in The Australian today regarding Meriton apartments. Meriton is currently building two very tall high rise apartment buildings in Brisbane, Soleil and Infinity. Meriton reports that sales have mostly been to Chinese investors, who have stopped buying. Meriton says that it is Chinese investors who purchase most of the off-the-plan apartments in Australia. There is a clear risk in buying an apartment as an investment in such circumstances. As I have previously written, it is best to buy in a building where there are a large percentage of owner-occupiers in the building.

"Mr Triguboff said prices in the overheated Chinese property market were starting to fall, while the Australian dollar continued its stellar run, making Australian property increasingly expensive compared with China.

"Our (real estate) market is the Chinese market, just like coal and iron ore," Mr Triguboff said.

"We need lower interest rates so that our dollar drops and it stimulates growth."

Mr Triguboff, whose Meriton Apartments builds more than 1000 units a year, said Chinese owners and investors had accounted for about 75 per cent of Meriton sales for the last two to three years.

But in the past month, numbers had fallen steeply. ..."

Market Cracks

See this story from Bloomberg:

Luxury Home-Price Cracks Emerge for Australia in Gold Coast, Noosa Heads

Extract:

Apartment prices in the luxury beachside Australian town of Noosa Heads have tumbled by a fifth since 2008 as cracks emerge in a housing market that’s so far escaped the rout seen in the U.S., U.K. and Ireland.

The median apartment price in the tourism and retiree town 150 kilometers (93 miles) north of Brisbane has slumped 21 percent in three years to A$570,000 ($594,000), according to the Real Estate Institute of Queensland. Sales have more than halved across Queensland state’s Sunshine coast, home to “Crocodile Hunter” Steve Irwin’s Australia Zoo, and the Gold Coast, known for its surfing beaches and casinos.

“We have a very overvalued housing market and even a small adverse shock can be magnified by a large adverse impact on property values,” said Gerard Minack, Sydney-based global developed markets strategist at Morgan Stanley (MS), who asserts Australian home prices are as much as 40 percent overvalued. “We’re seeing that now in parts of Queensland.”

Soleil Marketing

A sign in the Soleil window has the following information.

Vendor finance - 5%

Prices as at January 2011

Studio - from $341,000 - estimated rent $330 to $380 per week

1 bedroom no parking - from $363,000 - estimated rent $400 to $470 per week

2 bedroom with parking -from $550,000 -estimated rent $550 to $650 per week

2 bedroom plus study with parking - from $659,000 - estimated rent $600 to $700 per week

3 bedroom with double parking - from $840,000 - estimated rent $800 to $950 per week.

Expected occupancy dates - levels 2 to 39: mid 2011. levels 40 to 64: early 2012

Compare rents in Admiralty Towers One, nearby.

1 bedroom, furnished with carpark - $520 per week

2 bedroom, unfurnished with carpark - $550 per week

2 bedroom, furnished, with car park & river views - $640 per week

So I think that Meriton's rent estimate is a little optimistic.

They are offering a 7% rent guarantee for 5 years on the 1 bedrooms. That suggests that the sales price is overpriced.

Meriton's Infinity Pricing

I received this from a Sydney investor, who was asked to invest in Infinity, on Herschel Street in Brisbane:

1 bedroom with study with city views from: $398,000 
1 bedroom with study with river views from: $448,000  
2 bedroom with city views from: $525,000 
2 bedroom with river views from: $560,000  

Macrossan and Soleil growing

A nice photo from Chris Hinds showing Macrossan Residents and Soleil growing, with Skyline to the right, and then Admiralty Quays and Admiralty Towers One.

Infinity Release in September

Infinity near Roma Street to be released in September 2010.

Alice Street Development by Sunland

The developer of the world's tallest residential tower Q1 on the Gold Coast has unveiled plans to build a $250-million luxury apartment tower in Brisbane's CBD. Sunland Group has lodged its proposal for the 44-storey Carrington Tower opposite the Botanical Gardens at 140 Alice Street, after acquiring a small slice of neighbouring land that currently houses a small apartment building.

The tower - said to be encased with a pewter glass wall with a subtle gold tint - will be built on the site of Devine's former French Quarter which was flattened by the global financial crisis in 2008.

Carrington Tower will be Sunland's first foray in the Queensland residential market since the completion of Q1 and Circle on Cavill at Surfers Paradise almost five years ago. Sunland Group managing director Sahba Abedian has hailed the design by Wood/Marsh as the developer's finest piece of architecture to be produced in the company's 27 years.

The facade of Carrington Tower will flow down to create a canopy over the lobby.

"We will be looking to create a very sculptural, iconographic tower that will really mark the entry into Brisbane from the southside of the city.

"It's a curvilinear building that really personifies the feminine form. If you look at the building it actually drapes out at the base that is not dissimilar to a beautiful dress - that's really the intent behind the tower."

Mr Abedian said he was confident Brisbane City Council would approve the tower by mid-2011, as it could potentially have an unprecedented amount of innovative sustainable design features, including solar panels incorporated into the louvres and blinds to capture and reuse energy.

"As we know the Baby Boomers are moving into retirement and lifestyle choices are changing ... and we hope to cater for these individuals," Mr Abedian said.

If approved by the council, Carrington Tower will be one of only a few buildings in Brisbane, including Riparian and The Grosvenor, designed for owner-occupiers. Mr Abedian said Carrington Tower would boast of the facilities of a hotel, including a 24-hour concierge.

"We believe there is strong demand for these environments," he said.

One-bedroom apartments with a study are expected to sell for about $500,000 and sub-penthouses $3 million.

Although Harry Triguboff's twin-tower residential development on Herschell and Adelaide streets is near completion and the abandoned Vision tower site on Mary Street may also be resurrected by developers Billbergia, Mr Abedian said he was confident there was room in the Brisbane market for Carrington Tower.

"We have a strong track record and we also have a very strong client base that I have no doubt will be very excited when we launch this project," Mr Abedian said.

"The testament of our capabilities is the proof of our projects through from Q1 to Circle on Cavill and Palazzo Versace."

Brisbane Times

North Quay

Meriton is set to launch its Brisbane North Quay tower, to be called Infinity. This building will have a mix of 1,2 and 3 bedroom apartments. It appears that the apartments will be larger than in many current projects, but there are no balconies.

Some example floorplans and floorplates:

This should be compared with Evolution, which is the nearest apartment building of similar age. Evolution is not yet sold out, and two bedroom apartments that originally sold off-the-plan in Evolution for $650,000 range and now listed for sale in the $550,000 range.