Falling prices

I have been looking at the listing and sale prices for two bedroom apartments in Brisbane. During the peak of the market, which was about 2008, good quality two bedroom apartments (which were more than 110 sqm in size, and often larger) were selling in the $800,000 range. Now, these same apartments are selling in the mid to low $600,000s. That is a decrease of about 20%. One wonders what would have happened to Vision and Empire Square buyers, where the contract price of two bedroom apartments exceeded $1 million.  These buildings did not go ahead, despite Colliers reporting strong presales.

Project Marketing Blog

A new blog has recently been launched by Colliers Real Estate dealing with project marketing.  That is, marketing a real estate project, such as an off-the-plan apartment building.  See Project Blog

Chinese Investors

"And buyers from China once again topped the list, according to new research by Colliers International.  The figures on buying patterns during the 2010-2011 financial year have shown 733 residential sales to foreign buyers.  In all, 506 of those sales were investments with 277 for owner-occupiers."

See Courier Mail

Colliers Research Report - Brisbane Apartments Q4 2010

Here are some interesting extracts from the recently released Colliers Brisbane Apartments Q4 Research Report that focuses on off-the-plan sales in the inner Brisbane area.

"Transaction activity in the new Inner Brisbane Apartment market is currently being driven principally by demand from investors. Recently owner-occupiers have been largely absent from the market due in part to expectations of flat prices in the short to medium term, higher borrowing costs and the removal of fiscal stimulus measures.

Currently investors are accounting for 80-90% of all transactions in the new Inner Brisbane apartment market. Investor demand - which is driven largely by rental return and expected capital appreciation - is even stronger for affordable stock (less than $650,000). Notably, the market generally is strong for price-pointed affordable stock.

Returns, which ultimately drive transaction activity for investors, are highly sensitive to both rental values and borrowing costs. Currently, both of these variables are delicately balanced, with rental values sensitive to current and future levels of supply and borrowing costs dependent on the bank’s cost of capital and macroeconomic factors such as inflation. In the near term, investor returns are likely to be driven by rental income rather than capital growth.

Given the current market imbalance, stemming mostly from elevated supply in Inner Brisbane, owner occupiers have become increasingly cautious before committing to purchase. In addition, there is now less urgency to purchase as the strong levels of capital growth witnessed in recent years have dissipated.

Despite the aforementioned threats to performance, the fundamentals of the new Inner Brisbane apartment market remain reasonably solid and underlying demand has held up well. This is reflected by the number of unconditional sales over 2010, which are well above trend levels. However, the ability and/or willingness of both investors and owner-occupiers to purchase has been eroded by increased borrowing costs and expectations in the near term of flat prices and limited rental growth. Whilst some rental markets will be influenced in the short term by home owners displaced by the floods, a sustained increase in tenant demand will be required to deliver solid levels of rental growth.

The annual demand for new apartments in Inner Brisbane is rising, as reflected by the number of unconditional sales reported during 2010 (1,433). The number of transactions in the year to December 2010 is now at its highest level since December 2005 and is well above the long term average for this market. Similarly, demand continued at trend levels over the final quarter of 2010, with 339 unconditional sales.

On the supply side, the number of new apartments available for sale in Inner Brisbane rose to 2,228 during Q4 2010, representing an increase of 24% from the previous quarter. More importantly, available supply is now at its highest level in over 10 years and is well above previous highs observed in 2002 and 2004 (circa 1,500 apartments). Current levels of available supply in Inner Brisbane represent 19 months of demand, based on the average number of unconditional sales witnessed over 2010.

Like many property markets – both residential and commercial - the New Inner Brisbane Apartment market is experiencing the impacts of a misalignment between the business cycle and development cycle. Economic conditions turned down sharply in 2009 and are yet to fully recover, whilst the supply pipeline has retained its strength, resulting in a significant market imbalance.

Most of the new apartments currently for sale in Inner Brisbane are located in the CBD and Inner North, which account for 34% and 41% of the total respectively. Additionally, when we include our estimates of apartments which are likely to be released during 2011, the Inner North and CBD continue to account for the largest share of supply.

The weighted average price of unconditional sales has been trending downward since late 2008. Despite above trend levels of demand during 2010, prices have continued to fall, although the pace of decline has eased significantly. Continued recent falls in the weighted average sale price are a reflection of the large proportion of price pointed affordable stock that transacted during 2009 and 10. The weighted average price of unconditional sales for Inner Brisbane during Q4 2010 was $556,200, a moderate increase from the previous quarter.

The unconditional sales of new apartments in Inner Brisbane during Q4 2010 were comprised largely of affordable stock, with 84% of transactions involving properties less than $650,000 in price. More specifically, 42% of the unconditional sales in the fourth quarter involved properties less than $450,000 in price. Evidently, purchasers continue to be very price conscious and this trend is likely to continue in the near term. Fourth quarter transactions in Inner Brisbane were dominated by one and two bedroom stock, with each category accounting for 45% of the unconditional sales reported.

The number of unconditional sales in the Brisbane CBD rose substantially over the final quarter of 2010, increasing to 94, which is more than twice the average witnessed during 2010 (45). Most of the sales were achieved by Meriton projects, with Infinity and Soleil accounting for 61 and 30 sales respectively. Furthermore, the majority of transactions involved two and one bedroom apartments, with 65% and 21% respectively of the total. The CBD precinct achieved 28% of the sales reported for the new Inner Brisbane Apartment market during Q4 2010 and 12% of the 2010 total. In annual terms there were 179 unconditional sales for the Brisbane CBD during 2010.

The CBD precinct represents a large component of available supply in Inner Brisbane, with 34% of the total (758 apartments). Supply levels are expected to rise substantially during 2011 due to the expected release of some 875 units.

Future Projects

Colliers International Research has estimated approximately 4,000 apartments will be released within Inner Brisbane during 2011.

Approximately 45% of this supply is expected to be located within the Inner North precinct. Madison on Mayne will release the largest number of apartments to the market (286).

The CBD precinct is likely to receive 21% of the potential supply with Camelot providing 420 apartments.

Resales of Existing Apartments

• During the third quarter of 2010, the number of apartments (new and established) which settled in Inner Brisbane fell by 12% to 1,191.
• The number of settlements in Q3 2010 was significantly lower (-23%) than the equivalent quarter of 2009 (1,357).
• Buyers continue to be very price conscious, as reflected by the large number of settlements involving affordable stock, with almost 80% involving apartments less than $600,000 in price."

New Gold Coast Apartments - Colliers Report

The Gold Coast new apartment market has seen a continued decline in stock levels during the third quarter of 2010 to sit at its lowest level in six years

KEY FINDINGS.....

• The Gold Coast and Tweed Coast new apartment market reported a total of 126 unconditional sales during the third quarter of 2010.

• There were a total of 1,588 apartments available for sale at the end of September representing 3.1 years supply based on the current selling rate.

• 2 projects sold out during the third quarter, and 2 projects were added.

• The Southport / Labrador Precinct was the standout performer for the quarter with a total of 57 sales.

• The high rise sector recorded the highest number of sales for the third quarter with 79 (63%) of the total 126 recorded.

• The average sale price of a new apartment during the third quarter was around $680,000.

Brisbane Apartment Report from Colliers

The Brisbane Apartment market has recognised its strongest quarter of sales in over six years and suggests that Brisbane apartments are back on the radar for investors seeking low priced, yield driven product.

KEY FINDINGS.....

• The Inner North was again the top performer, leading Brisbane purely through supply of price pointed apartments.

• Q3 2010 finished with 1,584 new apartments available for sale in Inner Brisbane.

• 425 unconditional sales were made, suggesting a new unit supply of 11 months.

• The weighted average sales price of new apartments in Brisbane for Q3 was $534,894.

• The median price of units in Inner Brisbane was $445,000.

• High levels of residential supply are expected to enter the market in the short term.

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More Details from Colliers Apartment Report

A post below mentioned the Colliers September 2010 Brisbane Apartment report. See "Why Are Colliers Optimistic". Some more details:

See this report:

Lachlan Walker, Colliers International project management & research - residential, says the Brisbane apartment market is in a similar position in the property cycle as it was more than a decade ago, where the market was looking more positive and just a few years from a major property boom, following a substantial period of depressed market conditions.

"The resounding theme for the September 2010 quarter is that the Brisbane Apartment market has made strong progress in recovering from the effects of the GFC," he says.

"It has been a difficult two years since the impacts of the declining US economy impacted the Australian property market, however the most recent quarter has seen the strongest rate of sale for the Brisbane market since 2004."

The report revealed that there were 425 unconditional sales of new apartments within Brisbane's Inner Ring, encompassing the five kilometre radius from the CBD, representing an increase of 21 per cent per cent from the 276 sales recorded in the June 2010 quarter. This brings the total unconditional sales for the 2010 year to-date to 977 transactions for Brisbane's Inner Ring, 182 more transactions than recorded for the entire 2009 calendar year. It must be noted that 32 per cent or 135 of the 425 unconditional sales were recorded in Laing O'Rourke's new residential release, M & A, in Brisbane's Fortitude Valley.

Other strong performers were FKP's The Milton to be developed by FKP which registered 68 unconditional sales for the three month period, as well as Devine's Riverside Hamilton and Aria Property Group's Station 16, which saw 41 and 42 sales respectively.

Why Are Colliers Optimistic?

In The Australian this week, a story about the Colliers Real Estate Agents Brisbane Apartment Report:

"Its Brisbane apartment report for the September quarter found a 56 per cent surge in the number of inner-ring unit sales, compared with the September quarter last year, for the area within a 5km radius from the central business district.

"Broadly speaking, the Brisbane apartment market is in a similar position in the property cycle as it was more than a decade ago," Colliers International Brisbane-based research analyst Lachlan Walker said. At that stage, "the market was looking more positive and just a few years from a major property boom".

The resounding theme was that the Brisbane apartment market had made strong progress in recovering from the effects of the global financial crisis."

Source: The Australian

Now my personal view: You have to take what Colliers says with a grain of salt. They are real estate agents, who are hired by developers and apartment owners to sell apartments. Of course they would sprout a positive outlook. The Brisbane inner city apartment market at the moment is not strong. Comparing this year to last year (which wasn't a great year) doesn't really say much. There has been little to no capital growth in recent times, and probably a decease in value. At present, there are more sellers than buyers; prices are not rising; it is uncertain what the rental market will be like in 2011, particularly if students do not come to Brisbane. The smart money is waiting on the sidelines -- buying an existing apartment in six months time (when prices will not be more, and will likely be less) looks like a good thing to do.

Gold Coast - Colliers Newsletter

"Sellers who have been holding on for the last 2 years, not needing to sell, are now making the decision to sell.

There is good buyer interest however some are still looking to find the bargains, which are almost gone from the market as the competition from buyers increases.

Recent auction results confirm buyers are active in the market, but their offers are sometimes falling short of the owners expectations. The real test for the properties that have passed in at auction is to see if they sell within the next 2 weeks. These sales will occur because buyers realise that they need to pay a little more than their first offer to secure the property or sellers realise the market will only support a certain price level."

This sounds to me like prices are going down.

The Bottom Has Passed?

"Australia's top institutional and private investors believe the nation is well and truly past the bottom of the property cycle and now heading towards upswing, according to new survey findings released by Colliers International.

The second Colliers International Investor Sentiment Survey, conducted late last month, has shown investors around the country believe that if the property cycle were a clock, with the top of the market at 12 o'clock and the bottom at 6 o'clock, Australia moved upwards to 7 o'clock in Q3-09, after the majority of investors believed the same clock sat at 5 o'clock when they were first surveyed in May for Q2-09. ...

The majority of investors, at 52 per cent, believe Australia is not only past the bottom of the property cycle, but 64% also believe the upswing will occur earlier than indicated in the first survey - by Q2/Q3 2010 or even earlier, instead of in Q4 2010. ...

When asked how they would describe their property investment strategy over the next 12 months, the majority of investors, almost half at 49 per cent, identified they were heading into growth mode, with 43 per cent in defend mode or holding steady. Only 8 per cent were expecting to contract holdings.

Investors also signalled the green light to purchase property is now definitely on. 69 per cent now expect to buy property in Australia over the next 12 months, up from 63 per cent in May. Investors also expect it will become easier to buy property with 47 per cent believing access to debt capital will become easier in the next 12 months, versus just 20 per cent in the May survey.

Most investors, at 45 per cent, are looking to buy office property, with the top 5 buy markets identified as Sydney Office (20 per cent), Melbourne Office (15 per cent), Sydney Residential (7 per cent), Melbourne Residential (6 per cent) and Sydney Industrial (6 per cent). ...

Residential was again the standout property sector with the majority of investors believing values had only declined by 1 to 10 per cent since the peak of the market, while 16 per cent believed residential values hadn't changed at all, or even witnessed some growth. The majority of investors believe there will be no further softening to residential values and 8 per cent believe there will now be growth."

http://www.colliers.com.au/site/page.cfm?c=1305

Colliers Sentiment Survey Results

See Podcast for the results of Collier's national property sentiment survey.

Investor Sentiment - Still Not at the Bottom

"Colliers International’s Investor Sentiment Survey reveals bottom of property cycle now imminent with upswing
predicted to be well underway by 2010. Property investors around the country believe Australia is now approaching the upswing point of the property cycle with the majority of investors believing the industry is currently between 4:00 and 6:00 on the property cycle clock (where 6:00 is considered bottom). This was the major finding of the inaugural National Investor Sentiment Survey conducted by Colliers International. Colliers International surveyed institutional and private clients across Australia to attain their sentiment on the current climate of Australia’s property market, and their views on the next 12 months. The investment calibre of respondents was exceptionally high with 42 percent stating the value of their portfolio was greater than $AUD1 billion. Felice Spark, Director of Commercial Research at Colliers International says the majority of investors believe we are now fast approaching, if not already at the bottom of the cycle, poised for upswing. “36 percent of investors surveyed believe Australia is currently at 5:00 on the property clock with a further 36 percent identifying either 4:00 or 6:00.”
Summary of key findings:
• 72% of investors believe we are between 4:00 and 6:00 on the Property Cycle Clock, poised for upswing
• Residential sector is the standout with values holding steady or possibly growing
• 63% said they were looking to buy property in Australia within the next 12 months"
Source: Colliers
So based on this survey, more than 60% of property investors think that things are going to get worse before they get better.

New Apartment Sales in Brisbane

Property market indicators including the "Colliers International Brisbane Apartment Report" indicate that the market for new units is stabilising in the Queensland capital. The report reveals that 207 new units were sold in Brisbane in the June 2009 quarter, up from 87 in the preceding three months

Gold Coast Penthouses

From a Colliers email:

"Since early March, six penthouses have reportedly sold across the Gold Coast, from beachside Burleigh Heads to waterfront Hollywell in the north, for a combined total of almost $20 million.

The sales included the penthouse at Ivory in Burleigh Heads which sold for $4.185 million, Ultra in Broadbeach which was secured off the plan for between $3 million and $3.5 million, Pintari and The Inlet in Main Beach, both snapped up for $3.4 million, and Allisee in Hollywell for $2.6 million.

The City’s latest penthouse sale was in Chevron Renaissance’s spectacular Skyline Tower. It sold earlier this month to a local resident for $2.95 million in a deal negotiated by Colliers International Gold Coast’s Director - Prestige Property, John Natoli.

There has been a surprising number of penthouse sales on the Gold Coast in the last four months as vendors were meeting the market on price, driven by the global financial markets, and buyers were quick to act to secure solid investment opportunities – in this case prime residential property."

Colliers Opinion about Brisbane

"Although Brisbane is at the bottom of the property clock, Colliers International believes still booming population growth will drive a market in which developers try to meet residential product demand. On that basis, the agency considers it a good time for investors in the Brisbane market. It also believes the residential sector will lead a wider property recovery, as it did during the 1990s recession.

The report concludes that Australia seems to be escaping the worst of the global financial crisis. 'In a time of rising unemployment, it's a big call to say the housing market is past six o'clock, but talking to real buyers sums up a mood hope, Dearlove added.

Source: PropertyWire

Colliers March 09 Apartment Report

"Currently, the new apartment market is not healthy. A lack of appropriate product, has led to a lack of demand. Only 87 new apartments were sold the Inner City during the three month period to March 2009 producing a weighted average sale price of $650,063. From a historical perspective, this is the lowest weighted average price Brisbane has recorded since the March quarter in 2007 and displays the mind set of the current consumer who is seeking a price driven product. A total of 688 new apartments remain for sale within the Inner Brisbane ring. The bulk of this Inner City product exists as two and three bedroom apartments totalling 41% and 37% of new stock respectively. Based on recent demand through the past three months, the 688 available apartments allow an apartment supply of almost two years, a subjective figure but an eye opening one nonetheless."

Source: Colliers International Brisbane Apartment Report March Qtr 2009

Luxury Apartment Report

From Property Wire
The Luxury Apartment Report released today by Colliers International reveals multimillion-dollar, quality designed units are helping Brisbane’s property market defy a national slowdown in sales. "High end luxury units are outperforming the general market in capital growth," said report author, Colliers International research analyst Alison Timchur.

Queensland's developers and agents report healthy sales to local buyers. "One thing most buyers have in common is that generally they are Brisbane locals, with the occasional Gold Coast buyer," said Ms Timchur.

See also Brisbane Times

Colliers March 08 Apartment Report

Colliers has released its March Quarter 2008 Brisbane Apartment Report.
It is available from the Colliers Research page, updated here.
The introduction states:
"The Inner Brisbane unit market started the March 2008 quarter with one of the lowest supplies on record. Less than 500 new apartments were available for sale spread across 24 projects. Only 78 sales were made during the quarter. While this is the lowest figure on record, this is largely due to the very low number of apartments available for sale.
There were no new project releases during the quarter. Apartment prices continue to increase, showing demand is still present. Buyers seem to be holding off, waiting for something new to inspire a return to previous sales levels. And they don’t have long to wait, with a number of large, innovative projects currently in planning for the Inner Brisbane area. Meanwhile, the average cost of a new apartment continues to rise, showing demand is still strong for high quality inner city dwellings. New apartments selling in the March 08 quarter achieved an average sale price of $894,000, an impressive 23% higher than the December 07 quarter. Part of this can be attributed to the fact that most existing projects have seen the highly popular low-cost apartments sold in previous quarters, leaving the mid to high end apartments in the market. General market apartment sales were very buoyant during 2007. The inner city residential market now numbers around 48,000 apartments of different sizes, types and ages. There were 4,883 apartment sales in Inner Brisbane in 2007. Some 3,485 of these apartments were priced under $500,000 (71.3% of all sales), and 244 were over $1 million. There are 34 new projects pending which could possibly equate to over 6,000 apartments."
The Australian Financial Review had an article on Wednesday this week, titled: "Low Supply Powers Brisbane Prices."
The revamped Colliers Report focuses on new projects. So take care with the $894,000 figure and "low supply" reports, as this only relates to new stock. The medium price of "second hand" apartments is lower, and there are plenty of apartments for sale.
For new stock, what is left for sale is mostly apartments that are overpriced or the worst apartments in the building. So this is not selling. People are waiting for new releases, and there are a number of projects in presales - Trilogy Towers, Empire Square and Waters Edge for example. This is what people are buying, not the left overs.
Good apartments that are not too small, in good buildings, with never to be built out views, are selling at good prices for vendors. Apartments in buildings of more than 200 apartments or that are managed by Oaks are struggling.