Roma Street Parklands - Recent Sales

Here are some recent sales of apartments in the Roma St Parklands complex in Brisbane, which was developed by Pradella in around 2002 to 2006:

• Apt 3006, 3 bed, $520,000
• Apt 3093, 1 bed, $360,000 
• Apt 3107, 1 bed, $370,000
• Apt 7046, 2 bed, $621,000
• Apt 6039, 3 bed, $1,475,000
• Apt 3081, 3 bed, $590,000
• Apt 6028, 3 bed, $1,300,000
• Apt 3120, 2 bed, $637,000

What is interesting here is that of the eight resales listed above, only 1 was less than the purchase price that the seller originally paid.  Also, at least 5 were sales to owner occupiers, and one was a sale to a super fund.  All apartments seem to have Parklands views.

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

Who is buying and what are they buying?

From the hsbrisbaneproperty.com.au newsletter from an agent that specialises in mid-priced inner city Brisbane apartments:

Usually buyers are hot-off-the-mark in January, however this year we’ve seen buyer interest only gradually increase in January with a marked jump in February. This also translated into sales and is a positive indication of the year to come. In fact, we recorded more buyers signing contracts than in any other month over the last two years.

What are people buying? The trend to properties up to $500,000 continues within the CBD. Although there is and always will be certain demand for top-end properties, $500,000 seems to be the upper limit for the majority of buyers, particularly investors, at present. One bed units were the ‘property of choice’ in February, probably due to their perceived more affordable price.

Who is buying? Both owner occupiers and investors were busy in February. Currently, the tightening CBD rental market is directing some tenants into property ownership as the most viable alternative. This is not only true for young professionals, but also for overseas students not able to find CBD rental accommodation. On the investor front, we recorded significant interest from overseas buyers, particular from China.

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

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

Brisbane Market Flat, and therefore good buying?

With the market remaining soft most of last year, Mr Lawless said Brisbane was again becoming more affordable compared to other capital cities.

There had not been such disparity between Brisbane and Sydney prices since 2007 and Melbourne since 2004.

"It just demonstrates that there is quite a strong value proposition opening up within the Brisbane marketplace,'' he said.  "Which should make the Brisbane market look much more attractive to investors and also interstate migrants.''
See Courier Mail

Predictions for 2012

I am not going to make any major predictions for the Brisbane apartment market for 2012.  It is too uncertain what will happen next.

It is probably not a good time to sell.  If you can hold off selling, then that is probably wise.  (I guess that the market will, at worst, be flat.)  However, if you may be forced into selling sometime in 2012, such as due to loss of a job, divorce, financial difficulties, or a forced move, then it is probably best to sell as soon as possible so that you are not a distressed seller.

If you are buying, there is plenty of choice.  But only buy if you plan to hold for the long term.  I think it is better buying an established apartment than buying off-the-plan, at least in Brisbane.  (The Gold Coast is a different story.)

Rents are unlikely to fall.  Body corporate levies are unlike to decrease.  Who knows what interest rates will do.

I may buy in the next 6 months, but only if the price is extremely competitive or the property is extremely unique.  I doubt that I will buy off-the-plan this year.

Two books to assist you:

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

Rent Money is Dead Money - part 3

Another interesting comment from a reader regarding the prior post Rent Money is Dead Money:

I am a number of months into my apartment owning experience, and your colum on buy versus rent this weekend was very interesting. 

 

It has surprised me how relatively expensive apartment living is in comparison to houses.   Unencumbered by the facts, you would think that apartment living would be cheaper due to massive economies of scale:

 

·         Two pools supported by 400 units not one pool by one house

·         Four large garbage collections from four points rather than traversing a neighbourhood with 400 different pickups – council gets the benefit of this one – and nobody would use tip vouchers.

·         Maintenance of larger grounds, but offset by 400 units supporting, versus grounds per house

·         Economies of scale on hot water heating by using much larger units

·         Economies of scale on water requirements

·         Economies of scale on heating and cooling due to insulation from two sides, roof and floor not being open to environment.

 

Obviously the above benefits are eroded by the cost and maintenance of elevators, the onsite manager, profit margin for developer, security, etc.

 

For my apartment, annual fees for rates etc are not $5k per your note but $9k, comprising $6k body corporate and insurance, $2k rates, and $1k water.

 

The $6k for the body corporate was not particularly out of line for similar units when I was looking around.

 

The $2k for rates is just as a result of robbery by Brisbane City Council.  My home rates are only $1.4k.  Rates for my apartment should be only $1k but a 2.1 parity factor was put on by the Council when they went through that rate adjustment exercise.

 

Obviously at home in a house, I have no body corporate, but realistically I should consider the $45 I pay a fortnight for lawns mowed as equivalent, and I look after my own pool.

 

So I am paying $1.2k/yr for lawns mowed, if I got the pool looked after I am guessing that would be $40 per month or so.  Say that’s $2k per year.  Home insurance is probably $600 per annum, can't tell as it is bundled with contents.  There are other costs with the pool, all the chemicals, the pumps/chlorinators etc and some provision for outdoor maintenace , say another $1k per year.  So in fact that is $3.6k per year, maybe a bit higher than I thought it would be.  And there are probably other episodic costs that I haven’t been quite fair to my unit on.  I just had to spend $3k to get my home pool fence up to spec.  Maybe the comparison is not as bad as I first thought.  If I am honest there would be other expenses on my house that would be covered by Body Corp for equivalent unit.

 

But still, even with all this, it seems evident that the apartment is still more expensive than house and all those economies of scale are eroded.

 

Obviously the other cost savings that you really need to be taking with an apartment are as follows:

 

·         Dropping Gym memberships and using shared facilities at the common areas.

·         Dumping at least one car – that would give a pile of savings, that are only going to get higher.

 

I don’t see the power bill for my unit, but this is an area where I suspect apartments are losing out to houses.  I've had for over a year solar hot water and solar panels for elec gen on the roof.  These have paybacks of around 5 years or so based on current elec price and are only going to get shorter payback as power bills increase.  How are apartments getting onto the bandwagon of sustainability.  I am sure it is impossible to get a pile of owners to cough up more money to install solar hot water or solar panels.

Rent Money is Dead Money - part 2

This is a note from a reader, in response to the prior Rent Money is Dead Money post.

Here’s an actual position scenario sent in by a reader in support of the report “RENT MONEY IS DEAD MONEY” that is, is it better financially to rent than own an apartment. The figures quoted here are actual, dated within the last 6 months. The apartment is a 2 bedroom in Newstead, approx 12 years old with good partial views of the river, 1 car parking, in a well managed complex.


Cost of Ownership VS Renting the same apartment. (round dollars)

Most recent sale price = $650,000 (2 years ago were selling for $725,000 to $795,000)

OWNING

Rates                                  $2060 p/a

Water & Sewage              $804 p/a

Insurance                           $480 (personal property) p/a

Corp Body                          $4169 pa

Sinking Fund                     ??

Extra Levy                          ??

Total cost of Ownership $7513 /12 months =$626.00 p/m

Loss of Interest on capital ($650,000 @ 6.11%)  = $39,715 pa /12  = $3,309 p/m

Total cost to buy outright for cash  = ($3,309 + $626) = $3925 p/m

COST PER YEAR TO OWN = $47,100

Other: At present, is a depreciating asset while ownership costs continue to rise.

RENTING

Rent paid  = $2100 p/m  = $25,200 p/a

BUT

Still have $650,000 in bank earning $39,715 pa (Bankwest, citbank, ING, ANZ (6%) et al online saver accounts, immediate access to funds)

Other: Property prices continue to fall, and may fall further in 2012 = no depreciating asset to carry.

Flexibility to buy if/when prices fall further. 

No responsibility other than taking good care of the property and paying rent on time.

COST TO RENT  = $25,200

SUMMARY

To own = loss of $1825 p/m x 12 = $21,900 p/a worse off owning a depreciating asset, just to say you own it. ($47,100 -$25,200 (rent) = $21,900). Who would want to own one with a loss like that!

I’m better off renting than buying AND still have liquid cash in bank. Therefore, with my money in the bank, I’m $21,900 a year better off renting.

THERFORE

To equal the return I get from the bank for the same money it would cost me to buy into these units, the unit would need to be priced at $427,000. Therefore, the real price of these units is $427,000. At $650,000, they are grossly overpriced, as we all know. $427,000 is the real value of these units.

And to the critics, don’t mention inflation  - I don’t believe in it over a short term 2-4 years. If you insist upon mentioning inflation, I’ll raise you a clear hand with “depreciating property prices”, 10 times the loss of inflation in just 18 months or “CGT” later or Negative Gearing (surely you’ve lost enough already without NG!).

Improving Market?

It is useful to look at recent sales of apartments, and compare the price at which the apartment sold with the price that the vendor originally paid for the apartment.  In find this is more useful than looking at medium or average prices.  For example, if a building has a mix of 1 and 2 bedroom apartments, and for the last six months, only 1 bedroom apartments are sold, then the medium price will decrease.  This does not tell us whether the 1 bedroom apartments went up or down in value.

I recently had a look at sales in the Fresh Apartment building on boundary where Taringa mets Toowong, at 20 Campbell Street.   This building had its carpark flooded in the 2011 floods, but no apartments had water in.  The two magnificent pools were not flooded either.  It was developed by Vecchio, who is currently developing Rive Apartments (see post above.)

Apt 20:.  This apartment is 2 bedrooms, 2 bathrooms, 120 sqm (85 internal, 35 balcony).  In March 2007, it was advertised off-the-plan for $459,000.  The next year, it was still for sale off-the-plan for $504,000.  It was sold by the developer in May 2008 for $566,000 (probably this was above market price).  The first owner then resold it in November 2009 for $537,000.

Apt 23:  This is a 3 bedroom, 2 bathroom apartment, with a North East Aspect over the pool.  It is 148 sqm in total. It was sold off-the-plan for $669,000 in July 2007.  It resold in September 2011 for $569,000.

Apt 54:  This is a 3 bedroom, 2 bathroom penthouse apartment.  It is 117 sqm internal plus a large 84 sqm balcony..  It sold off-the-plan in April 2007 for $807,000.  It resold in August 2011 for $600,000.

So take care when buying off the plan or from a developer.

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.

Charlotte Towers - Recent Sales Results

There have been 5 reported sales of apartments in Charlotte Towers in the July 2011 to October 2011 period.  Charlotte Towers was developed by Devine, is managed by Oaks, and is located at 128 Charlotte Street, Brisbane.

All sales have been one bedroom, one bathroom apartments, without a car space for parking.

• Apt 3101 - sold for $313,000
• Apt 2605 - sold for $325,000 (purchased off the plan for $326,000; listed for sale at $349,000)
• Apt 1406 - sold for $306,000 (purchased off the plan for $291,000)
• Apt 609 - sold for $302,000 (purchased off the plan for $295,000)
• Apt 3309 - sold for $302,000 (purchased off the plan for $347,000)

Taking into account stamp duty, legal costs, and real estate agent fees, all five of these original owners sold at a loss, and is some cases, for a loss greater than 10% (not taking into account inflation, interest costs and any furniture packages that may be been purchased -- so the overall loss will be somewhat more substantial.)  There are big risks in purchasing off the plan from the developer, and buying an apartment in Brisbane as an investment is not so easy.

Also, note that the highest reported sale for the whole building, for a four month period was $325,000.

With a tower being built across the road, values are unlikely to increase for some time.

Invest in Brisbane

Shares or property?

• The Standard & Poor’s 500-stock index was off more than 14 percent for the quarter — and more than 10 percent for the year so far.
• The Dow ended the quarter down 12 percent and the Nasdaq lost 13 percent.
• ASX index of shares fell 13% in the September quarter; down over 15% for the year to date.

"The market has fallen over 15 per cent so far in 2011, putting it on course for the second sharpest annual fall in 2 decades and the heightened volatility has led strategists to take a cautious view -- despite historic low valuations."

Real estate investments are far less volatile than shares.

According to RP Data, Brisbane apartment prices increased 3% in the quarter ending August 2011 and prices are flat year to date.  RP Data believes Brisbane real estate is at the bottom of the market.  There is a significant price difference between Brisbane and the Southern capitals.  Rent yields are increasing.  It would appear that now is a good time to buy in Brisbane.

Before buying an investment property in Brisbane, read Investing in Brisbane Apartments - A Guide for Successful Investing.  You can read this ebook using a free Kindle Reading App, or you can buy a Kindle reader for use in Australia.

Brisbane Investment Apartment

Don't forget to read, Investing in Brisbane Apartments - A Guide for Successful Investing, recently published and available at Amazon for immediate download delivery.

New Book: Investing in Brisbane Apartments

This is a plug for a new book published this week, Investing in Brisbane Apartments - A Guide for Successful Investing.

Currently, this book is available only via the Amazon Kindle store. If you don't have a Kindle, then you can download for free Kindle software apps for an iPad, iPhone, Mac or PC. If you can read this blog, then you can use Kindle software to read this new book. Click on the following link for the software to read this book:

Kindle Reading Apps

The Chapters include:

• Apartments as Investments
• Buying Decisions
• Off the plan apartments
• Renting Your Apartment
• Foreign Investors
• Legal Structures for Apartments

Investing in Brisbane Apartments - A Guide for Successful Investing

Adjusting property value growth for inflation

Brisbane has been the weakest performing capital city market over recent times with property values down -7.3% from their March 2010 peak. When the results are adjusted for inflation, the fall in values from the March 2008 peak is much more pronounced at -12.3%. Similarly in Perth, the fall from the market peak is more than double (-5.4% versus -11.3%) when the results are adjusted for inflation.

On the flip-side these conditions are likely to impact on negatively geared investors. Given this, RP Data anticipates that investor activity is likely to remain relatively subdued and those investors which are active in the market are likely to have a much greater focus on yield maximisation rather than negatively geared properties. At least for the short term, investors chasing substantial capital gains are likely to be disappointed given the anticipated market conditions.

Source: RP Data Property Pulse

Investors Returning

New mortgage sales figures for May point to investors returning to the Queensland market. More than a third of loans (36.5%) processed in Queensland in May were investment loans, the highest figure for more than a year, according to the latest AFG Mortgage Index.

This is just below the proportion of investment loans processed in Victoria (38.8%) and NSW (37.9%)

Mark Hewitt, general manager of sales and operations at AFG, tells Property Observer the Queensland market has reached a point where house prices have come down in past 12 months, meaning investors are seeing value in the market.

“We are not anticipating a massive rush, but there are positive signs in both Queensland and WA,” Hewitt says. “That there is a lot of stock available, especially on the Gold Coast. Looking at the overall market, Hewitt says property investment has remained at consistent levels throughout the ups and downs of the property cycle, but strengthened significntly in May. It is certainly a buyer’s market right now, and investors looking at rising yields are probably better insulated from the impact of rising interest rates than other types of buyers.”

Property Observer

The Mood In Brisbane

I have spoken to a number of agents and bankers lately in Brisbane. It seems that the mood in changing, and properties are starting to sell, especially in the $400,000 to $550,000 price range. Buyers, including investors, are buying where the price is right (typically 5% to 10% below the peak), and sellers are accepting offers. Bankers are back in sales mode and appear to be willing to lend. Vacancy rates are low and rents are good.

For example, at the Ray White auction today, a relatively new two bedroom apartment at Indooroopilly (113 sqm in total) sold for $400,000 under the hammer, where the rent is $500 per week. Another 2 bed apartment of similar size in a different complex with river views also in Indooroopilly recently sold after only a few weeks on the market for $485,000.

Good quality two bedroom apartments in the downtown area are renting for $650 per week unfurnished.

But this more confident mood is not the same everywhere. The top end apartment market is very dead. For some apartments over a million, no buyers are calling at all. On the Gold Coast, things are very slow. Juniper's Soul development has been slowed down, with the first batch of settlements being delayed until the second half of this year and there are less construction workers on site. I wonder why?

In short, the mood is picking up in Brisbane for well priced investor apartments.

High Rises

In a post below, I mention that the May edition of Australian Property Investor had a good story about the oversupply of inner city Melbourne high rise, titled "High on High-rises" (page 86, May 2011 edition). Some quotes about the Melbourne apartment market:

• "What we have sitting out there is a potential tsunami of apartments. They're all high-rises and a lot of them are aimed at the investor market."
• "They're missing the point altogether, building high-rises and thinking this will solve the housing dilemma. These places have poor facilities, with a lack of shops and where people don't get a chance to mix in a community."
• "High-rise apartments are largely marketed to investors because developers are under pressure to sell a certain percentage off the plan before they can build. You're buying brand new, so obviously paying a premium for the 'wow' appeal."
• "The majority of this construction will also be relatively small one and two-bedroom apartments aimed at investors, and 50 to 70% populated by students. The initial vacancy rate is likely to be high, taking significant time to absorb the necessary demand."
• The Age recently reported 88% of the 4,155 apartment sales in the first half of 2010 were in investment focused buildings.
• "My concern is that with a high-rise there are so many of them and they're all the same. There's no point of difference."
• "Because so many come on the market at once, they get let very quickly to anybody that comes along. Before you know it they look like slums."
• "Investors should try and buy two-bedroom properties [rather than one-bedrooms] if they can afford it."
• "In a high-rise, you're buying a carbon copy of 100 or 200 other units. Your until will be completely dictated by what the last unit sold for."
• "Poor property struggles in the market for years."

Real Estate Agents Say Ideal Conditions for Investors

The real estate agents industry lobby group, REIQ, issued a press release today, putting a positive spin on apartment sales in Queensland:

"Reduced demand for investment properties is providing ideal conditions for buyers, according to the Real Estate Institute of Queensland (REIQ).

Over the September quarter, median unit and townhouse prices held steady in most areas of the state, while demand for properties usually targeted by investors and first home buyers reduced markedly as economic conditions and higher interest rates sidelined buyers.

Preliminary sales in the $350,000 to $500,000 price bracket across the State fell more than 20 per cent compared to the June quarter while sales in all other price brackets held their ground.

“The number of first home buyers has fallen since their high of last year, however, we anticipate demand from first-timers to continue to gradually increase next year,” REIQ managing director Dan Molloy said.

“Investors have also been sitting on the sidelines, with investment demand currently half of what it is was during 2007.

“Investors and first home buyers are usually competing for the same affordably-priced properties but the current lack of competition between these two buyer types has created ideal buying conditions, especially for investors.”