Showing posts with label highrise. Show all posts
Showing posts with label highrise. Show all posts

Saturday, June 4, 2016

Brisbane apartment oversupply?

Will there be an oversupply of apartments in Brisbane?  In certain geographic areas, and for certain styles of apartments, I think that the answer will be yes.  Some clear reasons for oversupply include:
  • extremely high level of construction of high rise apartments in some areas, many with a large number of small apartments
  • low population growth
  • apartments targeted at investors, not owner occupiers, so a more limited market segment of buyers and renters
  • apartments being constructed in second and third tier areas.
However, I don't think that all the apartments currently "in progress" will actually be built.  This includes apartment projects that have good pre-sales and where "construction has started".  This is because:
  • some developers are unable to obtain the level of finance needed to commence the project
  • construction costs have increased dramatically, especially for union built projects, and so the project is no longer viable, even if the project is sold out
  • simply because the site has been cleared, and some work has started, does not mean the that project is underway -- it may never be built.
  • the number and percentage of presales in a development is often overstated by the developer in advertising and market surveys, and so the developer will not in fact be able to obtain finance at all.
So I think that the level of oversupply may be overstated.  There will still be oversupply, just not as bad as some people are predicting.

There are other risks in the high-rise apartment market:
  • off-the-plan buyers may have trouble settling, because valuations may be lower than contract price, because banks are not lending to offshore buyers, and because banks are requiring a higher cash contribution.
  • rents are likely to fall, which means that valuations will fall
  • some projects are overpriced, and it is likely that after settlement sales prices will be less than  the contract price
  • some constructions companies are in financial difficulties, and so are cutting corners -- the end product many be different, and lower quality, to what is expected by the buyer
  • many buildings are being built close to other buildings, impacting light, view and ventilation
  • foreign buyers may evaporate.
The question in my mind is whether this will impact the high quality buildings in good locations that have large apartments with good aspect?

Sunday, February 7, 2016

Brisbane Prediction

"Brisbane Avoid: High density apartments in the CBD, West End and Fortitude Valley. Recommend: Character houses in low density, established areas with good schools, transport and lots of renovation activity."

See Property Observer

Saturday, August 30, 2014

When should I buy? When should I sell?

The Brisbane inner city apartment market is somewhat strange at present.  Some points to note:
  • I mentioned in a recent post that there were fewer apartments listed for sale than in recent times.  That is the case for resales of existing apartments.
  • There is a large potential increase in the number of inner city apartments, due to a large number of high rise apartments being developed.
  • With spring, more apartment owners are likely to list their apartments for sale.
  • Rents are down, vacancy rates are up.
  • Sydney and Melbourne are or have boomed.  Brisbane has not.  It is still behind its peak 5 years ago.
  • Future capital growth is uncertain, but apartments are currently selling at good prices due to lack of stock available and low interest rates.
  • My prediction is that in 3 months time, prices will decrease slightly.  So now may be a good time to sell, but an uncertain time to buy.

High-rise Brisbane

A newspaper article by Matusik in the Courier Mail today reflected on potential changes to the Brisbane inner city apartment market:

"Brisbane is set for an increase in the supply of new inner-city digs.  Brisbane could well face an oversupply of downtown apartment stock.  And that increase in stock might more resemble a tsunami in terms of its impart on the market and potential investment outcomes.

For the past five years, the Brisbane market has been undersupplied, with an underlying demand of about 9000 new dwellings across Brisbane.  However, when we break down future demand by market segment, going rental demand (those who occupy a significant percentage of inner-city apartments) appears likely to fall.  And Brisbane's future demand will more likely be deriven by the increasing downs and retirement markets.  Those folk are, for the main, not enticed by large, high-rise complexes.

Rents are down, the vacancy rate is increasing and some resales in recently completed inner-city apartment buildings are already selling for losses.

Currently, the vacancy rate in Brisbane city is 4.2%.  Two years ago it was 1.2%.

And there are now 276 properties (as at June) for rent in Brisbane/Spring Hill, compared with just 48 two years ago.  For the first time in five years, rents have fallen."

Tuesday, August 28, 2012

West End High Rise

The State Government has allowed 12 storey apartment buildings to be built in West End, against local community interests, and as a reward for loyal property developers.

"The Newman government has cleared the way for 12-storey buildings in the part of West End opposite Toowong by ticking off on changes to the local plan.  Deputy Premier Jeff Seeney yesterday confirmed he had approved the reinstatement of parts of a Brisbane City Council plan that had been blocked by the former Bligh government."  See Brisbane Times

Monday, March 19, 2012

Low rise or high rise apartment?

"First-time property investors buying off the plan should consider low-rise apartments over high-rise units, according to developers and market analysts."
See Property Observer

Friday, August 5, 2011

High in the High Rise

"Here's another misconception: if you're buying apartments, high-rise is best, and the higher the better. This one, too, has been shot down by the results of research.

Brisbane property analyst Simon Pressley, director of 6-Point Property, has found, contrary to popular belief, that apartments in small complexes outperformed those in high-rise buildings on capital growth.

Meanwhile, analyst Michael Matusik argues persuasively that the common belief that apartments in the higher levels are more valuable than those below is also a myth."

Full story in The Australian

It is hard to react to 6-Point Property's research, because they do not make it freely available. It can be purchased for $1,650. One reason for the better performance of small complexes compared to high rise is that many of the high rise apartments in Brisbane are relatively new, and a number of people (particularly non-Brisbane investors) purchased off the plan at inflated prices. If these buildings were removed from the survey, I wonder if the results would change?

Sunday, January 17, 2010

Are more high rise apartments needed in Brisbane?

Brisbane will need an apartment building boom on the scale of Dubai if it is to accommodate a forecasted growth in population by 2030, the State Opposition claims. However, he estimated as many as 1725 20-storey buildings would need to be built before 2031 in order to cope.

"It is areas like Indooroopilly, Chermside, Mt Gravatt that are designated to do it," he said.

The plan also nominates the Brisbane CBD, Carindale, Toombul, Mitchelton, Wynnum Central and Toowong. Mr Gibson said the difficulty was finding the land in these areas to build thousands more apartments.

"You go through street by street and you identify where you can build 82 new 20-storey building every year for the next 21 years and the land is not there right now," he said.

Brisbane Times & The Australian

Sunday, August 9, 2009

Differences in Value Between Apartments in the Same Building

Usually, it is relatively easy to determine a value or price range for an apartment in a high rise building. This is because there are often a number of sales a year in the same building, and so if you can find an apartment with a similar floor plan that has sold (e.g., an apartment in the same line), that gives you a good starting point. Then, you can look at the difference in floor levels, and determine how the value is different.

For new apartments, developers use a rule of thumb, that says going up a floor is worth another $5,000 or $10,000 per floor. This doesn't seem to hold true for existing buildings, where there is little difference in value between an apartment on level 20 and the same apartment on level 23 (for example). What is more important is the actual view. A lower apartment may not clear another building, and a higher apartment may have a river view. Often, the price jumps at a certain floor, because the view is dramatically better for apartments at that floor and above.

A car park in downtown Brisbane adds about $60,000 to $70,000 compared with an apartment without a car park.

Also, sometimes an apartment is sold furnished, and that cannot be seen from prior sale records. (Furniture usually doesn't add much to the sales price - often only $5,000 or so.)

What is often missed by purchasers (and some valuers) is that some apartments in a building may have access to special amenities, that other apartments cannot access. A good example is the Admiralty Two building. This building has a high rise section and a low rise section. The high rise apartments have access to a swimming pool and gym on the top floor, as well as a roof deck. Both the high rise apartments and low rise apartments can access the pool and gym on the lower level. So an apartment on level 32 has access to facilities that the same style apartment on level 20 cannot access. Often this benefit is overlooked.

Photos on this page show the exclusive use areas for Admiralty Two in Brisbane - use for the apartments in the high rise section only.