AFR: Qld Property Due for Kick Start

Extract from Story in the AFR:

For years now, much of Queensland has been a home-grown testament to how property booms can go dreadfully wrong. But a select few see the parlous state of the Queensland housing market as a rare opportunity to pick up homes with great growth prospects at bargain prices. Many see the landslide election of the LNP government as a key catalyst.

Earlier in March, private equity firm Engage Capital bought 19 luxury apartments from the Bank of Scotland in The Macrossan tower in central Brisbane, developed by Macquarie Group. Engage Capital director Ben Grootemaat says he paid about $1 million less for each apartment than off-the-plan prices. He thinks Brisbane values have bottomed and he plans to sell the homes straight away, claiming there is strong demand for the right kinds of apartment at the right price. “There is a lot of demand, especially for three-bedroom residences,” he says. “We have a strong level of interest.”

He’s not the only one positive about the sunshine state. Veteran developers Ken Woodley and David Devine founded apartment developer Metro in March 2010. Since then they have bought or are in the process of buying 2500 apartments in inner-city Brisbane. Woodley says the company sold more than 450 apartments last year, and hopes for a similar result this year. The drivers he is banking on are a tight rental market and the influx of resources employees.

“Because of the huge influx from the resources companies in the office towers, I think what is going to happen within six months is people will have to pay three months’ to six months’ rent in advance to secure an apartment,” Woodley says. “There really aren’t many being built.” But he’s also hoping a confidence boost will come with the reforms new Premier Campbell Newman has promised to deliver in his first 100 days in office. One is stamp duty exemptions for the principal place of residence, which may become law on July 1, costing the government $900 million.

Combined with more interest rate cuts that most banks are still expecting, housing will become more affordable. “I would think those two things would kick start the market,” Woodley says.

The value of houses in Brisbane fell 7.6 per cent in the 12 months to the end of February, according to RP Data Rismark, the worst decline in any mainland capital. The fall in values and dearth of credit have caused a plunge in building. Mirvac research figures show per capita housing levels in Queensland have plunged to their lowest levels since about 2002. But Hoke Slaughter, Morgan Stanley head of real estate investing in Asia, believes the supply-demand picture in Queensland will be “quite attractive” when the market finally recovers. And there are certainly some bargain prices on offer.

Queensland has been littered with receivership sales. Receivers KordaMentha predicted last month there would be an increase in the volume of distressed assets put to market in the state this year as financial institutions attempted to clean up their loan books. Savills agent Greg Harris is selling new townhouses on the Gold Coast that were once priced at $635,000 for about $500,000. He says although prices have fallen 30 per cent, rents haven’t.

Australian Property Monitors senior economist Andrew Wilson says some “green shoots” are emerging in Brisbane. Home values fell 1 per cent in the three months to February, according to his figures, a slower rate of decline than last year. There were other early signs of improvement, such as an increase in home loans and positive feelings about the new government, which may improve buyer sentiment. “The whisper around is we’re just starting to get some early cycle momentum in that Brisbane market,” Wilson says. “With the election behind them, there is always a honeymoon period for the market, which can lead to a more positive attitude.”

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! 

Metro Property

Metro Property, owned by Pearls from India, David Devine and Ken Woodley (who lives in a Mirvac apartment), will soon launch The Plaza at South Brisbane.  It is a ten story building located on Manning Street, with 165 small apartments.

Metro have sold their 37 Mayne Road development in Bowen Hills.  The rumour is that it was sold to Arden Property Group.

In other news, there is a rumour that Devine/Leighton (no longer associated with David Devine) has sold its Camelot site on the corner of Albert Street and Margaret Street.

Reapfield Sells Maidson Heights

If you are thinking of buying a property in Brisbane, why not ask a property consultant in Singapore. For example, Metro Property Group is marketing its Bowen Hills developments in Singapore through Reapfield. They are even advertising in newspapers. One example, above, is the "iconic" Madison Heights development. I wonder if buyers in Singapore know the track record of David Devine and the actual location in Bowen Hills of the property? As reported in the Courier Mail recently, Bowen Hill has 12 traffic bridges. It is not a place that I would want to spend the night.

The image immediately below, from the Reapfield website, shows the proposed Madison Heights location (yellow line) and Chelsea Apartments proposed location (thin red line). Below that is another view of Bowen Hills - Madison and Chelsea are located approximately behind the red circle titled Inner City Bypass.

Metro Property Group

There is a rumour that David Devine's Metro Property Group is in the process of selling one of its Bowen Hill's projects to another developer.

Bowen Hills Developments

See article in BusinessDay.

Towers of up to 30 storeys high will soon start being built in Bowen Hills as developers snap up land in Brisbane's booming inner-north. But ailing confidence in the property market has one company struggling to secure pre-commitment commercial sales vital to the commencement of construction. ...

Metro Property Group, headed by property baron David Devine, has also turned its attention to Bowen Hills announcing last month it had sold all 195 units in The Chelsea, on Hamilton and Tufton streets, since the project's launch last November.
Metro Property Group has been given the green light for another two apartment towers of 24 and 30 storeys in the suburb.The developer's 24-storey tower on Mayne Road, which will protrude over the Edgar Street laneway, includes 242 apartments in total. Although the taller tower, The Madison on Campbell Street, exceeds the ULDA's 24-storey general height limit in the precinct, the body's design panel said the additional storeys made the tower appear more "slender".

Devine and Leightons

David Devine, who founded the Devine development company, no longer owns part of it. He sold out as part of a legal dispute involving a long time personal assistant. Devine developed lower quality high rise apartments, primarily sold to offshore and interstate investors. David Devine has established Metro Property Group, and is back in business building large highrise buildings with small apartments in B-grade locations. David Devine, and his marketing manager Ken Woodley (also ex-Devine) both live in very large apartments not built by Devine.

David Devine recently has been critical Leightons who owns 49% of Devine. Extract from The Australian:

"In February 2007, Leighton paid $94.7m for a 40 per cent stake in Devine but the two groups fell out during the GFC.

"At Devine, they weren't interested in the fundamentals of the business. They just thought you do it and it happens," Mr Devine said. "I have a lot of respect for Wal King but I can't say the same for the other Leighton representatives on the Devine board while I was there."

A Leighton spokesman said Mr Devine's comments were no longer relevant to Leighton and its investment in Devine.

"Mr Devine would be better placed to look at his own performance and that of Devine when he was there rather than a company that he no longer has anything to do with," he said."

Madison Heights Bowen Hills

Metro Property Development and Pearls are marketing a 29 level high rise off the plan in Bowen Hills. The development is called Madison Heights Bowen Hills.

Metro is a recently formed company by David Devine and Ken Woodley. Both are ex-Devine (a listed company controlled by Leightons). Devine has a reputation for building low end apartment complexes. Pearls is an Indian development company.

The Madison Heights development has 182 studio/one bedroom apartments and 104 two bedroom apartments. This gives a total of 286 apartments. However, there are only 204 car parks. So taking into account visitor car parking, about 100 apartments will not have a car park. The development is in an industrial area, on Campbell Street, opposite the Courier Mail printing site, with good views of the hospital and inner-city bypass. There are no amenities around, so a car is needed.

The apartments are tiny. For example, an example two bedroom apartment is 70 sqm, including a 4 sqm balcony. (It is hard to call 4 sqm a balcony -- that is smaller than a bathroom.) Typically, I would not recommend a two bedroom which is less than 85 sqm internally, and even that is small. A good two bedroom should be at least 90 sqm internally. For comparison, you can buy modern two bedroom apartments that are 110 sqm internal.

And pricing is not cheap. A two bedroom, two bathroom which is 73 sqm internally plus a 4 sqm balcony on a low floor is listed for sale at $548,000. This is outrageous. This is over $7,000 a sqm.

Compare this two bedroom apartment in River City, a Devine building (developed by David Devine and Woodley). It is not a great quality building, and it is a few years old, but there is no reason to think Madison Heights will be any better. It is located on Albert Street in the city -- a much better location. It is 76 sqm internal plus 13 sqm balcony, with views of the Botanic Gardens. It has one car park, and is being sold furnished, for "offers over $450,000". So if it sells at $450,000, that will be $5,056 a sqm.

Take care!