FKP's SL8 Monster

FKP developed a project in West End, called SL8, a few years ago.  It is interesting to look at how it has performed.  FKP advertised this as an architect designed building in a good location.  In my opinion, the design was poor, and the location (even though in West End) is not great.

Here are the recent resales of apartments in SL8 (all two bedroom apartments), 8 Musgrave :

• Apt 146, sold off-the-plan for $545,000 in 2007; resold for $475,500 in May 2012
• Apt 123, sold off-the-plan for $585,000 in 2008; resold for $449,000 in November 2011
• Apt 174, sold off-the-plan for $725,000 in 2007; resold for $600,000 in November 2011
• Apt 144, sold off-the-plan for $765,000 in 2008; resold for $610,000 in October 2011
• Apt 214, sold by the developer for $520,000 in July 2010; resold for $440,000 in September 2011

Who said you can't loose buying property?  Every purchaser who has resold in SL8 has lost money.  And don't forget, the above does not take into account stamp duties and real estate agent fees.  Most buyers lost more than $100,000 when reselling.  If the buyers borrowed 80% of the purchase price, the buyers would have lost 100% or more of their equity.

Why such massive capital losses?  The property market has clearly gone into negative territory.  But a key factor here in my opinion is that the developer priced the apartments above the market value even in 2007, promoted the development heavily (including website keyword optimisation), and delivered a mediocre product.  (Have a look at the comments regarding this FKP advertorial.)  Take extreme care when buying off the plan!

Metro 21 Sales

A boutique apartment building in Brisbane City is Metro 21, located at 21 Mary Street.  I generally like this building, because it is smaller than most inner city buildings.  It is about 34 floors high, with a maximum of 4 apartments per floor.  There is a pool and gym, and as well, a sky lounge BBQ area on level 26.  Some of the 2 bedroom apartments have 2 ensuites, plus a 3rd guest bathroom, making it a good apartment to share.  The two bedrooms are 84 sqm internal, plus a large balcony.

Recent sales:

Apt 3401, 2 bedrooms, 3 bathrooms, sold in May for $550,000

Apt 1701, 2 bedrooms, 3 baths, sold in March for $492,500

Apt 1003, 1 bedroom, no car, sold in February for $310,000.

Apt 1804, 2 bedrooms, sold in October 2011 for $525,000.

Few Optimistic Words From Real Estate Lobby Group

From an REIQ media statement, issued last night:

"Queensland home buyers retreated from the property market in the June quarter as they waited for the return of stamp duty concessions but house prices held their ground, according to the latest Real Estate Institute of Queensland (REIQ) data.The REIQ June quarter median house price report, released today, shows house prices remaining steady in the face of lower sales activity across the State. REIQ CEO Anton Kardash said there was a noticeable slow-down in activity from May to June."

REIQ is the lobby group for Queensland real estate agents, and they are reporting a slow-down and lower sales activity.  That is, nothing is selling.  (The median house price data released by REIQ, which is for houses (not apartments) is not that useful, if there are few sales.  The price data reports only on what is selling today, and not whether values for any particular property have risen or fallen.)

River Place - Recent Sales

Recent sales for River Place, 82 Boundary Street, on the river in Brisbane.

• Apt 142, 2 bed, 2 bath, sold in May fully furnished for $563,000
• Apt 79, 2 bed, 2 bath, sold in May for $618,000
• Apt 98, 1 bed, 1 bath, sold in March for $402,000
• Apt 59, 2 bed, 2 bath, sold in March for $539,500
• Apt 319, 4 bed, 2 bath, sold in March for $1,815,000

Oaks Aurora Towers - Recent Sales

Recent sales in Oaks Aurora Towers, an apartment building at 420 Queen Street that is managed by the onsite manager as a short term serviced apartment complex.

• Apt 316, 2 bedrooms, 2 bathrooms, sold in June for $582,500
• Apt 84, 2 bedrooms, sold in May for $512,500
• Apt 439, 2 bedrooms, 1 bathroom, sold in May for $500,000
• Apt 289, 2 bedrooms, 1 bathroom (no car), sold in May for $420,000
• Apt 356, 2 bedrooms, 2 bathroom, sold in April for $600,000
• Apt 514, 2 bedrooms, 2 bathroom, sold in March for $605,000
• Apt 368, 2 bedrooms, 1 bathroom, 1 car, sold in March for $428,000

Highest priced sale this year:

• Apt 626, 3 bedrooms, 3 bathroom, 2 car, sold in January for $1,255,000 (after being listed for over 250 days for sale according to online databases).

Profits and Losses on Actual Sales Data

From a report from RP Data, that shows a number of people made losses when sell property -- it is not true to say "as safe as houses" if you buy badly or at the wrong time or hold for a short period:

As a special feature in this report we examine the level of gross profit or loss based on residential dwellings that sold during the March quarter of 2012. The results are shown in the graphs below across all sales and also divided between homes that were purchased pre and post GFC (before or after January 1, 2008).

Of those owners that had purchased their home prior to the financial crisis (for the purposes of analysis we have used the date of January 1, 2008), a lower 7.2 percent had sold their home at a loss. A much greater 42.3 percent of these vendors sold their home at price which was at least double the previous purchase price.

Capital gains were much weaker for those vendors who had purchased their home in 2008 or thereafter. A larger proportion of these vendors recorded a loss on their sale, with 27.5 percent of dwellings sold recording a sale price lower than the initial purchase price. On the other hand, only 7.5 percent recorded a capital gain of more than 50 percent compared to the original purchase price. These results reflect the significantly weaker housing market conditions since 2008 and the benefits of a long term hold when it comes to turning a profit on residential property.

The most significant barrier to a housing market recovery

"The most significant barrier to a housing market recovery: 301,414 homes for sale.

The number of homes available for sale across Australia has been decreasing; however stock levels remain well above average. Over the four weeks to 8 July 2012 RP Data tracked 301,414 unique properties advertised for sale across the country. While the number of homes available for sale is very high, the volume has been reducing and is actually about -7.4% lower than when supply levels peaked last November. ... Clearly, the large number of homes available for sale is due to a lack of absorption rather than a large number of new listings being added to the market."

See Property Pulse.

There are also a large number of properties that owners want to sell, but cannot, so they have been withdrawn from the sale process and rented out, with the hope that the market improves.

Recent Apartment Sales in Brisbane

Metro 21 (21 Mary Street)

• Apt 1701, 2 bedrooms, 3 bathrooms, sold furnished $492,500 (rents for $700 per week)
• Apt 1003, 1 bedroom, $310,000

Quay West (132 Alice Street)

• Lot 29, Apt 503, 1 bedroom, 73 sqm total size, sold furnished $450,000

Admiralty Towers One (48 Howard Street)

• Lot 105, 2 bed, 2 bath, on Macrossan Street side, sold on 28 April, $532,500
• Lot 85, 1 bedroom, direct riverfront, sold on 4 April for $562,000
• Lot 141, 2 bedrooms, 2 bathrooms, $535,000
• Lot 31, 2 bedrooms, 2 bathrooms, $615,000
• Lot 5, 1 bedroom, 1 bathroom, on rear of building, for $490,000

Admiralty Quays (32 Macrossan Street)

• Lot 83, 1 bedroom, $580,000

Felix (26 Felix Street)

• Lot 57, 2 bedroom, 1 bathroom, large courtyard, sold for $540,000
• Lot 152, 2 bedrooms, sold for $475,000
• Lot 117, 2 bedrooms, sold for $465,000
• Lot 278, 1 bedroom, no car, sold for $325,000

Casino Towers (151 George Street)

• Apt 1503, 2 bedrooms on front/side, with river and Southbank views, settled in May for $580,000.
• Apt 1603, 2 bedrooms, on front/side with river and Southbank views, $565,000
• Apt 2202, 2 bedrooms, middle front with river and Southbank views, 103 sqm total size - $655,000
• Apt 2107, 2 bedrooms, river views, 93 sqm total size - $515,000
• Apt 2104, 1 bedroom on rear - $362,500
• Apt 3803, 2 bedroom sub penthouse, 188 sqm in size - $805,000

Rent Sales in Charlotte Towers

• Apt 1907, 2 bedrooms, sold on 11 April 2012 for $456,000
• Apt 1104, 1 bedroom, no car, sold on 27 March 2012 for $326,000
• Apt 2808, 2 bedrooms, sold on 25 March for $510,000
• Apt 605, 1 bedroom, sold on 22 March 2012 for $290,000
• Apt 1704, 1 bedroom, sold on 21 March 2012 for $322,500
• Apt 2003, 2 bedrooms, reported as sold on 17 March for $475,000
• Apt 2804, 1 bedroom, sold on 14 March for $350,000
• Apt 1210, 1 bedroom, sold on 12 March for $338,000
• Apt 4108, 1 bedroom, sold on 5 March for $330,000
• Apt 2502, 2 bedrooms, sold on 1 March for $498,000
• Apt 910, 1 bedroom, sold on 29 February for $370,000
• Apt 1904, 1 bedroom, sold on 21 February for $327,000

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.

Evolution Sales - Massive Losses for Investors

I have written in the past about Evolution, and how Citimark sold these apartments off-the-plan at high prices.  It is not the greatest quality building in my opinion.  Most of the original buyers from Citimark were Korean.  Evolution opened in 2008.  Here is some recent sales evidence:

• Apt 245, sold off the plan in 2006 for $767,500.  Resold in November 2011 fully furnished for $605,000.
• Apt 184, sold off the plan in 2006 for $660,500.  Resold in November 2011 for $460,000.
• Apt 153, sold off the plan in 2009 for $570,000.  Resold in October 2011 for $410,000.
• Apt 276, sold off the plan in 2006 for $701,000.  Resold in September 2011 for $620,000.
• Apt 163, sold off the plan in 2007 for $649,500.  Resold in September 2011 for $435,000.
• Apt 194 sold off the plan in 2006 for $512,720.  It is currently listed for sale for $510,000.  Based on the above, it will be lucky to be sold for above $460,000.

This shows massive capital losses for each of these buyers.  Take care when buying from developers off the plan.  Take extra care if buying from Citimark!

Number of Dwellings Sold in Brisbane

In Brisbane, in 2003, over 73,000 dwellings were sold.  In 2007, over 69,000 dwellings were sold in Brisbane.  However, in 2011, only 34,300 dwellings changed hands.

This was the lowest number of properties sold in any year in Brisbane in the past decade.

RP Data says:
"Clearly 2011 was a very weak year for housing transactions. The higher interest rate environment throughout much of the year and the general conservative nature of consumers were likely to be the biggest influences on such a low volume of sales. We are anticipating transaction volumes will pick up over 2012 due to slightly more favourable conditions."

See Article from RP Data

Brisbane real estate transaction volumes below average

Recent Brisbane City Apartment Sales

Here are the recent reported apartment sales in the larger Brisbane downtown buildings.  Most of these sales closed in the period from late October to early December 2011.

Charlotte Towers

• Apt 2110, 1 bed, 1 bath, 1 car - $382,000

Aurora

• Apt 393, 2 bed, 2 bath, 1 car - $665,000
• Apt 236, 2 bed, 2 bath, 1 car - $515,000
• Apt 512, 2 bed, 1 bath, 1 car - $582,000

Festival Towers

• Apt 3401, 2 bed, 2 bath, 1 car - $475,000
• Apt 1707, 2 bed, 2 bath, 1 car - $440,000
• Apt 2110, 1 bed, 1 bath, ? car - $350,000

Felix

• Apt 356, 2 bed, 2 bath, 1 car - $505,000
• Apt 276, 2 bed, 1 bath, 1 car - $492,000

River Place (82 Boundary Street)

• Apt 302, 2 bed, 2 bath, 1 car - $690,000
• Apt 326, 3 bed, 2 bath, 2 car - $1,497,000
• Apt 231, 2 bed, 1 bath, 1 car - $423,000
• Apt 110, 1 bed, 1 bath, 1 car - $410,000

Skyline

• Apt 55, 1 bed - $320,000
• Apt 131, 3 bed, 2 bath, 1 car - $700,000

Admiralty Quays

• Apt 9, 3 bed, 2 bath, 1 car - $900,000
• Apt 67, 1 bed, 1 bath, 1 car - $580,000
• Apt 135, 2 bed, 2 bath, 1 car - $780,000

Admiralty Towers Two

• Apt 57, 2 bed, 2 bath, 1 car (103 sqm) - $660,000

No reported recent sales (last October to early December) in Casino Towers, Quay West or Admiralty Towers One.

Two Queensland Buildings

From a recent article by Matusik: A Tale of Two Queensland Buildings

"Firstly, an investment dwelling’s worth should be determined by income – that means rent – just like it does for offices, shops and factories.  It shouldn’t be determined by a “comparable” resale.

Secondly, how and where the developer spends his or her money on a project shouldn’t affect the market’s (nor valuers’) perception of value.

• An investment’s value shouldn’t be determined by what a buyer once paid but by its income.
• The distribution of costs has no bearing on the end value of a product."

Full article here.

Brisbane Sales Volumes

Here are the number of properties sold in the 4000 post code area each year.  This volume includes apartments and houses in the downtown Brisbane area and Spring Hill.  Mostly, it will be apartments.

• 2007 - 1,342 properties sold
• 2008 - 729 properties
• 2009 - 825 properties
• 2010 - 525 properties
• 2011 - year to date reported sales - 254

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.