Photomontages Misleading

"Up to 90 per cent of photomontages produced for development applications could be misleading, architects and planners say.  An architect and planner at Dickson Rothschild and visiting professor at the University of NSW, Nigel Dickson, said such images should be verified independently."
See Domain.
I think a similar point could be made about computer generated renderings for off-the-plan sales brochures.

Receivers Move Into Alderley Square

This blog reported recently that PCN's Alderley Square development was on hold.  The AFR reported on Thursday that receivers have moved into Alderley Square, due to a significant slow down in sales.

• Developer owes Westpac $12 million.
• Construction has not yet started.
• Off-the-plan purchases have dried up.
• Colliers reports 30 months of supply of new apartments in Brisbane.
• Alderley Square had 234 apartments across 3 buildings.
• In the first 12 months, $55 million of contracts, mostly to locals.
• In the next six months, only $4 million in sales, even with the $10,000 building boost.
• The AFR reports that buyer fatigue extends throughout south-east Queensland.
• At Australand's Yungaba project at Kangaroo Point, only 37 out of 167 lots have been sold, or about $33 million out of $150 million of stock.
• What will happen to PCN's El Dorado Indooroopilly development?
• See also story here and here.

Hamilton Harbour Press Release

HUNDREDS of new sales and settlements of residential apartments at the Hamilton Harbour mixed use development are signaling renewed confidence in Brisbane’s property market, according to developers Leighton Properties and Devine Limited.

During the November-January period, over 380 pre-sold apartments settled in the 22-level Harbour One and 19-level Harbour Two towers, completed in November 2011.  This now brings total settlements to more than 90 per cent of the 434 pre-sold apartments.

Project director John Campbell said, “Predominantly local buyers have been the driving force behind these sales and the average price of settled apartments is $526,000.  Pre-sales accounted for over 90 per cent of apartments in the two towers, a Brisbane record for the post-GFC environment.”

The 20-level third and last residential tower Riverside Hamilton, currently under construction and due for completion in late 2012, had sold 128 apartments (113 on unconditional contracts) by the end of January.

With Harbour One and Harbour Two owner occupiers moving in, and over 75% of investor purchased properties already rented, the first two towers are quickly filling up with residents.

“The average gross rental yield on one-year leases is 5.3 per cent across all stock, with one-bedroom and two-bedroom with study products achieving higher yields,” Mr Campbell said.  “Professional workers, couples and fly-in fly-out workers are boosting popularity of the leases on offer, with rents starting at $300 per week.

Mr Campbell said residents were also eagerly awaiting the opening of Hamilton Harbour’s commercial and retail precinct which would bring restaurants, convenience and boutique shopping right to their doorstep.

Gold Coast Hilton

The Gold Coast Hilton development (originally developed by Rapits, a company that went bankrupt during construction) still has unsold apartments.  They are advertised as starting at $475,000, with two bedroom apartments with ocean views for sale at $565,000 and three bedrooms with ocean views for $765,000.

Misleading Photo Montage

Some developers are known to produce misleading photo montages and computer generated images of their apartment projects to make them look better, so as to sell to off the plan purchaser.  He is a different spin on the story -- a developer submitted a misleading photo montage for development approval, to make the apartment complex look smaller so that local residents would not complain.  See story here.

Devine Hamilton Harbour Settlements

Devine recently issued a stock market release saying:

"Market conditions have continued to deteriorate across most Australian property markets which have had a significant impact on the company bringing new projects to the market."

In Brisbane, Devine has a joint venture with Leightons on a multi-building apartment complex called Hamilton Harbour, where most off-the-plan sales for buildings one and two have reached settlement.

According to the AFR this week, as at late December, Devine had settled 80% of the off-the-plan sales.  Why have 20% not settled?  All may be revealed when Devine's financial results are released shortly.  If 20% of the sales have fallen over, this may impact nearby developments by Brookfield Multiplex, Mirvac and Citimark.

Devine has a rental website for the project, advertising two bedroom apartments for rent from $545 per week.  But some two bedroom apartments are listed on RealEstate.com.au for $795 a week, which seems outrageously high for a 85 sqm apartment facing West.

Alderley Square on hold

PCN's Alderley Square project is on-hold.  See Quest story.  PCN's El Dorado Indooroopilly project seems to have stalled.

There are a number of other projects where the developer is trying to off-load the whole project to another developer.  Buyers beware!

The Dunmore in the Valley

There is a new apartment development currently being marketed in Fortitude Valley.  It is called The Dunmore.  Management rights have been sold to Mantra, and the property will be managed under the Peppers brand as a small hotel.  For investors, the rental returns will be on a pooled basis based on lot entitlements, similar to many Mirvac properties.

According to the selling agent, The Dunmore will comprise of 78 apartments including:

-           42 One bedroom apartments, a number without car parking

-           18 One bedroom + study nook apartments

-           18 Two bedroom apartments (inc. flexibility of dual key access)

Product	Price Range
1 Bedroom	$376,000 - $462,000
1 Bedroom + study	$399,000 - $482,000
2 Bedroom	$572,000 - $632,000

Off-the-plan commissions

I have recently come across off-the-plan developments in Brisbane where the agent is being paid a flat 7% or 8% commission.  These agents are mostly selling to foreign buyers.  On a $600,000 apartment, that means $48,000 goes to the agent.  In other words, you are paying at least 8% too much!

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?

Buyer Confidence Improves

The AFR had a story on Thursday about Brisbane apartments, "Buyer Confidence Improves" (p. 55).  Highlights from the article (copy available here):

• Thousands of new apartments in Brisbane's inner city have helped boost sales volumes 30% in September quarter compared with the June quarter, but the number sold is still substantially lower than the same period in 2010.
• 312 new apartments sold in September quarter, according to Place Advisory research report
• Influx of new projects scheduled for next year - 1000 new apartments are expected to come onto the market in the first half of 2012.
• 2059 new apartments currently for sale in Brisbane
• Average sales price was $580,529.
• "The Brisbane market is at the bottom of its cycle and we are now starting to see an increase in inquiry and sales activity" according to Mr Walker from Place.
• Most of the sales appear to be to overseas and interstate buyers.
• "The biggest positive is the local buyers are yet to enter the market. ... As consumer sentiment improves, they will start buying again."
• The influx of new units, particularly in urban renewal precincts such as Hamilton riverfront, Newstead River Park, and Show Ground Hill, could limit the market's recovery.
• Agents said too much choice and concerns about whether the market has hit bottom could constrain buyers.
• Urbis property economics consultants said Brisbane has a long-term undersupply problem.

Luxury Apartment?

Old time property developers, David Devine and Ken Woodley, now of Metro Property Developments, specialised in low end high rise apartments.  They are advertising one of their many new developments, Brooklyn on Brookes, as "Luxury Valley Apartments from $305,000".

I wonder what makes these apartments "luxury"?  Sure, they will be new, but a new apartment does not mean it is luxurious.  Let's look at the facts:

• built on a main road, Ann Street
• no city or river views from most levels
• 191 apartments, most with only one bathroom
• small apartments
• no separate kitchen
• bathrooms do not have separate bath and shower
• little cupboard and storage space in apartment
• no balcony

In my view, calling these "luxury apartments" is seriously misleading.  Buyers beware! 

No Views at Bella Vue - Contract Terminated

A recent Queensland Supreme Court decision worth noting:  Nifsan Developments v. Buskey.  Mr Buskey purchased a penthouse apartment off-the-plan from Nifsan in the Bella Vue complex at Emerald Lakes.  The contract price was over $1.5M.  Before signing the contract, the sales agent told them about the uninterrupted views that the apartment would have.  However, the developer was planning a building in front of the apartment that would block the views.  The court rescinded the contract, and Mr Buskey got his deposit back.

Interestingly, the developer had a policy of not telling its sales agents about relevant information.  The sales agent may be honest, but being kept in the dark by the developer.

Also, the evidence before the court was that the apartment was not worth $1.5M when the contract was signed, and was now worth about $800,000.

Extreme care must be taken when buying off the plan.  You may be paying way too much. What the sales agents tell you may not be true.

See full text of decision.

Lend Lease Puts On Its Big Show

The headline of a story in the AFR on Thursday:  "Lend Lease Puts On Its Big Show", a story about the Brisbane RNA Showgrounds development, Show Ground Hill.  The first 43 apartments (The Green) will go on sale soon according to the AFR, with the developer using a $2 million sales suite and marketing shows in Sydney, Singapore, HK and KL to drive sales.  It is said to be a 15 year project, with 2000 dwellings, so I guess if you miss out on the first release, you will still have a chance to buy later on.

Prices for the first stage are reported to be $345,000 for a one bedroom apartment without parking to $665,000 for a two bedroom apartment.  This is a higher price than what you can buy today for a three to five year old apartment in a more central location.

CBRE says that "there was little demand for three-bedroom units in the market following a glut of high-end owner-occupier stock was built in the mid 2000s."

Off the plan sales data shows average price points have fallen 50% from the 2007 peak according to the AFR.  This means that cheaper, lower quality apartments are currently being marketed, not that prices for like-for-like apartments being sold off the plan have decreased.

CBRE says "Eventually it has the potential to become its own suburb."  This means that when first being built, there will be little infrastructure or amenity nearby for the initial residents.  In 15 years it may turn out ok, but that is a long time to wait, especially if the average hold period for an apartment is about 5 or 6 years.

CBRE also says:  "The Brisbane market is quite challenging at the moment, but my view is we are at the bottom of the market."

Mary Street Development

Demolition work has started on the 103 Mary St apartment hotel development.  It is located next door to the 111 Mary St "hole" that was to be the Vision building.

The 103 Mary Street development is 32 floors high, and will kill the views from the rear apartments in 212 Margaret St and in some of the Devine River City apartments.

In the photo below, 212 Margaret can be seen on the left and River City on the right.

Developer's Stock of Apartments in Brisbane

The Courier Mail on Saturday had a number of advertisements for new apartments being sold by developers, off the plan.  Here is a summary of the advertisements:

• Centrus One at Eight Mile Plains
• Hamilton Harbour, 2 bed 100sqm from $715,000
• Eastwood Apartments, 2 bed 104 sqm from $498,000
• Fish Lane Apartments, 2 bedroom $555,000
• Rive Apartments, 2 bed 110 sqm $575,000
• Riverbend Tower, selling whole floors (5 apartments per floor)
• Allure West End
• The Midtown, 2 bed 85 sqm $563,500
• Alex Perry Residential, 2 bed 81 sqm from $560,000
• The Encore Indiana
• Madison Heights, 1 bed no carpark 56 sqm from $389,000
• Linear St Lucia, 2 bed 122 sqm from $487,000
• Essence Chermside 2 bed 84 sqm from $479,000
• Precinct Bulimba, 132 sqm $599,000
• Lawsons Edge 
• Barton on Barton, 101 sqm $549,000
• Residences on Upper Oxford from $999,000

Show Ground Hill

Lend Lease has commenced marketing its apartment projects at the Bowen Hills Ekka redevelopment site.  See The Green.  There will be five buildings in The Green.  The registration form only refers to 1 or 2 bedroom apartments.

Lease Lease is currently in the process of completing the on-site Sales Centre, located on St Paul’s Terrace, which will showcase both the Showground’s new Master Plan and the apartment options that will be available in The Green. The Sales Centre will be opening for both VIP and Pre-Release appointments in early October 2011.

Phantom Apartments

It is hard to tell exactly how many new apartments are for sale in Brisbane.  A number of developers have withdrawn completed apartments from the market (and either locked them up, or put tenants in.)  So I suspect that there is more stock available for sale than the figures that are commonly published actually show.

House Price Crash

This is a good article on property investment, and points out some of the risks of off-the-plan purchases and dealing with developers.

House Price Crash

Sunland's Brisbane Development

Sunland reports that it was holding discussions with Cbus Property about a joint venture for $250 million Carrington Tower on Alice Street (also known as the French Quarter site -- that Devine sold to Sunland). The new tower (B1??) is awaiting final approvals. Mr Abedian of Sunland is reported as saying:

"With a project as unique as Carrington and given its proximity to the city and entry into the Botanic Gardens, we will ensure that the timing of the launch is one where we have the greatest confidence. We think 2012 is the more appropriate time to launch such a project. But we are no in a hurry and we won't rush a flagship project such as this."

It sounds to me like this apartment development will not start construction for some time.