Decline in Proportion of Apartment Sales

"Although units offer a significantly lower price point at which to enter the housing market, the vast majority of sales across the country are for detached houses as opposed to units. The recently released 2011 Census data showed that 75.6% of occupied dwellings were houses highlighting that they well and truly remain the dominant housing type.

Over recent years there has been a decline in the proportion of units sold, both nationally and at a capital city level. The decline can partially be attributed to the fact that more recent off-the-plan unit sales don’t enter into our figures until they reach settlement. The decline may also be as a response to first home buyer grants and stamp duty concessions that have been available, as well as recent falls in home values which has improved affordability. Unit values have typically recorded lower value declines than that of houses and this may be leading to buyers taking the opportunity to buy houses as opposed to units."

RP Data: Why has the proportion of unit sales declined since 2009?

Gold Coast less than $300,000

From the HTW Month in Review for September 2012:

"In Surfers paradise there are plenty of options for purchasers with $300,000 to spend, including older style units starting in the low $100,000’s and 1- bedroom, 1- bathroom units in modern highrises ($250,000 to $320,000). An example is Unit 709 in Wings residential which is a 7th floor 1- bedroom plus study with 2- bathrooms in a circa 2004 building that sold on 28 June 2012 for $250,000.

Just south of our tourism mecca, a semi-modern unit in a three storey walk-up in 2-bedroom, 1-bathroom configuration in Mermaid Beach/Broadbeach falls under the $300,000 category. An example is Unit 43 in Diamond beach South in Mermaid Beach which sold on 2 March 2012 for $300,000 - a 1994 2-bedroom, 2-bathroom lowrise unit with a floor area of 105 square metres."

Why Investors Favour Apartments

"Nationally, 58% of flats, units and apartments are owned by investors. That is quite an amazing statistic, especially when you compare that detached houses only 21% are investor-owned."
See Tim Lawless article.

Apartments or Houses?

"Nationally, 58% of flats, units and apartments are owned by investors. That is quite an amazing statistic, especially when you compare that with detached houses where only 21% are investor owned. Across the capital cities the proportions are even higher. Darwin tops the list with 70.6% of all units being rented followed by Brisbane where 70.2% of all units are rented."

See RP Data Blog

No Smoking in Some Apartment Buildings

Archers director Andrew Staehr said building owners across Queensland had passed by-laws to stop people smoking in apartment buildings, with several in mixed-use developments in inner-city Brisbane.
See City News story

Units the Way to Go: RP Data

"Within a 10-kilometre radius of each city centre the opportunities to purchase units below $500,000 are much more abundant than they are to purchase detached houses. Across all cities, 69% of suburbs within 10 kilometres of the city centre have a median unit price below $500,000 and each individual city has at least 20% of suburbs with a median price below $500,000."
Source
Table showing Median Unit Prices

Apartment Prices Strengthen says REIQ

From an REIQ Press Release issued today:

The Queensland unit and townhouse market is showing healthy signs of recovery with many areas across the State posting median prices increases over the December quarter, according to the Real Estate Institute of Queensland (REIQ).

The REIQ quarterly Queensland Market Monitor, which tracks median property prices and rents across the State, found that prices in the fourth quarter of last year rebounded in most areas of South East Queensland.

"What we are starting to see is that as 2011 progressed, so did confidence levels in our property market with prices beginning to strengthen," REIQ CEO Anton Kardash said. "Many regions posted their most robust price results this quarter since prior to the natural disasters at the beginning of last year. As we move into 2012, REIQ accredited agencies are reporting healthier levels of enquiry with first home buyers and investors especially taking a keen interest in the more affordable unit and townhouse market."

According to reiq.com, there are more than 5,000 listings for Queensland units and townhouses currently for sale under $350,000. The median unit and townhouse price in Brisbane increased 2 per cent to an even $400,000 over the December quarter. On the Gold Coast, it increased 5.3 per cent to $350,000 and was up 2.1 per cent to $245,000 in Toowoomba.

See similar story here.

Local Investors Buying in Brisbane

New research indicates Brisbane property investors are the strongest buyers in their own backyard.  As investment activity returns to the city, PRDnationwide has found some 86% of recent property investors are Queenslanders.  The company's research director, Aaron Maskrey, says most of the property investors in the city came from inner-city suburbs, and they often chose to invest in the same suburbs.

Although housing stock is higher priced than unit stock and typically provides a lower gross yield, when closely analysed it is determined that approximately 50% of investors have purchased units, and the other half bought houses.

See Property Observer

Brisbane Apartment Capital Growth

Extract from a recent article by Tim Lawless from RP Data:

"Another recent trend has been the superior performance of the unit market relative to houses. Over the first five years [2001 to 2005] average annual growth was recorded at 8.7% for houses and 6.2% for units, over the last five years [2006 to 2011] the figures have been 4.4% pa and 5.5% pa respectively. The results reflect the fact that affordability has become an issue and people are focusing on cheaper housing options. The results also reflect changing lifestyle patterns and a greater acceptance of unit living, particularly within inner city areas of our major capital cities.

If recent market conditions are anything to go by, the residential housing market is likely to show lower levels of capital gains in the coming years compared to the longer-term historical trend. It is important to note that historically housing has been a long-term asset class which has appreciated at a slow pace over a long period of time. In recent years big spikes in growth rates have seen people more prepared to speculate on short-term value growth. Given the recent data it looks as if the housing market fundamentals are reverting to "normal" market conditions after a period of higher than normal growth rates."

Indooroopilly Shopping Centre Expansion

Indooroopilly shopping centre is set for a major facelift, with a $450 million expansion receiving the green light from planning authorities. Eureka Funds Management, which manages the superannuation trust that holds a 50 per cent stake in the centre, announced today that development approval had been obtained and work had started on the 30,000 square metre addition. Construction company Brookfield Multiplex is expected the finish the work by April 2014.
Full Story Here.

In addition, apartment buildings up to 20 storeys will be allowed near Indooroopilly shopping centre and Indooroopilly train station under a draft neighbourhood plan passed by Brisbane City Council in December.
Full Story Here.

These changes will probably have a negative impact on those apartments very close to the shopping centre, such as those on upper Station Road, on Belgrave Road and on Grosvenor Road.  But for those apartments a little further away from the shopping centre, it will be a positive addition and will add further value to those apartments.

Gold Coast Still Oversupplied

"The high-rise market on the Gold Coast is nothing like any other Australian market.

"It's a unique market and it's driven by speculation and not necessarily the fundamentals. But we just don't need any more high-rise developments for the moment.''

Mr Morris said his latest research indicated there were 625 new high-rise apartments for sale on the Coast. That represented a 2 1/2-year supply based on the average sales rate over the past two years.

"But the figure is a bit camouflaged by a rather big project in Southport - Philip Usher Constructions' $200 million H20 on Broadwater development, which is completed, but has not yet been put to the market.

"So there's another 350 apartments just sitting there which, when they get released for sale will add another year to supply, increasing it to 3 1/2 years.''

In the wake of the GFC, the Gold Coast high-rise apartment market has been hit by spiralling valuations and two high-profile victims of receivership, Southport Central and the twin-tower The Oracle Broadbeach.

It has led to heavy discounting of stock, with prices of some luxury apartments slashed by as much as 30 per cent.

But Mr Morris believed prices could fall even further throughout 2012.

"Most of the stock on the Gold Coast is held by receivers and the prices are not being driven by the market.

They're being driven by what the receivers have to do to get rid of the debt,'' he said. ``So it's quite possible the average price of new apartments could sink below the average price of resale stock.''

Research by the Oliver Hume Real Estate Group shows the Coast's total supply of available apartments - low, medium and high-rise - has reached 1626, down from its peak of more than 2000 over the past couple of years.  And the figure is expected to continue to fall with predictions of the strongest summer sales since the GFC. 

See Full Story

South Brisbane and Indooroopilly

A recent report by Urbis lists South Brisbane as being "trendy" and Indooroopilly as a "prime unit location".  Bowen Hills also gets a mention as an area undergoing redevelopment.
See Article

Finding A Great Apartment to Rent in Brisbane

Introduction


Finding a good apartment or home unit to rent in Brisbane is not easy, particularly in January and February when the demand for apartment rentals is high and many tenants are looking.


In the best buildings, the existing tenants do not often leave, and when they do move out, the apartment is often snapped up quickly. For the better buildings, a large percentage of the apartments are occupied by the owner, and so are not rented out.   Also, onsite managers often control the rental rolls, and don't often advertise on the usual property websites (as they don't need to do so).  Some have their own website.  Also, onsite managers may have a relationship with executive relocation services, and the better apartments may be provided to corporate tenants.  For the mid-quality buildings, many apartments are furnished and rented on a short term basis, sometimes even overnight.  Thus, there may be few apartments available for rent. 

At one time, a good specialist website for apartments was http://www.seqrents.com.au However, it seems that some buildings are not using this site anymore, or are not bothering to update their listing on this site. So, although useful, it is less useful.


A newer website that has a number of rental listings is CityApartmentSales, and is used by a number of the onsite managers to list apartments for rent.  The largest number of listings are located on RealEstate.com.au, but a number of onsite managers do not use this website.  Also, try Central Apartments for rentals in Pradella buildings.

You have to find out how each manager advertises his/her vacancy.

Generally, you want to avoid any buildings managed by Oaks, as they focus on short term hotel style rentals.

This website has a list of most city apartment buildings, with useful information and links about them. Also, try this customised search engine.

Downtown Brisbane:

If you want to live downtown, then I recommend the Admiralty Precinct. This comprises three first-tier buildings (Admiralty One, Admiralty Two and Admiralty Quays), plus River Place (good location, not as good quality) and Skyline (second tier).  Recently partially opened just behind these buildings is Meriton's Soleil (budget quality).

Admiralty One is good value, and has some of the largest two bedroom apartments in Brisbane, but is a smaller building.  It is direct river front - http://www.admiraltyone.com.au/

Admiralty Two also has good sized apartments, and the building has great facilities. http://www.admiraltytwo.com.au/

Admiralty Quays is newer, and has a great pool, but the apartments are smaller than the two Admiralty buildings listed above, and it is more expensive. http://www.admiraltyquays.com/

Nearby on the river in the city is River Place, that is not as good quality, but is likely to have availability as this is a large complex. Careful of Storey Bridge noise. Great views.  Great pool.

Soleil has only just opened.  It is currently the tallest building in Brisbane.  A large building with over 400 apartments, but less than half have been sold.  In late December, the Soleil website said that there were currently no apartments available for lease.
On Alice Street in the city, if you can get an apartment in Quay West, that is fantastic, as it has park and river views.  About half the apartments in this building are hotel managed, so it is easy to get short term accommodation in Quay West, but difficult to find an apartment for a long term lease.  All apartments are privately owned. You want to get above level 7.

For an inner city downtown building, Metro 21 is one of the better quality buildings. It has only 4 apartments per floor -- and tries to be more upmarket so is better than most buildings that aim at students -- it seems to have better availability, and some of the two bedroom apartments have three bathrooms. The baloneys are large:
http://www.realestate.com.au/realestate/agent/metro+21+brisbane/mlibri
and http://www.metro21apartments.com.au/

M on Mary has recently been taken over by new management, so it will be interesting to see what happens in this building.  It was not high on my list previously, but that may change with the new management.

Parklands at Roma Street also has some good apartments.

SouthBank


I recommend Arbour on Grey at SouthBank: http://arbour.com.au/cms/welcome.html

Also, Saville (Mantra) at SouthBank is one of the nicest buildings if you get a river facing apartment.  The apartments are level 8 and above.  Below level 8 is a hotel.  The best thing to do here is call to find out availability.  Telephone 07 3305 2559

West End


There is likely to be some availability in some of the riverside West End apartments.  These include Waters Edge, Flow, Koko and Left Bank.


Some of the better apartments not on the river road include SL8 and Tempo.


In my view, all of the above West End apartments are too isolated.

Apartments in Suburbs

The suburbs that I recommend, due to location, transport and large number of better quality apartments, are Toowong, St Lucia, Taringa, Indooroopilly and possibly Milton and Hamilton.  I don't recommend Chermside.

In Indooroopilly, there has been very little recent construction.  Two of the newer, quality buildings Riva and Ciana.

Riva has apartments with great river views. It is a quiet building, with a pool, and is close to the train station and Indooroopilly Shopping Centre.  It has good onsite managers, but apartments rarely become available here.

Ciana is a larger new complex, in a central location, with many large apartments. There is a pool and gym, plus a bowls club! 

The newest complex in the Toowong / Taringa area is Fresh.  This complex has two pools, a gym and great gardens, and a large number of apartments are owned by super funds and thus are rentals.  Try here.

Next door to Fresh is Encore, which is a relatively nice complex, with good pricing (but not as nice as Fresh, and some of the apartments are small).  This complex flooded in January 2010.  

St Lucia is harder to find quality -- there are few onsite managers. So you have to try local real estate agents.

If you want an apartment complex that feels more suburban, then Parklands at Sherwood is a great choice. Many apartments have park/rural views, and there is a great pool and bbq area.

Nearby is Tennyson Reach, where you can get a large new apartment on the river. This is a new complex, but (apart from river views) not a great location.  It was badly flooded.  You can rent a high quality apartment at a reasonable price here, if you don't mind the location.

Asian Developers

"Foreign developers have grabbed a 30 per cent share of Australia's apartment market, a trend not repeated since the Japanese office and hotel development boom in the late 1980s.

Overseas investors are behind 13,000 apartments in 37 projects in Australia. Based on the average number of apartments completed in 2011, that represents a market share of as much as 32 per cent, research by the property group CBRE finds.

About 40 per cent of projects are under construction; the rest are at the planning or marketing stage."

See Fairfax

So it appears that Asian developers are building small apartments in Australia for Asia buyers that are rented to Asian students.  When the tide goes out, will Australians want to buy or live in these boxes?

Apartment values outperform houses in Brisbane

Headline in today's paper:

UNITS continue to outperform houses in Brisbane, according to the latest market research from property analysts RP Data.

Extract from story:

"And, from an investment perspective, they offer superior rental returns. The gross rental yield for a Brisbane house is currently recorded at 4.7 per cent compared to 5.3 per cent for Brisbane units."  [Note: this does not take into account higher costs for apartments, namely body corporate fees.  It may be the case that net yields are similar for apartments and houses.]

The level of vendor discounting for houses is also greater - 8.3 per cent compared with 6.8 per cent for units.

"Discounting levels for houses are higher than at the same time last year, however unit discounting is slightly improved from the 7 per cent 12 months ago," Mr Kusher said.

"Despite the inflated discount levels, both measures are below their recent peaks of 8.7 per cent and 7.8 per cent respectively."

The average time it takes to sell a Brisbane property is also at relatively high levels.

Of those properties that sold in October, houses had been on the market for an average of 61 days and units 60 days. Both measures were higher than they were 12 months ago, but both had improved from their respective recent peaks of 66 days for houses and 61 days for units.

Mr Kusher said the data was for October and therefore did not take into account the Reserve Bank cut in interest rates by 25 basis points on Melbourne Cup day."

Full story here.

Rent Money is Dead Money

I often hear young people say that rent money is dead money.  However, in many instances, it is better to rent than to buy.  This is particularly the case if you only want to live in the property for up to three years.  The transaction costs kill any possible benefits of buying.

Consider the purchase of an apartment for $450,000 in Brisbane.  The stamp duty (unless it is a first home) is just over $14,000.  The real estate agents' commission on resale (when you come to sell) is about $12,000, plus advertising costs.  This totals $26,000, or $500 a week if you own for a year, or $166 a week if you own for three years.

Plus you have to pay rates, body corporate, water and insurance, which for most apartments in Brisbane will be more than $5,000 a year (or about $100 a week).

So if you own for three years, you will be paying about $266 a week for stuff that the landlord would normally pay.

This does not take into account interest payments.  Interest is likely to be more than $24,000 a year (assuming no payment of principal), or $461 a week.

So to own the $450,000 apartment for 3 years will cost the equivalent of at least $727 a week in rent.  Of course, you can rent such an apartment for much less than this.  So if you have a $90,000 deposit, put it in the bank and receive $100 a week in interest, and rent for $500 a week, and you will be at least $327 a week better off renting than buying!

Hotels in Apartment Buildings

Many of the apartment buildings in Brisbane are "class 2" buildings -- which means they are for residential use.  To operate a hotel, the building must be a class 3 building.

A number of onsite managers operate hotels from class 2 buildings.  An example is Oaks.  Many owners are not happy with this situation.  See prior posts for example.

At M on Mary, an owner tried to stop the onsite manager operating a short term rental operation from the building, on the basis that the building was only a class 2 building.  A decision of the Tribunal said that it did not have the power to deal with this issue.  See decision.

Northshore Hamilton

The $5 billion Northshore Hamilton urban redevelopment is underway, with thousands of apartments expected to be built in the next 10 years.  About 15,000 new residents are expected to move into this area, which is an old port and industrial precinct 6 km down river from Brisbane City.

• Two Devine apartment buildings are almost complete, with a third on the way.
• Brookfield Multiplex is building another Portside apartment building, Promenade (172 apartment), with two more planned.
• Citimark has development approval for Rivana, 15 levels with 208 apartments.
• Mirvac has a three building apartment complex planned, with a sales display office constructed onsite.
• Australand has launched 78 apartments as part of its $400 million project, Hamilton Reach.

Will there be an oversupply of small, non-riverfront apartments in this part of Hamilton, where there are few facilities and not much within walking distance?

Two Queensland Buildings

From a recent article by Matusik: A Tale of Two Queensland Buildings

"Firstly, an investment dwelling’s worth should be determined by income – that means rent – just like it does for offices, shops and factories.  It shouldn’t be determined by a “comparable” resale.

Secondly, how and where the developer spends his or her money on a project shouldn’t affect the market’s (nor valuers’) perception of value.

• An investment’s value shouldn’t be determined by what a buyer once paid but by its income.
• The distribution of costs has no bearing on the end value of a product."

Full article here.

Two Books

Before buying or investing in an apartment in Queensland, you should consider these books:

• Buying An Apartment Off The Plan in Queensland - A Guide For Successful Buying
• Investing in Brisbane Apartments - A Guide for Successful Investing

I see that BigW is now selling Kindle Book Readers.