Showing posts with label off-the-plan. Show all posts
Showing posts with label off-the-plan. Show all posts

Saturday, February 29, 2020

Brisbane Apartment Supply - Undersupplied?

Brisbane is predicted to be the first east coast city to experience an undersupply of apartments, having turned down earlier.  According to experts, Brisbane requires approximately 23,000 additional dwellings per annum to accommodate its growth.
In 2019 construction commenced on 2,100 apartments—a decrease of 3,000 on the 5,100 commencements recorded in 2018 and was the lowest number of commencements since 2010.

Apartment completions in Brisbane have fallen by almost half over the following two years, and in 2020 are on track to record the lowest level of completions since 2013.


One real estate agent's reaction:  The agent said the impending undersupply of apartments signals a likely ‘step up’ in market values for second hand units.  There is excellent value-for-money in the CBD with established apartments in great locations. New and ‘off the plan’ units are already selling for 15-20% more than existing stock.

Sunday, February 16, 2020

Luxury Apartment Supply

"The number of three-bedroom luxury apartments to be built in prime suburbs over the next three years is rising in Brisbane" according to the AFR (13 Feb 2020, p 34).

Luxury three bedroom apartments will make up 21% of new apartments built by 2022 "amid growing demand from downsizers and retirees."

Bulimda, Ascot and Hawthorne are areas which will are predicted to get the lion's share of these apartments.

Maybe the demand for 1 bedroom and student accommodation is falling in Brisbane, particularly with the sluggish student demand due to coronavirus.  That makes sense, because small badly designed one bedrooms have a limited market appeal.

I have seen good one bedrooms sold off the plan a few years back now selling for $100,000 less than the off the plan price.  Some developers have unsold stock that they have held for over a year.

Thursday, February 13, 2020

Queens Wharf Residences Brisbane

The marketing campaign for Queen's Wharf Residences in Brisbane (part of The Star casino development) has launched, with off-the-plan sales starting soon.  See https://qwresidences.com.au/

This will be a 64 level residential tower.  It is not riverfront, but on George Street.

Before buying, it is worth looking at this Kindle Book:  Buying An Apartment Off The Plan in Queensland

Saturday, March 3, 2018

New or resale apartment?

I am often asked whether it is better to buy a new or a resale apartment.  Often, you get better value in a resale apartment.  There are less marketing and agent costs, and the seller does not have to achieve a price to satisfy a bank or investors.  A resale apartment may have an older kitchen or bathroom, but will often be larger.

Before buying a new off the plan apartment, look at what is available today for resale.  For example, this apartment in Admiralty Towers Two, on a high floor, is listed for sale at $749,000.  This is in a good location on Queen Street, near the Marriott Hotel and the Howard Smith Wharf development.   It is direct river front, has excellent views, deducted air-conditioning (not a split system) and is 116 sqm (much larger than most new two bedrooms.)  Currently, it achieves $670 a week rent.


Sunday, February 25, 2018

West Village in West End

The West Village development in Boundary St, West End is being heavily marketed at present.

Is this a good place to invest?  I have a number of concerns:
  • The development consists of 11 new apartment buildings, going as high as 22 storeys, with a huge number of new apartments.  It is being developed and sold in stages, with the first two buildings settling at the end of 2018.  If you buy today, not only will you be living near a construction site for years, you will be competing with new apartments as they come online over the next few years.  Hard to resell or rent in this situation.
  • In my opinion, the apartments do not appear to be high quality.  For example, in the two bedroom apartments, the second bedroom is not air-conditioned.  The air-conditioning is not a central system, but a split system with unsightly head ends on the wall.  
  • Most of the bedrooms do not have large windows -- they appear to have one tiny window, and I suspect they will be dark and feel pokey.
  • The bathrooms are small.  (None have a separate bath -- compare Saville Southbank by comparison.)
  • Most bedrooms don't have access to the balcony.  Of itself, this is not an issue, but it makes both the bedroom dark (and for the smaller apartments, the balcony will be dark and alley-like). 
  • The apartment layouts are troubling.  For example, in 1 bedroom apartments, the bathroom is a long way from the bedroom, through the kitchen.  For most two bedroom apartments, the second bedroom is too close to the main bedroom and too far from the bathroom.   
  • The prices are expensive!  For example, a one bedroom apartment is selling for $467,000 on a low floor.  This apartment is 54 sqm internal.   (The balconies are long and skinny, with an air-conditioning compressor on the balcony.  The apartment, especially the kitchen, is likely to be dark.)
  • The 3 bedrooms are being sold for more than $1.6M.  Small two bedroom apartments (only 84 sqm internal) start at $700,000!

    The design is such that you can't even put a sofa in front of the TV!

    It is worth comparing the West Village apartment with a similar recent development nearby, for example, Opera on Cordelia Street that settled about 6 months ago.  A similar size brand new one bedroom in Opera, which I feel is a better quality development is a better location, recently sold for $415,000 on a midlevel floor.  A floor plan for the Opera apartment is below.  When you compare the apartments side by side, you can see that the Opera living room space is bigger, and the design is better.  Opera even has a walk-in wardrobe and a separate laundry, plus more storage cupboards, and an island kitchen bench.  (It is also better quality, for example, deducted air conditioning.)


    So make sure you compare what is currently happening in the market, for existing apartments, before buying in a risky new off-the-plan development.

    Wednesday, February 14, 2018

    Is there an oversupply of apartments in Brisbane?

    "Brisbane’s high-rise apartments have been growing at a rate of 34% to 43% each census since 2001. This year alone, Brisbane has had 9,000 new apartments supplied, which is a massive 200% increase since 2015. As a result, Brisbane currently has a huge supply of new apartments, and is evidently oversupplied in popular inner-city suburbs such as Fortitude Valley, Newstead and West End.

    However, over the past 12 months, there has been a large reduction in apartment building approvals as more developers have become fearful of the current market. At the moment, 38% of projects with development approval have been deferred indefinitely. Larger developers are even opting to land bank and sell existing projects as they fear getting stuck with a partial apartment development. This is now contributing to Brisbane’s stalling apartment price growth in the densely populated suburbs."

    Saturday, June 17, 2017

    Brisbane off-the-plan market "subdued"

    Place Real Estate Agents issue a quarterly report as to Brisbane apartment sales.  It is worth studying.  See Place Projects website.

    From their recent report for the March 2017 quarter:

    As expected, the March 2017 quarter brought another period of subdued sales activity across Inner Brisbane’s off the plan apartment market as sales momentum continues to soften.

    The Inner Brisbane apartment market saw just 272 unconditional transactions take place throughout the rst quarter of 2017, a substantial decline of 67% from the same period 12 months prior, which recorded 828 unconditional sales. Meanwhile, the weighted average sale price recovered over the past 12 month period, increasing by 5% from $602,415 in the March 2016 period to $629,963 in the March 2017 period.
    • Inner Brisbane’s off the plan apartment market recorded 272 unconditional transactions over the March quarter, the lowest level of sales since the June 2011 period. This re ects a 13.7% decline from the December 2016 quarter.
    • Just over $171.4 million worth of apartment sales were recorded throughout the quarter.
    • There are currently 67 projects being sold off the plan in Inner Brisbane, with just two projects reporting for the rst time during the quarter. These include Augustus Residences and The One, adding an additional 151 apartments to the market.
    • A weighted average sale price of $629,963 was recorded for
      the period, an increase of 5% from the corresponding period
      12 months prior. This is indicative of a slight change in the product mix across the market, resulting in higher sale prices.

    • Augustus Residences, located in Toowong, was the top performer for the quarter, recording 61 unconditional transactions. 
    The Brisbane CBD saw very little activity during the March 2017 quarter, with just 16 unconditional transactions recorded for the period. With no new projects released throughout the quarter, the CBD continues to sell down current apartment stock.


    A weighted average sale price of $668,750 was recorded for the three month period, re ecting a 3.8% decline from the previous quarter, indicating a slight increase in the level of investment stock that transacted during the period. Brisbane Skytower recorded the highest number of unconditional transactions across the CBD market during the March quarter, recording a total of 12 sales.

    The majority of transactions that occurred within the precinct were in two bedroom con gurations, accounting for 88% of total sales. The remaining 12% of transactions for the period were in one bedroom configurations.

    A total of 225 out of 1,498 apartments remain for sale across four projects in the CBD including The Midtown, 111 Quay Apartments, Skytower and Mary Lane. 



    Sunday, May 14, 2017

    Sunland Abian Apartment Resales on Alice Street

    Sunland is in the final stages of completing Abian on Alice Street, in Brisbane city.  The building is high end residential, overlooking the Brisbane Botanical Gardens.  Settlement of new, off-the-plan apartments, is planned for June.

    Sunland reports that the development is sold out.  A few apartments are available for resale:
    • Apt 404, 4th floor, 1 bed, 1 study, 2 cars, 84 sqm, $695,000
    • Apt 1204, 12th floor, 2 bed, 2 bathrooms, 2 cars, 112 sqm, $1.3 million
    • Apt 1603, 16 floor, 3 bed, 3 bath, 2 cars, 225 sqm, $2.7 million
    • Apt 2703, 27th floor, 3 bed, 2 bath, 2 cars, 225 sqm, $2.7 million
    The larger apartments are about $12,000 a sqm.

    Next door, is Quay West, built by Mirvac about 20 years ago.  It is interesting to compare recent sales in Quay West.  For example, Lot 60, which is 1 bed, 1 bath, 1 car on about level 10, at 75 sqm, sold in January for $500,000.  Lot 102, which is the same apartment on a higher floor, sold late last year for $513,000.

    Also,
    • Apt 2102 on the 21st floor is up for auction, which will be a good guide to market price.
    • Apt 1203, 12th floor, 1 bed, 1 bath, 1 car, 75 sqm is listed for sale fully furnished at $510,000
    • See also Apt 2001
    The Quay West apartments are less than $7,000 a sqm.

    It will be interesting to see whether the Quay West apartments increase in value or the Abian decrease in value.  Abian, being newer, should have higher values than Quay West, but nearly double the value is hard to explain.

    Monday, May 1, 2017

    Brisbane apartment sales slow

    The AFR on 27 April 2017 had a story on page 39 about apartment sales slowing in Brisbane and Melbourne.  "Slower off-theplan apartment sales in Melbourne and Brisbane have resulted in fewer projects staring construction, a sign the apartment markets in these two cities may have peaked."

    The story says Brisbane is worse than Sydney and Melbourne.  "While it has 11,000 units due to be completed between late 2017 and 2022, current pre-sales of apartments have slowed forcing developers to abandon projects.  ... Only 52% of the 5,897 apartments currently marketed have been pre-sold."

    There is good news.  "Despite many off-the-plan sales having extended settlement periods, this has not translated into substantial settlement failure across the market.  However, projects completed later int he cycle may be exposed to higher levels of settlement risk than those approaching completion."

    Saturday, February 4, 2017

    Valuer says Brisbane will get worse

    Independent property valuers Herron Todd White say that the Brisbane apartment market is about to enter a decline.  It looks like values will go down.  We have not had a boom in Brisbane since 2007.  Who said property prices double every ten years?  If you bought in 2007, you may still be underwater!

    The report says:
    "Brisbane property has been a heartbreaker over the past few years, offering so much promise, but failing to live up to the hype – and anyone hoping 2017 would prove to be “The Year of the Brissie” will probably be disappointed again.

    The hoodoo continues to be employment-fuelled interstate migration and, truth be told, we can’t see anything on the economic horizon to suggest southern buyers will start heading here in droves.
    That’s not to say we should be ignored - on the contrary, Brisbane is one of the country’s most forgiving capital city markets. There are very few disappointed long-term buyers in our sunshine- state’s big city, provided they stuck with the fundamentals and bought the right property in the right position at the right price. With this historic performance as a foundation, there are opportunities to get into Brisbane and hold tight that will leave you feeling very satis ed with your decision come a market cycle or two.

    Herron Todd White Brisbane has always been keen on well located second hand units as a strategy for those trying to get a foot on the market. They usually offer an affordable option in a great location, and while capital gains aren’t always mind blowing, good tenant demand ensures you can continue to service the mortgage without too much stress. There is, however, a very real oversupply risk looming for investor units in our city as new stock struggles to find demand. This is having a negative flow on to our traditionally solid second-hand unit market. If you buy investor-grade unit stock in particular – new or old – please tread with caution in 2017."


    Thursday, February 2, 2017

    Brisbane Still Going Backwards

    According to RP Data CoreLogic, Brisbane apartments did badly in 2016.  See report here.
    Brisbane apartment prices (to 31 January 2017):
    January 2017 - down 0.1%
    Quarter - up 0.2%
    Year on Year - down 2.7% 
    Median price based on settled sales of Brisbane apartments over the quarter - $380,000

    The report says:
    Mr Lawless cites the large number of high-rise units currently under construction as another factor that may slow overall housing market performance. He said, “Dwelling approvals have already peaked across the high rise sector, as have construction commencements. However, the unit supply pipeline remains at unprecedented levels with a large proportion of these high rise units located within the inner city regions.”
    “As these units flow through to settlement, the risk of buyers receiving a finance shock is becoming heightened.”
    ”Metadata flowing across CoreLogic valuation platforms is showing more than 40% of off-the-plan settlement valuations are coming in under contract price across the Melbourne, Brisbane and Perth unit sectors. While the large majority of these ‘under valuations’ are not showing a significant gap between the contract price and settlement valuation, more significant differences can be seen in some projects and precincts. Buyers who receive a valuation lower than the original contract price will generally require a larger than expected deposit in order to meet the loan to valuation ratio required by the lender.” 

    Saturday, January 21, 2017

    Brisbane Apartments -- What happens next?

    Most predictions for the Brisbane apartment market for 2017 are that prices will fall, and that there is going to be an oversupply or glut of apartments.  Well, maybe.

    I think there may be a glut of certain kinds of apartments in certain areas.  For example, there are a large number of apartments under construction in Bowen Hills and Newstead.  Many of these apartments are small apartments in large buildings.  Some of the buildings are not in great locations or have poor aspects.  I am not sure who will want to live in these apartments.

    But I don't think the news is all grim.  My reasons for saying this:

    1.   In certain areas, there is no a glut of apartments.  Or even where a number of new buildings are under construction or have just been completed, the area has many facilities and a good location.  For example, South Brisbane, Indooroopilly and Toowong have new apartment buildings, but these are excellent areas, and can probably hold up to the new stock entering the market.

    2.   Existing apartments that are 10 to 20 years only are good value.  Many are large apartments and are located in the better areas, and have good views.  Compared with newer apartments, which are smaller, the older apartments look very price competitive.

    3.  There is a shortage of large apartments.  As baby boomers look to downsize, and wealthy families move from Asia to Brisbane, they are looking for apartments that are more than 120 sqm in size.  There are very few apartments in Brisbane that are spacious and luxurious.

    4.  Compared with Sydney, or the freestanding house market in Brisbane, prices for apartments have been relatively flat for the past 2 to 4 years.

    5.  Rents have decreased for some apartment types, but I think that rents will not keep decreasing.  I suspect that this time next year, we may start to see rent increases for certain apartments.

    6.  Not all apartment buildings that have been announced or that are being sold off-the-plan will actually be built.  The potential oversupply is less than anticipated.  (That being said, there are a lot of apartments under construction, and there will be an oversupply.)

    One example to consider.  Sunland is building Abian on the corner of Albert Street and Alice Street in Brisbane city.  The apartments were sold off the plan about 2 years ago (it has sold out) and settlement is likely to take place in June and July this year.  It has a great location, overlooking the Botanical Gardens, and will not be built out other than on the rear side.  It is on a corner block.  It is tall, but there are only about 150 apartments in the building.  Most are large.  The quality of the build and finishings are reported to be super.  There are resales available, and it is said that these kinds of prices are being achieved:
    • Two bedroom, 69 sqm - from $680,000
    • Two bedroom, 103 sqm internal- from $1,150,000
    • Two bedroom and study, about 135 sqm internal - from $1,175,000
    • Three bedroom and study, 150 sqm internal - from $1,700,000
    • Three bedroom and media room, 200 sqm internal - from $2,700,000
    This does not suggest to me that there is oversupply of this kind of apartment in this location.  (Or do these high prices tell us that a crash is coming?)

    On Wednesday, the AFR had an article that said:  "... This year, that courage may well pay off for investors in established apartments.  In Melbourne, Brisbane and Adelaide, owners of these older style 1930s to 1970s built apartments saw little or no return last year and would have enviously watched houses perform substantially better.  This divergence in performance has been due to an oversupply of new units suppressing the entire apartment sector.  But with a slew of recent ABS data showing the apartment building boom is fading, we may well see the first signs of a recovery in older style unit prices and a vindication for remaining faithful to these assets in hard times."

    Is now the time to buy established Brisbane apartments?


    Friday, December 16, 2016

    Big Discounts to Lure Chinese

    On page 3 of the Australian Financial Review on 15 December 2016 is a story titled "Big discounts to lure Chinese unit buyers."  It says that property developers are discretely offering discounts on new apartments in Brisbane and elsewhere to Chinese buyers, in a sign that lending restrictions and oversupply are beginning to affect prices.

    Price discounts of up to 7% are being offered on Chinese property website fang.com.

    An example is given of discounts on apartments in the Brisbane One complex near South Bank.  For a two bedroom apartment of 86 sqm, there is a $40,000 discount, so that the price is now $675,000.  To me, that discounted price seems to be over-priced!

    "The market has slowed down a lot over the past six months and recently the only deals that are moving are those with big incentives."

    A real estate agent reported that a number of his clients in Shanghai had been unable to obtain finance and therefore could not settle, and so lost their deposit.

    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, March 13, 2016

    Has the Brisbane new apartment crash started?

    On 10 March, the AFR reported that there will be a "very messy end" to the apartment boom.  See AFR story here.  It says:

    ""In Melbourne the oversupply will be significant, in Brisbane it will be worse. It is an accident waiting to happen," said BIS-Shrapnel managing director Robert Mellor at the group's six-monthly Building Forecasting Conference."

    Has the end already started?

    Let's look at a recent apartment project in Brisbane, that recently completed -- The Milton at 55 Railway Terrace, Milton.  Some examples of the disaster there:
    • Apartment 1302 is listed for sale for 10% below in the initial price, at $365,000.  For a one bedroom apartment, looking West, which has a 55 sqm internal floor space, and a main bedroom that is only 3m by 3m, and no car space, $365,000 is expensive.  Rent is estimated by the selling agent to be $450 to $460 per week unfurnished, which seems to be optimistic.
    • Apartment 2901 - one bedroom, is not even listed at a price -- "make an offer"
    • Apartment 2709, which is four bedrooms, if it sells at all, will sell for a huge amount less than the current owner has paid
    • Apartment 2005 is listed at $1.1M, which is very high for a 3 bedroom apartment in Brisbane that is only 123 sqm -- you can buy luxury two bedroom apartments elsewhere that are this size and at a lower price, and it only has a narrow tandem carpark
    • Apartment 2311, is not listed with a price
    • Apt 2609 is two bedrooms, "bring me offers"
    • Apartment 3008, a top floor two bedroom, 91 sqm in total, is listed unpriced
    • Apartment 3009, also a top floor two bedroom, is listed for $849,000 -- are they dreaming?
    • Apartment 2511, 2 bedrooms, listed at $659,000 is said to be under offer
    • Apartment 2007, 1 bedroom, is listed at $490,000
    • Apt 502, 2 bedroom, 74 sqm internal, is listed at $499,000
    • The list goes on.
    The onsite agents, Mint Residential, have a large number of apartments for rent.  And so do offsite agents.  The following are rent ranges, depending on floor, car parking etc:
    • 3 bedrooms, from $650 per week to $800 per week
    • 2 bedrooms, from $570 per week to $720 per week
    • 1 bedrooms, from $370 per week to $490 per week
    • A fully furnished two bedroom is listed at $640 per week
    • Some apartments have 4 weeks free rent, which (for example) in effect reduces the rent per week of a $500 a week apartment to $460 a week over a yearly lease.
    The Milton won my award for the wildest advertising claims of 2010.  See this prior post.  In that post, I said:  "They have a sheet of paper showing investment returns for a 2 bed, 1 bath apartment listed at $650,000. The prediction is that this apartment will be worth $807,500 on completion of the project in 2013, and will be worth over $1M by 2016. The predicted rent is over $720 a week in 2013."

    As can be seen from the above, this was in fact wildly inaccurate.  

    The Milton has a host of problems, not simply that it was sold for prices that are way above market price.  The development is on a train line, with half the apartments looking west and close to a brewery.  The river views are distant, and will be blocked by construction of apartments in front.  Body corporate for a 2 bedroom is about $4,800 a year.  See comments in prior posts.  It is very dangerous buying off the plan in Brisbane.

    Compare the above to a 2 bedroom, 2 bathroom, 1 car apartment, 106 sqm, with direct river views, for $700,000.

    If The Milton is representative, then we are in for a very rough ride.


    Monday, March 7, 2016

    Off the plan risks

    Two stories in the AFR today are worth reading, both on page 33.

    The first is titled "Industry warns of settlements failure".  It has a chart that shows that the average number of completed apartments in Brisbane for the period 2007 to 2014 was less than 2,500 a year.  For 2016, it is predicted to be more than 5,000 in the year.  For 2017, it is closer to 10,000, or more than 3 times the past average.

    "The settlement risk will occur in places where prices are slowing and the market's getting harder."

    "Banks are not only cutting back their LVRs, they are also taking a more conservative approach to valuing completed apartments, and in the case of at least one retail bank, this meaning between 15 and 23 per cent below the purchase price."

    So if you are buying off the plan, and have paid a 10% deposit, you may need to stump up 40% of the contract price, because the Banks may only lend in effect 50% of the purchase price.

    The second article is titled "Lenders nervous about incentives to apartment buyers".  It states:

    "A recent survey by WBP Property sowed nearly half of the off-the-plan sales in the eight months to last August were in negative equity, which means worth less than the purchase price."  And this does not take into account transaction costs, such as stamp duty.

    Thursday, January 21, 2016

    China limits cash moves offshore - danger for property settlements

    A story in today's Australian Financial Review is titled "China limits cash moves offshore" and show the risks for developers in relation to off-the-plan sales contracts.  The Chinese buyer may not be able to get the cash out of China, and then may not be able to settle the contract on completion of the building.  And try suing the Chinese buyer.  Some buildings under construction in Brisbane have more than 80% offshore buyers, so I suspect that some developers may run into troubles next year.
    
    
    China limits cash moves offshore
    AFR, 21 Jan 2016, p1
    
    Shanghai | Chinese banks are delaying and even blocking some foreign exchange transactions under a decision by the central government to limit capital leaving the country, a move that could hurt demand for foreign assets including Australian property.
    
    At meetings on Monday and Tuesday afternoon senior bank executives were told by the government to toughen up their capital controls.
    
    While they haven't introduced new rules, one executive told The Australian Financial Review banks were using existing measures to slow the amount of money going overseas. The crackdown has seen more stringent checks for both companies and individuals.
    
    "We are now refusing all foreign currency transfers where the documents are not fully complete … previously the requirements were not so strict," said a bank executive in Shanghai who asked not to be named.
    
    ...
    
    An Australian real estate agent based in Shanghai, Scott Kirchner, said the tougher capital controls could "cause problems for Australian developers as clients may not be able to get their money out of China".
    
    "I'm advising people not to sign a contract unless they already have their money outside China," said Mr Kirchner, a director of BellerChina. "There is lots of uncertainty at the moment and that might affect sales."
    
    In China, individuals are restricted to exchanging the equivalent of $US50,000 in foreign currency each year.
    
    American lawyer Dan Harris said on his blog on January 14 that his firm's China office had received more "money problem" calls in one week than it had received for the whole of the past year.
    
    "If there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars," said Mr Harris from Seattle-based firm Harris Moure.  He said it had affected real estate agents and companies waiting for Chinese investment money.
    
    Previously, one option for those interested in buying overseas property was to use the currency quotas of friends and family.
    
    Alternatively, underground channels in Macau or Hong Kong were available to get money out of the country. Both these methods are now under increased scrutiny as the government tries to stabilise the yuan.
    
    "They haven't introduced any new capital controls but the implementation of existing measures has been strengthened," said another executive, who works at one of China's big state-owned banks.
    
    David Olsson, a China Practice Consultant at law firm King & Wood Mallesons, said Chinese banks "have clearly got some direction to look more closely at outbound capital flows particularly around Shanghai and Shenzhen".
    
    He said it was not expected to affect legitimate outbound investment and Australia would continue to be a big beneficiary of Chinese investment in agriculture, services-related sectors and tourism."

    Wednesday, January 20, 2016

    Failure to settle an off the plan contract was a costly decision

    The Queensland Supreme Court recently decided a case involving an off the plan apartment contract in the Soul building at Surfers Paradise.

    The case is Juniper Property Holdings No 15 P/L v Caltabiano (No 2) [2016] QSC 005 

    Mr Caltabiano purchased the penthouse in Soul in July 2006 for $16.85 million, a lot of money for a 519 sqm apartment.  Mr Caltabiano failed to settle upon completion of the building in 2012.  So the developer forfeited the deposit, and sued Mr Caltabiano for damages.  The developer resold the penthouse in April 2015 for $7M.  So the claim for damages was $8.8M plus interest under the contract for failure to settle for over $3M.

    Mr Caltabiano claimed that the sales agent was misleading -- it was claimed that at the request of Mr Caltabiano, the sales agent provided information in an oral discussion regarding supposedly comparable sales in Jade and Q1.  Mr Caltabiano never checked whether this information was correct.

    The judge decided that the sales agent did not make the alleged misleading statements.  Even if they were made, they were not relied up by Mr Caltabiano.

    1. "The defendant submits that the fact that he did not obtain external advice as to the value of the Soul penthouse or the prudence of the purchase only serves to emphasise his reliance on the alleged representations. However, in my view, it is commercially illogical and inherently improbable that in deciding upon a $16.85 million purchase the defendant would not have obtained such advice because of reliance on the alleged representations made by the plaintiff’s sales consultant comprising comparisons with properties that the defendant did not know anything about. This is where the defendant’s story is incredible." 
    See http://www.sclqld.org.au/caselaw/QSC/2016/005

    This shows one of the many dangers of buying off the plan.  Values may go down substantially between contract and settlement, but you still have to settle.  And if you don't, then you are in big trouble.

    Monday, January 4, 2016

    Brisbane apartment market looking grim

    According to the CoreLogic RP Data Home Value Index, dwelling values were absolutely flat across the combined capitals during December, with negative movements in Sydney, Adelaide and Canberra being offset by a rise in dwelling values across the remaining five capital cities. The Sydney housing market was the main drag on the December results, with dwelling values down 1.2%, while values were down 1.5% in Adelaide and 1.1% in Canberra, and down 0.5% for Brisbane apartments.

    See full report here.

    Brisbane apartment prices (to 31 December 2015):
    December 2015 - down 0.5%
    Quarter - no change
    Year on Year - up 1.8%
    Median price based on settled sales of Brisbane apartments over the quarter - $390,000

    This is not a good result for the Brisbane apartment market for 2015.

    The long term view for the Brisbane apartment market looks very uncertain.

    There are a huge number of apartments being constructed.  There are also a number of new hotels opening, which impacts the short term rental markets (for example,  negatively impacting rents in apartment buildings such as Charlotte Towers, Aurora, Felix, Casino Towers and Festival Towers).  At present, from my informal survey, rents are decreasing in Brisbane and vacancy periods are significantly increasing.  This will only get worse.  I am not the only one say this.  See AFR article.

    It is likely that valuations for new apartments sold off the plan in Brisbane will come in lower than the contract price, which may impact whether non-cash buyers will be able to settle.

    My prediction for 2016 is that we may see values fall in 2nd tier buildings and remain flat in prestige buildings.  Rents will likely continue to decrease.  It looks grim.  What happened to the Gold Coast about 5 years ago (remember, Soul, Hilton and Oracle) may happen in Brisbane this year or next.

    Sunday, May 31, 2015

    Leave Your Money in the Bank

    "The latest research shows that only 10% of sales in the Brisbane inner-city unit market are to owner-occupiers. Investors are buying 90% of the stock and the great majority of them are distant investors – people from interstate and overseas. Many will wish they had left their money in the bank.
    Vacancies in Brisbane’s inner-city suburbs range from 4% or 6.5% - and that’s before all the new supply now under construction hits the rental market. BIS Shrapnel research shows that a record number of new apartments will be completed this year, but more will be finished next year and even more the year after. These numbers are a red flag for sensible buyers.
    Brisbane, like Melbourne and the Gold Coast, is building far too many apartments because they’re not being created for local consumption – they’re being conceived for sale to unsuspecting foreign buyers."