Showing posts with label yield. Show all posts
Showing posts with label yield. Show all posts

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.” 

Sunday, October 9, 2016

Brisbane Rental Yields

The resale market for apartments in Brisbane at present is slow.  There are bargains if you are buying, and it is taking a long time to sell if you are a seller, and often the seller is disappointed with the sales price. 

At present, for apartments in Brisbane that are being sold resale (that is, not by the developer off the plan), the sales prices are decreasing.  Rents are also decreasing, as there is an oversupply.  This is a generalisation, and does not apply to all apartment types or all areas.

I have recently studied the Indooroopilly area.  The gross rental yields are good.  For reasonable quality 2 bedroom apartments, prices have dropped about 10 to 15%.  So apartment that were selling for $485K to $530K last year are now selling in the range of $425K to $500K, with most sales being about $450K to $465K.  Some vendors are selling for more than $100,000 less than what they paid.  The rents for these apartments have dropped from a range of $520 to $560 a week to $480 to $510 a week.  New developments with smaller but modern apartments are doing promotions such as 4 weeks free rent.  On an apartment that I own in Indooroopilly, I am getting a gross yield of 5.7% , where the lease was signed last week.  

Small city apartments are struggling, esp those that are rented in short term rental pools.  I have seen one apartment building in an Accor rental pool where net returns (after rates and body corporates etc) on large one bedroom furnished apartments have dropped from $13,000 a year to less than $5,000 a year. 

Monday, June 1, 2015

Capital city dwelling values rise 9% over past 12 months but capital losses in May

From RP Data:

Today's results revealed the pace of home value growth stalled in May with dwelling values down 0.9% over the month.  After an increase in dwelling values of 3.8 per cent over the first four months of the year, the May CoreLogic RP Data Home Value Index results out today recorded a drop of 0.9 per cent for the month across the combined capitals index; the first month-on-month fall since November last year.

Mr Lawless said, "Over the past three years, dwelling values have risen more than three times as fast as rents. Dwelling values are 24.2 per cent higher across the combined capitals over the past three years while weekly rents have risen by only 7.2 per cent. The net result is that gross rental yields have been compressed from 4.3 per cent back in 2012 to the current average gross yield of 3.7 per cent across the combined capital city index," he said.


Brisbane apartment prices (to 31 May 2015):
May 2015 - up 0.1%
Quarter - up 1.4%
Year to Date - up 1.7%
Year on Year - up 2%
Median price based on settled sales of Brisbane apartments over the quarter - $393,500


Friday, March 6, 2015

Rental Yields Decreasing as Prices Increase

From RP Data CoreLogic:

"CoreLogic RP Data February Home Value Index results released today showed that Australia’s combined capital cities have seen dwelling values rise by a further 0.3 per cent in February taking home values 8.3 per cent higher over the past twelve months.
According to CoreLogic RP Data head of research Tim Lawless, dwelling values continued their upwards trajectory over the month of February by recording a 0.3 per cent gain over the month. This now takes combined capital city dwelling values 2.5 per cent higher over the rolling quarter and 8.3 per cent higher over the twelve months to the end of February.
Over the past twelve months the CoreLogic RP Data Index shows dwelling values across the eight capital city aggregate index are up 8.3 per cent. Sydney is once again the clear standout with dwelling values 13.7 per cent higher while Melbourne values are 7.4 per cent higher. Australia’s third largest city, Brisbane, recorded the third highest rate of annual capital gain with dwelling values up 5.9 per cent. In contrast, dwelling values have increased by less than four per cent in every other capital city over the year.
Evidence of compressed rental yields is continuing across each of the capital city markets. A year ago the gross rental yield for a capital city dwelling was averaging 4.3 per cent; by the end of February the typical gross yield has been eroded down to just 3.7 per cent - due largely to the consistent high rate of dwelling value growth relative to rental growth."

Brisbane apartment prices (to 28 February 2015):
February 2015 - up 0.5%
Quarter - down 2.3%
Year to Date - up 0.3%
Year on Year - up 0.5%
Median price based on settled sales of Brisbane apartments over the quarter - $385,000

So, Brisbane apartment prices over the past year have barely increased, and increased much less than detached houses in Brisbane.  Brisbane is still under performing compared with Sydney and Melbourne.  And if you purchased at the peak of the market in about 2008, you would still be well underwater.


Monday, September 1, 2014

Brisbane Apartment Prices Down Slightly in August

From RP Data's months report for August 2014:

According to today’s results, with rental rates rising at a slower pace than dwelling values RP Data expects to see a compression in rental yields across each of the capital cities. The only regions where yields have moved higher over the past 12 months have been across the Adelaide and Hobart apartment markets.

Across the combined capital cities, the typical gross yield on a house has reduced from 4.1 per cent to 3.7 per cent over the past twelve months. Mr Lawless said the most significant yield compression is taking place in Sydney and Melbourne.

Investors are currently comprising their largest proportion of new mortgage commitments since late 2003. In fact, investor loan commitments have accounted for more than 38 per cent of all mortgage lending for nine consecutive months, the longest period ever that investment lending has held above that level.

“Investors are mostly concentrated across the Sydney and Melbourne apartment markets where capital gains have been strong but yields have been pushed very low. Potentially there are better investment returns to be had in the smaller capital cities where the growth trend is less mature and yields are also healthier.” Mr Lawless said.


Brisbane apartment prices (to 31 August 2014):
August 2014 - down 0.5%
Quarter - up 1.6%
Year to Date - up 2.6%
Year on Year - up 5.6%
Median price based on settled sales of Brisbane apartments over the quarter - $389,250

Saturday, August 30, 2014

Top Yields

Today's paper had a chart with the top rental yields for inner-city Brisbane.  All were apartments.  A summary of some of the data:

  • Spring Hill - based on 170 sales, median sale is $380,000, median asking rent is $485, so indicative gross yield is 6.6%
  • Brisbane city - based on 666 sales, median sale of $500,000, rent $600, so a yield of 6.2%
  • Woolloongabba - 86 sales, sale price of $400,000, rent $465 so yield of 6%
  • The Valley had an indicative yield of 5.6%
  • South Brisbane had an indicative yield of 5.4%
These figures are a little rubbery.  The apartments being sold may not be the same apartments listed for rent.  The rent is the asking rent, not the rent achieved.  The figures do not take into account vacancy.  And the sales price does not include stamp duty.

Take the following example, of an apartment sold for $431,000 and then rented furnished for $550 a week.  On a simple calculation using these numbers, the yield is 6.63%.  If stamp duty of $13,510 is added, the real sales price is $444,510, so the yield changes to 6.43%.  Once letting agents fees, body corporate fees and rates are taken into account, the yield drops to 4.5%.  And this does not include vacancies and repairs.

I recommend focusing on net yield, after expenses.  For a one bedroom apartment, you should aim for a net yield of 5%.  For a two bedroom, aim for a net yield of 4.5%.  For a three bedroom, 4%.

Friday, May 2, 2014

Likely increased investor activity in Brisbane predicted

From RP Data Press Release:  "Gross rental yields on a typical Melbourne house are sitting at 3.3 per cent and Sydney gross yields are a bit higher at 3.7 per cent. According to Mr Lawless, such a scenario of low yields in these two cities suggests that housing values have moved out of step with rental rates which is likely to dampen some of the investor exuberance we have seen in both of these markets. I wouldn’t be surprised if Brisbane, where home values are much more affordable and rental yields are comparatively healthy, will start to see an increase in investor related demand based on Brisbane’s early stage in the growth cycle and comparatively healthy rental yields,” he said."

Wednesday, February 5, 2014

Brisbane in Early Stage of Growth Cycle

"Rental rates continued to grow at a slower pace than dwelling values and further eroded rental yields across the capital cities. The markets where dwelling values have shown the most appreciation, Melbourne and Sydney, are now showing gross yields for houses below 4 per cent while the typical gross yield on a Melbourne and Sydney unit are higher at 4.2 per cent and 4.7 per cent gross respectively, however, they are lower than in all other capital cities.

According to Mr Lawless, such a yield environment may potentially start acting as a disincentive to investors. 

“With gross yields low in Melbourne, and not a lot better in Sydney, together with the fact that both these markets are well advanced in their growth cycle, it would suggest that investment fundamentals in these markets are waning. It is my view that investors will start seeking out the higher yields of Brisbane where the market is also far earlier in the growth cycle,” he said.

The Brisbane apartment median price is up 2.6% for the quarter and 0.8% for the month, according to RP Data.


Tuesday, October 8, 2013

Rental Yields

Brisbane rental yields have increased dramatically over the past five years.  At least one commentator is suggesting that this means Brisbane real estate prices have room to increase.


Saturday, September 21, 2013

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.

Thursday, August 15, 2013

Rental Increases

In Australia, rental yields for apartments are 4.9%, according to RP Data.

Saturday, May 18, 2013

Investors Returning to the Market?

"With lower interest rates and home value growth remaining moderate we would expect that the basis point spread between official interest rates and gross rental yields on houses to increase further over the coming months which would subsequently make investing in housing potentially even more attractive for those investors focussed on yield."

See Why Are Investors Returning to the Housing Market?

Sunday, June 3, 2012

RP Data Report


From a recent RP Data Report:

Brisbane values and volumes
  • Over the past 12 months, property values in Brisbane have fallen by -6.6 percent for houses and units declined by -5.4 percent, underperforming the ten year average annual growth rates of 8.0 percent for houses and 7.0 percent for units.
  • Although the combined capital cities began to record a strong rate of growth post GFC, Brisbane’s property market underperformed and has recorded limited growth in home values over the past five years.
  • Brisbane’s property market also experienced distinct cycles over the past decade, with annual property value growth recording an historic high in November 2003, then consolidating over 2004 to 2006, followed by a strong recovery prior to the GFC however, Brisbane has been underperforming since 2008.
  • Over the last five years, sales volumes have been recorded an average of 3,915 transactions per month.
  • The current sales volumes are estimated to be -24 percent lower than the five year average.
  • Brisbane’s median house price is recorded at $430,000 and the median unit price sits at $360,000 in April 2012. 
Key Statistics

  • Compared to the combined capital city average, Brisbane’s property values have been underperforming since the beginning of 2009.
  • Over the past five and ten years, Brisbane has experienced a much stronger housing market performance than it has over the past 12 months.
  • Vendor discounting rates are currently recorded at an average of -9.5 percent for houses and -7.5 percent for units. At the same time last year, discount rates were recorded at -8.9 percent for houses and -7.8 percent for units.
  • In March 2012, Brisbane houses were on the market for an average of 86 days and 58 days for units. In March 2011, houses took an average of 88 days to sell and units 66 days, highlighting a slight improvement in conditions for sellers.
  • Vendors who sold their dwellings over the past year had owned their houses for 8.7 years on average and units for 6.9 years. 
  • In June 2011, Brisbane’s estimated population was roughly 2.1 million persons, growing by 1.7 percent over the year.
  • Brisbane dwelling are each home to an average of 2.7 persons. 



Friday, February 24, 2012

Hamilton Harbour Press Release


HUNDREDS of new sales and settlements of residential apartments at the Hamilton Harbour mixed use development are signaling renewed confidence in Brisbane’s property market, according to developers Leighton Properties and Devine Limited.

During the November-January period, over 380 pre-sold apartments settled in the 22-level Harbour One and 19-level Harbour Two towers, completed in November 2011.  This now brings total settlements to more than 90 per cent of the 434 pre-sold apartments.

Project director John Campbell said, “Predominantly local buyers have been the driving force behind these sales and the average price of settled apartments is $526,000.  Pre-sales accounted for over 90 per cent of apartments in the two towers, a Brisbane record for the post-GFC environment.”

The 20-level third and last residential tower Riverside Hamilton, currently under construction and due for completion in late 2012, had sold 128 apartments (113 on unconditional contracts) by the end of January.

With Harbour One and Harbour Two owner occupiers moving in, and over 75% of investor purchased properties already rented, the first two towers are quickly filling up with residents.

“The average gross rental yield on one-year leases is 5.3 per cent across all stock, with one-bedroom and two-bedroom with study products achieving higher yields,” Mr Campbell said.  “Professional workers, couples and fly-in fly-out workers are boosting popularity of the leases on offer, with rents starting at $300 per week.

Mr Campbell said residents were also eagerly awaiting the opening of Hamilton Harbour’s commercial and retail precinct which would bring restaurants, convenience and boutique shopping right to their doorstep.

Sunday, December 4, 2011

Apartment values outperform houses in Brisbane


Headline in today's paper:
UNITS continue to outperform houses in Brisbane, according to the latest market research from property analysts RP Data.
Extract from story:
"And, from an investment perspective, they offer superior rental returns. The gross rental yield for a Brisbane house is currently recorded at 4.7 per cent compared to 5.3 per cent for Brisbane units."  [Note: this does not take into account higher costs for apartments, namely body corporate fees.  It may be the case that net yields are similar for apartments and houses.]
The level of vendor discounting for houses is also greater - 8.3 per cent compared with 6.8 per cent for units.
"Discounting levels for houses are higher than at the same time last year, however unit discounting is slightly improved from the 7 per cent 12 months ago," Mr Kusher said.
"Despite the inflated discount levels, both measures are below their recent peaks of 8.7 per cent and 7.8 per cent respectively."
The average time it takes to sell a Brisbane property is also at relatively high levels.
Of those properties that sold in October, houses had been on the market for an average of 61 days and units 60 days. Both measures were higher than they were 12 months ago, but both had improved from their respective recent peaks of 66 days for houses and 61 days for units.
Mr Kusher said the data was for October and therefore did not take into account the Reserve Bank cut in interest rates by 25 basis points on Melbourne Cup day."

Tuesday, July 5, 2011

RP Data May 2011 Index

RP Data – Rismark Home Value Index Release

Capital city dwelling values declined by 0.3 per cent (seasonally adjusted - s.a.) in May, and are down 1.2 per cent (s.a.) over last 3 months. Rest of State house values were also weak in May (-0.1 per cent s.a.) and are off -0.9 per cent (s.a.) over last 3 months. Gross rental yields for Aussie apartments are now 5.0 per cent.

Based on more than 110,000 home sales nationally in 2011, the market-leading RP Data-Rismark Home Value Index for Australia’s capital cities declined by -0.3 per cent (s.a.) in the month of May (or by -0.5 per cent in raw terms). Capital city home values have now fallen for the last five consecutive months with by far the worst seasonally-adjusted result coming in the month of January (-1.2 per cent), which accounts for 45 per cent of the 2011 decline.

The softening in Australian home values is delivering a valuation dividend with Australia’s dwelling price-to-disposable income ratio falling to 4.2 times, which is its lowest level since June 2003 according to Rismark’s analysis.

RP Data’s research director, Tim Lawless, added “For property investors, rental yields are also improving with RP Data-Rismark’s Index showing that gross Australian apartment yields have now risen to 5.0% (see chart). The best rental yields can be found in Darwin (5.7 per cent), Canberra (5.4 per cent), Brisbane (5.2 per cent) and Sydney (5.2 per cent). The worst yields are in Melbourne (4.2 per cent), Adelaide (4.6 per cent) and Perth (4.9 per cent).”

Over the three months to May 2011 dwelling values in Australia’s capital cities have retraced by -1.2 per cent on a seasonally-adjusted basis. In raw terms, dwelling values have fallen by -1.3 per cent. The quarterly rate of decline has, however, moderated since the end of March when home values were off by -2.0 per cent care of a flood-affected January.

Over the 12 months to end May, Australian capital city dwelling values are now down -2.3 per cent (seasonally-adjusted). If we just look at the first five months of 2011, Australian home values have stepped back by -2.7 per cent.

Across the capital cities performance has been varied and counter-intuitive to the purported resources boom. Sydney is the only market to have recorded a modest capital gain over the last year (up 1.0 per cent). Homes in Canberra have also held ground (-0.1 per cent over the year). All other capitals have slipped into the red, with some down by significant margins.

According to Tim Lawless, the two weakest results have been Perth, where dwelling values are down -7.5 per cent year-on-year, and Brisbane, which is off by -5.9 per cent over the year. ...

According to Tim Lawless the weakness across equities markets is likely to be an important factor affecting the premium housing market: “The S&P/ASX 200 Index remains almost 35 per cent below its November 2007 peak and the index is down 8 per cent since the start of April. The top end of the market clearly benefitted from the circa 40 per cent rise in share prices following the trough in March 2009. However, the recent share market weakness is affecting premium demand.”

Ben Skilbeck, Rismark’s Joint Managing Director, added, “Demand for Australia’s luxury homes has also been sapped by the surging currency, which has made local housing much more expensive for expats located in Europe, North America and Asian countries with US dollar currency pegs to buy. Financial markets are currently pricing in a decent chance of an interest rate cut over the next 6-9 months. If the RBA does indeed reduce rates, this would provide substantial support to the market. However, our central case remains that rates are heading up, not down, and thus we are not looking for any capital gains in 2011. That said, total returns will be boosted by very solid growth in rents, with gross yields in May now at 5.0% for Aussie apartments. Rental vacancy rates remain very tight, so we expect to see further improvements in rental returns.”

See RP Data Press Release.

See also Brisbane Times

"Consumers are well and truly focused on saving, not spending," Mr Lawless said. "Despite the low rate of unemployment and the strength of the resources sector, it is clear that the average Australian is content to pay-down debt and wait for some economic certainty to return. As a consequence, transaction volumes in the real estate market are about 20 per cent below the five year average and listing volumes are about 25 per cent higher than what they were last year."

Vendor discounting in Brisbane has fallen back to 7.8 per cent after peaking at 8.3 per cent last December.

Saturday, April 16, 2011

Rental Yields


From an REIQ press release from Friday:

"Demand for rental homes in resource-rich regions of Queensland is continuing to drive up residential rental yields in some mining areas, according to the Real Estate Institute of Queensland (REIQ).


The REIQ residential rental yield report found that over the December quarter 2010, the postcodes of Dysart, Blackwater and Moranbah in Central Queensland recorded gross yields between 14.5 and 8.9 per cent because there remains more demand than supply for rental homes in many of these mining areas.


Across the state, however, the market conditions of the past 12 months has resulted in more sustainable gross rental yields given property prices have generally softened and rents have remained stable.


Australian Bureau of Statistics (ABS) figures show that investor numbers in Queensland increased in February compared to January however numbers remain at historic lows."


For apartments and townhouses:



Tuesday, March 29, 2011

Yield

"Industry experts estimate a yield of at least 5 per cent is needed to attract investors into the market, though at this level it is unlikely to generate a positive cash flow.

Given the past performance and recent volatility of the rental market, which has occurred despite low vacancy rates, investors should be factoring both negative and positive rental-growth scenarios when making purchasing decisions.

Prospective off-the-plan buyers should also consider what kind of apartment stock and how much is planned in their immediate area, which could affect demand and rental levels by the time their unit is put on the market."

From Domain

Sunday, February 27, 2011

RP Data's Quarterly Review

From RP Data's Quarterly Review for the December 2o1o Quarter, released February 2011:

Overall, the fourth quarter of 2010 has been characterised by continuing soft conditions within the residential property market whilst Australia's economic conditions are the envy of many other developed countries. For 2011 we are forecasting minimal property value growth as the market continues to transition out of the growth phase and from a market favouring the vendor to one where buyers are back in the driver's seat.


  • Brisbane's capital gains have been well below the combined capital city average since the start of 2009. Compared to Brisbane's longterm and medium term gains, the last 12 months has recorded a very weak performance.
  • Average discount levels currently sit at 8.6 percent for houses and 6.6 percent for units and at the same time during 2009 discount levels were recorded at 5.4 percent for houses and 4.5 percent for units.
  • Houses in Brisbane are currently taking an average of 60 days to sell whilst units take 55 days. In comparison, 12 months prior houses took 40 days and units 37 days to sell.
  • Of those Brisbane dwellings sold during the last year vendors had on average owned houses for 8.1 years and units for 6.4 years.
  • Brisbane's population was estimated to sit at just above 2 million persons at June 2009 and has grown at 2.7 percent over the 12 months, or by an estimated 52,104 persons.
  • During the last 12 months, value growth has been significantly lower than five year and ten year average levels with house values falling by 1.1 percent and unit values falling by 0.2 percent. Across the capitals, only Perth has recorded lower capital growth during the year.

  • There has been an improvement in unit rentals during the last quarter, increasing by 6.9 percent whilst house rents have softened by 1.0 percent.
  • With rents easing over the last year they remain well below their peak of $413/week for houses whilst unit rents are currently at an all-­‐time high.
  • Gross rental yields have generally been falling since the beginning of 2009 however, there has been some recent improvement with yields recorded at 4.3 percent for houses and 5.3 percent for units.

Friday, October 16, 2009

REIQ June 2009 Brisbane Apartment Gross Yield Report

Locality Weighted average median¹ Median Rent /Wk Annualised Median Rent² Gross Rental Yield
Brisbane City/Spring Hill $360,676 $540 $28,080 7.8%
Buranda/Dutton Park/Gabba $337,000 $380 $19,760 5.9%
East Bris/Kangaroo Point $401,306 $435 $22,620 5.6%
Highgate Hill/Sth Bris/WEnd $440,704 $460 $23,920 5.4%
Bowen Hills/Valley/Newstead $472,500 $450 $23,400 5.0%
St Lucia $455,000 $415 $21,580 4.7%
Indooroopilly/Taringa $395,150 $360 $18,720 4.7%
Paddington $387,500 $350 $18,200 4.7%
New Farm $435,750 $390 $20,280 4.7%
Ascot/Hamilton $372,869 $325 $16,900 4.5%
Corinda/Sherwood $361,500 $300 $15,600 4.3%
Auchenflower/Toowong $448,455 $350 $18,200 4.1%
Chermside $416,500 $320 $16,640 4.0%
Kelvin Grove/Red Hill $493,103 $340 $17,680 3.6%