Month In Review

The Herron Todd White Month in Review report, issued each month, often has useful commentary. Some extracts from the September 2010 report:

"Importantly, do not read ‘relatively affordable’ as ‘secondary quality’. It is better to stretch the dollar a bit and buy a dodgy looking second had unit with good bones and quiet position in an area such as Ascot or Toowong, rather than a brand newie in the same areas that is the size of a bathtub and has full exposure to rail noise. The good thing with these units is that they always have a strong rental demand and some value-add potential if you get something that needs a little love.

... there are some areas that you should steer clear of.

The first that comes to mind is on the Redcliffe Peninsula and specifically high rise unit developments. A favourable council hell bent on turning the area into something beyond a sleepy seaside habitat went gung ho with developers to create a mini Surfers Paradise along the esplanade. The result was a number of multi-level unit projects designed to take advantage of the views and the natural attributes that usually have investors salivating. Unfortunately the suitors became a little too enamored and far too many projects came out of the ground, with many units snapped up by out of town buyers for prices well beyond the average local punters cashbook. The result - there is now a glut of these attached dwellings throughout the area. Some initial buyers have lost large money and given the abundant supply on the market and the near zero demand from well informed local buyers, the prospects of growth appear somewhat limited for some time at least.

Gold Coast

Overall market sentiment has remained very slow/ subdued over the winter months, with minimal market activity and some less than impressive sale results. Therehas been a significant drop off in the number of sales and selling prices, and fingers are crossed that demand will increase as the election is out of the way and the weather warms up."

The report then lists recent sales where the vendor has lost money.

The report also states that the Brisbane apartment market is "peak of market" and that the Gold Coast apartment market is "declining" but that the Sunshine Coast unit market is at the bottom of the market. This would suggest that it is best to buy on the Sunshine Coast, than in Brisbane or the Gold Coast.

Brisbane Report

"The Redcliffe peninsula was a stellar performer through the 2003 boom. The pointy end of Brisbane’s northern beaches appeared to be an undiscovered wealth of natural riches that went from obscurity to belle of the ball. Council was gung-ho in getting plenty of capital invested in the area and, on the whole, it has awoken this sleepy centre. The downside is the current and continuing oversupply of new units in the area, particularly in the high rise sector. Local government took on a flexible approach to development submissions where many projects were assessed on an individual basis with such items as public space contributions affecting the allowable density of a site. Much of these large scale attached unit developments also take advantage of water views and a café lifestyle that drives demand in so many other centres. The area saw a rush of investors from all around the country eager to take advantage of this now revealed gem. Unfortunately, oversupply is knocking the wind out of the areas sails (and its sales). Capital growth for new unit buyers has been a touch subdued and it looks to continue in this disappointing vein for a little while yet.

A surprise disappointment has been the multiple tenancy properties in greater Brissy. Multi room student complexes, genuine purpose-built flats buildings and boarding houses haven’t sparked as expected over the past year. The income sure looks good but its fair to say that some steam has escaped the rental market and future income potential is a touch more tarnished than it was 12 months ago. These properties probably have some good potential in the long term as long as you stick with the fundamentals - good location and a ready tenant base.

Infrastructure upgrades are another area that has lowered buyer expectations in locations that deserve a little more respect. Kedron is a good case in point. Almost overnight the Northern Busway turned sections of the suburb into a dust laden construction site – not the thing you necessarily want to wake to each day. The works have caused quite a bit of inconvenience and put off a few purchasers. The upside for those willing to take the plunge and grin and bear it is that, if finished right, these areas will benefit from improved transport access and useable community infrastructure."

HTW October Report