Is Housing Market Slowing?

From an RP Data press release:

Mr Lawless said we will need to see further months of flat to negative movements before we can confidently say the housing market is slowing. “Our view is that housing market conditions will start to wind down later this year as affordability constraints and low rental yields dampen market conditions. Additionally, with a belief that mortgage rates are likely to start tightening later this year, it may help to quell some of the exuberance we have been seeing,” he said.

Brisbane apartment prices (to 28 February 2014):

February 2014 - up 0.3%

Quarter - up 1.5%
Year on Year - up 3.1%
Year to Date - up 1.1%
Median price based on settled sales of Brisbane apartments over the quarter - $387,000.

Admiralty One

Apartment 59 in Admiralty Towers One sold at auction this week for $585,000.  It is a two bedroom apartment, in one of the best buildings in the city.

A valuer's view of Brisbane

From the HTW Month in Review for February 2014:

"... Brisbane is often touted as the next most likely to move after Sydney and Melbourne, and there’s no denying that some of these southern states saw a boom run on many suburban market as 2013 drew to a close.  In the field, agents are telling us that things are looking good. There have been multiple lookers at open homes and some auctions are jagging prices above vendor expectation. The pick locations are, and have always been, close to the CBD. The old story of limited supply and good quality stock plus comparatively high demand mean that as long as you’re appropriately priced, there is definitely a buyer or two out there for your property."

Botanica South Brisbane

From information provided by Aria:

Botanica will be located in a prime location at 2-4 Edmondstone Street, South Brisbane which is opposite Coles and adjacent to the renowned Boundary street retail precinct.   The building will consist of 1 and 2 bedroom units, indicatively priced as follows;

• 1 bed 1 bath with parking (50sqm internally & 7sqm balconies): high $300’s - mid $400’s
• 2 bed 1 bath with parking (65sqm internally & 10sqm balconies): high $400’s – mid $500’s
• 2 bed 2 bath with parking (80sqm internally & 10sqm balconies): high $500’s - mid $600’s

That pricing seems high to me.  I can buy a great two bedroom two bathroom apartment in a good inner city building, that is more than 85 sqm internal and more than 12 sqm external, for less than these prices.

Interstate Property Buyers

The AFR had a story on page 3 on Wednesday this week: "Interstate property buyers see value in northern exposure."  Some extracts:

• Investors from Sydney and Melbourne are flocking to Brisbane's apartment market seeking better value for money after being pushed out of increasingly expensive southern cities.
• Brisbane developer Silverstone Developments reports that 72% of off-the-plan sales in its Vertice project at Dutton Park were sold in interstate buyers.
• Other developers are all reporting surging interest from interstate buyers.
• Mirvac's chief executive for residential said there was an upswing in sales of quality Brisbane properties to interstate investors due to the low rental vacancy rates and increasing rental yields in prime locations across Brisbane, as well as the price differential between Brisbane and those in southern states.
• Since 2007, the gap in prices between Brisbane and Melbourne/Sydney has slowly opened up again.
• Further interest in Brisbane will be contingent upon how may jobs the south-east of the state creates.
• There is a lot more value for money in the Brisbane market, according to Metro Property Group.

Are Auctions A Good Way to Sell Property?

From a recent RP Data submission to the Queensland Government:

We conducted some analysis of auction sales in each of these two States for the period 1 October 2012 to 30 September 2013 in order to ascertain whether or not there were any material differences in terms of outcomes between the states. For each of the auction sales in the respective states during that period, we compared the sale price with RP Data’s estimate of the subject property’s market value at the sale date, derived from our automated valuation model (“AVM ”) and utilising only those AVM estimates we deemed reliable. The percentages in the table below demonstrate, by relevant price band, the extent to which the sales price exceeds our estimate of market value. For example, for all properties sold for less than $500,000 in Queensland during this period, only 14.9% of homes were sold for a price we consider to be higher than the estimated market value of the property at that time, with the remaining 85.1% of properties sold at or below our estimated market value.

Brisbane Apartment Capital Growth Summary - December 2013

From RP Data:

Brisbane apartment prices (to 31 December 2013):

Month of December 2013 - up 0.4%

Quarter - up 2.4%
Year on Year - up 3.5%
Year to Date - up 3.5%
Median price based on settled sales of Brisbane apartments over the quarter - $383,000.

Mr Kusher from RP Data said that it is clear that as the market enters 2014 and as values rise across each capital city, the rate of growth will vary greatly. He said that the main challenges in 2014 are likely to be the impact of a forecasted higher unemployment rate, affordability constraints for the more price sensitive sectors of the market (particularly in Sydney, Melbourne and Perth) and whether any regulatory changes will be implemented by APRA and the RBA to cool the near-record high levels of investment activity.

RP Data December 2013 Report

Highlights over the three months to December 2013

• Best performing capital city: Sydney +4.1 per cent 
• Weakest performing capital city: Canberra, -1.3 per cent 
• Highest rental yields: Darwin houses with gross rental yield of 6.0 per cent and Darwin Units at 6.2 per cent 
• Lowest rental yields: Melbourne houses with gross rental yield of 3.4 per cent and Melbourne units at 4.2 per cent 
• Most expensive city: Sydney with a median dwelling price of $655,250 
• Most affordable city: Hobart with a median dwelling price of $330,000

Each capital city housing market recorded positive home value growth in 2013, however, the cities driving the capital growth have been Sydney (14.5%), Perth (9.9%) and Melbourne (8.5%). Brisbane was the only other city to record value growth in excess of 5 per cent (5.1%) with each of the remaining capital cities recording annual value growth of 3.5 per cent or less.

Brisbane – house values have increased by 5.3 per cent over 2013 compared to a 3.5 per cent increase in unit values. Value growth has only slightly outpaced rental growth however it has resulted in gross house yields falling from 4.7 per cent a year ago to 4.6 per cent currently and unit yields easing from 5.6 per cent to 5.5 per cent.

Infinity Brisbane by Meriton

Meriton's Infinity tower in Brisbane is now at its full height -- 81 levels -- and is now the tallest tower in Brisbane.  The internal fit out in the upper levels is not complete.  Lower levels are being occupied.  Meriton is selling apartments up to level 64.

A two bedroom, two bathroom, 1 car apartment in the middle for the building will sell for around $665,000.  These apartments are being offered for rent at $690 a week.  No balcony.  Internal size is 86sqm to 90sqm, which is not large.  I suspect many of the buyers are not Australian residents.

Recent Sales in Brisbane's Admiralty Precinct

Admiralty Towers One (35 Howard Street)

• Apt 93, 2 bedrooms, 2 bathrooms, 2 car parks - sold in September for $880,000
• Apt 58, 2 bedrooms, 2 bathrooms, 1 car park - sold in September for $900,000

Admiralty Towers Two (501 Queen Street)

• Apt 108, 3 bedrooms - sold in September for $938,000
• Apt 132, 2 bedrooms - sold in August for $760,000
• Apt 26, 2 bedrooms - sold in July for $662,000

Admiralty Quays (32 Macrossan Street)

• Apt 100, 2 bedroom 2 bathroom - sold in October for $800,000
• Apt 12, 1 bedroom - sold in August for $590,000

Skyline (30 Macrossan Street - not riverfront)

• Apt 125, 1 bedroom, 1 car - sold in December for $347,000
• Apt 13, 3 bedroom - sold in October for $1,131,000
• Apt 172 - 2 bedrooms - sold in July for $590,000

Riverplace (82 Boundary St)

• Apt 215, 1 bedroom - sold in December for $510,000
• Apt 140, 1 bedroom - sold in November for $435,000
• Apt 316, 2 bedrooms - sold in October for $750,000
• Apt 54, 2 bedrooms - sold in October for $647,000
• Apt 146, 1 bedroom - sold in September for $370,000

Will property growth come to Brisbane?

The release yesterday of the RP Data and Rismark International October housing market results confirmed a 1.3 per cent rise across the combined capital cities index over the month with the rolling 12 month combined capital cities index growth rate recording its fastest pace in three years.

Rismark CEO, Ben Skilbeck, added that while Sydney has eclipsed its previous cyclical high and Melbourne is near its peak, Brisbane remains 8.4% below its highs. “There is, however, evidence that growth conditions may be spreading to Brisbane."

Brisbane apartment prices (to 31 October 2013):

October 2013 - up 0.6%

Quarter - up 2.3%
Year on Year - up 1%
Year to Date - up 1.6%
Median price based on settled sales of Brisbane apartments over the quarter - $375,000.

Recent Brisbane City Apartment Sales

A list of some recent reported apartment sales in Brisbane CBD area, since June 2013.

Admiralty One

- Apt 93, 2 bedrooms, 2 bathrooms, direct river views, large 132 sqm - $880,000

- Apt 125, 2 bedrooms, side river views - $600,000

Admiralty Towers Two

- Apt 132 - 2 bedrooms, direct river views, 116 sqm - $760,000

- Apt 26 - 2 bedrooms, direct river views - $662,000

- Apt 124 - 2 bedrooms, direct river views - $705,000

Admiralty Quays

- Apt 104 - 3 bedrooms - $960,000

Riverplace

- Apt 146, 1 bedroom - $370,000

- Apt 82 - 2 bedrooms - $750,000

- Apt 165 - 1 bedroom - $500,000

- Apt 31 - 2 bedrooms - $650,000

Metro 21

- Apt 283, 1 bedroom on level 28, no carpark - $307,000

- Apt 301, 2 bedroom on level 30 - $553,500

Felix

- Apt 312, 2 bedrooms, 2 bathrooms - $555,000

- Apt 294, 2 bedrooms, 1 bathroom - $485,000

- Apt 324, 2 bedrooms, 1 bathroom - $475,000

Quay West - construction starting next door, and disharmony in building

- Apt 86, 2 bedrooms - $655,000

- Apt 129, 3 bedrooms - $1M

Saville South Bank - reports of two bedroom apartments selling above $900,000.

It appears that pricing is picking up.  In some instances, apartments are selling for record highs.  In other instances, prices are still below the 2007/2008 peak.  Volumes of sales in the period June to September do not appear to be high, although in recent weeks, this may have changed.  The high end sales appear to be to owner occupiers.

Soda Apartments, South Brisbane

A new development at South Brisbane is in pre-sale, Soda Apartments.  Lifestyle video here.

The building is 20 storeys, with 131 apartments.  It is behind Fish Lane Apartments, and is located at 27 Cordelia Street, which is a busy street leading on to the Go Between Bridge.  (Soda will impact the apartments on the northern side of new Fish Lane apartment building, which can be seen on the left in the rendering below.)

• 19th Floor, 2 bed, 1 bath, 71 sqm, apt 1906 = $510,000
• Apartment 608, 2 bed, 2 bath, 90 sqm, no view = $595,000
• Apartment 602, 1 bed, 1 bath, no view = $375,000
• Apt 604, 1 bed, 1 bath, no car, no view, 64 sqm = $340,000
• Apt 1908, 3 bed, 2 bath, 190 sqm = $1,650,000

This pricing looks expensive to me!

Is there a property bubble

Property Observer had a series of comments yesterday, as to whether there is a property bubble in Australia at present.  Queensland's market is not as hot as Sydney and Melbourne.  In fact, a Gold Coast real estate agent told me today that he is waiting 12 months for the Gold Coast to follow Sydney and start to pick up -- until then, no price increases.  And there are no off-the-plan apartment projects being marketed in Surfers or Broadbeach, and no cranes on the Gold Coast skyline at present.  If anything, real estate prices and cost of living is already high in Queensland, and job growth looks uncertain.  So unless there is a sudden rush of investors from the Southern states or from Asia, or massive migration into Queensland, I can't see property prices increasing in Queensland any time soon.

Prices Up, Rents Down?

Some real estate agents are telling me that sale prices for Brisbane apartments are increasing, with apartments selling faster, particularly those that suit owner/occupiers.  On the other hand, agents are having trouble renting apartments -- rents are decreasing and days vacant are increasing.  Thus, for investors, rental yields are getting worse, not better.

I just don't understand

It seems to me that newer apartments are overpriced.  One example.
You can buy a year old apartment in Meriton's Soleil as follows:

• 93 sqm internal
• No balconey
• Air conditioning not ducted
• 2 bedrooms, 2 bathrooms
• Facing West, so hot in the summer
• General views of an ugly part of Brisbane
• Large, impersonal building, used as a hotel
• Your neighbour may be an Eastern European hooker or a football team on tour
• Price = $629,000 (apartment 4403) - $6,763 a sqm

Or you could buy an apartment in River Place:

• 113 sqm total
• Massive balconey
• Riverfront
• 2 bedrooms, 2 bathrooms
• Outdoor pool overlooking the river
• Price - $659,000 (apartment 54) - $5,831 a sqm

Or you could buy an apartment in Quay West:

• 130 sqm total
• Two balconies
• Ducted air-conditioning
• About 130 apartments in building
• Views of botanical gardens
• 2 bedrooms, 2 bathrooms
• Price - about $600,000 - $4,615 a sqm

It will be interesting to see what this apartment sells for in Admiralty One:

• 130 sqm in total
• Balconey
• Direct riverfront
• Ducted air-conditioning
• 2 bedrooms, 2 bathrooms, separate laundry room
• North Eastern view
• About 120 apartments in the building
• Auction -- there has not been a similar apartment sold in this building for years.

Why would you buy in Soleil?  Or in some of the currently marketed off-the-plan developments, when some of the "older" apartments are cheaper on the price per sqm basis, and in better locations?

Shop Amazon Gift Cards - Try Amazon Birthday Gift

REIQ Unit Report - June quarter 2013

The lobby group for Queensland Real Estate agents, the REIQ, issued the following press report and data today:

The sales of units and townhouses across Queensland have risen dramatically compared to last year, according to the latest data.  The Real Estate Institute of Queensland (REIQ) June quarter median unit and townhouse price report, released today, found the preliminary volume of sales increased nearly 40 per cent between the June quarter this year and the same period last year.  Sales of units and townhouses across the State have also grown by 15 per cent compared to the March quarter this year.

REIQ CEO Anton Kardash said the Queensland unit market was mirroring the burgeoning strength of the housing market.  “Both the unit and house markets are gathering steam with sales volumes much improved on the same periods in 2012,” he said.  “What is also interesting to note is that the preliminary numbers of unit sales this quarter were only marginally lower than during the strong spring selling season last year. That is, there were only 66 fewer sales this quarter than in the September quarter last year.  In fact, the June quarter is usually the weakest of the four quarters throughout the year. Over the last 12-month period, however, this quarter was actually the second strongest and very nearly wore the crown as the stand-out three-month period of unit sales activity.”

In Brisbane, the numbers of unit and townhouse sales increased 26 per cent compared to the June quarter last year and were up 21 per cent compared to the March quarter this year.  In Brisbane, the median price dipped by 1.3 per cent to $395,000, which is a result that can be classed as steady. Over the year ending June, its median price was down by 0.8 per cent.  Top Brisbane performers which posted median price growth over the quarter and the year included Kangaroo Point, Nundah and West End.

On the Sunshine Coast, there was a significant shift in demand for lower priced properties over the quarter which resulted in the region’s median unit price decreasing. The numbers of unit sales, however, increased significantly compared to the same period last year." 

[click chart to make bigger]

Hilton Gold Coast Capital Losses

"According to RP Data, since January last year 66 apartments have sold in the Boulevard Tower, with resales making up a small proportion of the total.  

Unit 10504 was bought off the plan for $850,000 in February 2008 and sold on May 30 this year for just $505,000, a 40.5 per cent drop in value.  In July this year, unit 10607 sold for $435,000, a 32 per cent dip in price from January 2011 when a buyer paid $647,000.  A unit on the 21st floor was purchased for $910,000 in January 2008 and sold in November last year for just $525,000."

See Courier Mail

An agent is quoted as saying losses of 30% on the Gold Coast are not unusual.  Take care when buying!

Cheapest Units within 10 km of Brisbane downtown

RP Data released a report today, showing the suburbs with the lowest median price for units within 10km of Brisbane's city centre.  The results are here and here.  The three cheapest suburbs were:

• Chelmer
• Zillmere
• Kedron

Buyers Retuning to the Market?

Real estate agents are reporting that buyers are coming back to the market in Brisbane, and that prices achieved are increasing.  For example, two bedroom apartments in higher quality city apartments that, at the height of the boom achieved above $800,000, and then dropped to the mid $600,000 range, are now selling in the $700,000 plus range, and sometimes more.  This includes a two bedroom apartment in Quay West, sold for about $700,000; a two bedroom in Admiralty Towers Two sold above $750,000 and a two bedroom in Saville at Southbank for more than $800,000.  In fact, another two bedroom at Saville is now listed for sale in the $900,000 range.

Investors appear to be returning to the market, due to lower interest rates.  Owner-occuppiers are looking for larger apartments, and there are not many high quality larger apartments available for sale (partly because developers have been focusing on building very small apartments that have been sold to foreign investors).  With interest rates low, many investors who currently own property are not selling, because these properties are now becoming positively geared -- why sell, unless the price offered is high?  There is a shortage of apartments for sale for owner-occuppiers; and a shortage of existing apartments (compared with off-the-plan apartments) for investors.

Towers like Infinity, aimed at Chinese investors, do not provide what local Brisbane buyers want in my view.

Photo of Infinity, under construction on the right.  Evolution Apartments is the smaller building in the middle of the photo.  The Supreme Court building is on the right in the foreground; the Magistrates Court building on the left in the foreground.  400 George St is the taller building on the left.