Rental Demand in Brisbane

From an REIQ press release:

As we head into the peak demand period for rental properties it is important for tenants to understand the attributes of successful rental applications, according to the Real Estate Institute of Queensland (REIQ).  Starting in January, demand for rental properties increases across the State.  Demand historically peaks during February and March when, based upon historical Residential Tenancies Authority data, leases for about 40,000 rental properties will be negotiated in just two months.

According to rental listings by REIQ accredited agencies on reiq.com, there are currently about 13,000 properties available for rent across Queensland.

REIQ CEO Anton Kardash said as Queensland’s rental market had been in a state of undersupply for most of 2012, it was more important than ever for prospective tenants to understand the rental process.
“Property managers generally use two equally important criteria when assessing prospective tenants for a rental property.  The first is proof of their ability to pay the rent as property managers have a fiduciary duty to the owner, or landlord, to effectively manage the risk of their client’s investment property.  Part of the rental process is to assess whether there is sufficient evidence from the prospective tenant that they would be able to meet the rent. The calculation is generally that rent should not exceed 30 per cent of the total income of all tenants named on the lease.”

The second criterion is evidence of ability to care for a property. Proof of this criterion generally can be provided through a rental or home loan history and/or proof of previous living arrangements, references from previous landlords, and/or personal references.

“In times of increased demand, landlords are also reminded that they must advertise their rental property at a fixed amount,” Mr Kardash said. 

RP Data End of Year Round Up

RP Data has released an end of year roundup video, looking at the Australia housing market.

You can view the video here.

The Long Decline in Australian House Values?

Morning Money, an investment website, has recently published an article:  The Long Drawn Out Retreat in Australian Housing Prices.  It predicts, due to an ageing population, that Australia will not need more housing in the future, and that house prices will decline as baby boomers sell up or die.

Whether the prediction is correct or not, I don't know.  However, I believe that apartments are more suited to an ageing population than stand-alone houses.  That is one reason I prefer apartments to houses.

Soul Surfers Paradise

The receivers of Soul have started a marketing campaign.  See www.soulatsurfersparadise.com.au.  The pricing on the Internet seems to show high discounts for the more expensive apartments.

On the Market

RP Data reports that there are over 88,000 properties advertised for sale in Queensland at present.  This is an increase from this time last year.

BOQ's view

"We've seen signs that it's bottomed and there have been a few good sales on the Gold Coast, Sunshine Coast and even Cairns,'' Mr Grimshaw said in Brisbane yesterday after BOQ's annual general meeting.

Courier Mail

Soleil Sale

The Soleil apartment building in Brisbane has been complete for some time, but there are still many apartments that are unsold.  (One of the developer's associated companies appears to have purchased a number of the apartments.)  The developer, Meriton, is having another sale for those apartments that it has decided not to keep.  From what I can tell, for Australian buyers, all prices are negotiable.

Off The Plan

Here is an article as to why buying an established apartment is better than buying off the plan.

See Property Observer

Viridian Noosa Massive Discounting

The Viridian Noosa "resort" is discounting the unsold apartments.  The website states that one bedrooms that were $656,000 are now $280,000.  I doubt that this is correct -- most of the one bedrooms were originally sold for less than $600,000, so the discount is probably not as large as stated. Also, it will be interesting to see if they are selling the better apartments at this price, or only the apartments that look at the carpark.  The complex is managed by Outrigger, and is a long walk up the hill from Hastings Street.

REIQ says demand is increasing

Demand for units and townhouses is increasing across Queensland as buyers flock to this more affordable type of property, according to the Real Estate Institute of Queensland (REIQ).  

The REIQ September median unit and townhouse price report, released yesterday, found the numbers of sales increased substantially over the period.  Across the State, sales of units and townhouses grew by 40 per cent in the September quarter, compared to the previous quarter. The numbers of sales were also up 14 per cent compared to the same period last year. 

 REIQ CEO Anton Kardash said the data also showed sales increasing for units and townhouses priced under $350,000.  "More than 800 preliminary sales were recorded for properties priced under $250,000, which is a very affordable price for many buyers. This was an increase of nearly 40 per cent on the same period last year.  The greatest numbers of sales was in the $250,000 to $350,000 price bracket, which recorded about 1,250 preliminary sales over the quarter - also an increase on last year.  Units and townhouses continue to be a reasonably priced, and also preferable, option for many buyers who want the convenience of living closer to the city while also keeping a lid on their borrowings." 

There was a noticeable shift in demand for lower-priced units and townhouses in Cairns and the Gold Coast over the quarter with both regions recording significant jumps in the numbers of sales of properties for under $250,000. 

In Brisbane, the median unit and townhouse price increased 0.6 per cent to $405,000 over the September quarter and also recorded a small positive price result over the year ending September. "Brisbane’s median unit price edged up 0.3 per cent over the year which is a welcome result and one we haven’t witnessed for a year or two now.  This is hopefully the start of the pricing turnaround that we have been anticipating given our property market has been improving throughout the year," said Mr Kardash.

Double click image to make bigger

Lead Indicators

RP Data has an interesting article about lead indicators, which are days on market and discount from original list price.

See RP Data article.

Property Market Highlights

HTW's Opinion

As the full effect of the earlier cuts are yet to be observed coupled with the unknown global risks and expectation of slightly higher unemployment, it makes for interesting times for property participants and observers coming up to the "big sleep" over the Christmas / New Year period.
Follow the link below for the December 2012 Month In Review: http://htw.com.au/Month_in_Review/Month-in-Review-December-2012.pdf

The Chelsea - an analysis

Matusik has done a very interesting analysis of The Chelsea development in Bowen Hills, that recently completed.  It is worth studying this analysis.  See The Chelsea.

Some points from the Matusik study:

• More than half the sales were "rebated sales", making it hard to determine the actual sales price.  Most rebates were given early in the sales process.
• It took about 2 years to sell the 177 apartments in the complex.
• Only six apartments have been purchased by owner occupiers.  This is a very low percentage.  (My rule is to purchase only in buildings where there is a high percentage of owner residents in the building.)
• 70% of the buyers appear to be Chinese, either from the Sunnybank area, Southern States, Singapore or elsewhere.
• A number of apartments are now listed for resale, at about 10% below the recorded purchase price (before any rebates are taken into account).

"Too often the last dwellings in a new project are discounted [by the developer].  This undermines the project’s overall value; is very unfair to those who bought early in the piece (regardless of what incentives were offered) and also reduces the developer’s profit (assuming there is any!)"

Market Flat, according to RP Data

Dwelling values across all of Australia’s capital city housing markets, except Melbourne, rose over November with values now just -0.1 per cent lower over the past 12 months.

Across the 8 capital cities, the month of November saw the RP Data-Rismark Home Value index rise 0.4 per cent during the first two weeks only to relinquish these gains in the last two weeks and finish flat for the month.

As usual, there existed notable dispersions in the returns observed across the individual capital cities.  According to RP Data Senior Research Analyst Cameron Kusher, the November market conditions highlight that the road to a market recovery will not be without pauses and those cities which performed very strongly in 2009 and 2010, like Melbourne, may show continued weakness. “Capital city home values remain -5.6 per cent lower than their historic highs of 15 November 2010, but, up 2% from their low of late May 2012."

Home values in Brisbane and Perth remain below where they were five years ago whereas the other mainland cities have all increased over this period. This has meant that relative to the other capital cities, Brisbane and Perth have experienced affordability improvements and subsequently we may see them become more popular from both an owner occupation and investment perspective.

Brisbane apartment prices (to 30 November 2012):
November 2012 - up 2.3%
Quarter - up 1.2%
Year to Date - down 0.7%
Year on Year - down 0.8%
Median price based on settled sales of Brisbane apartments over the quarter - $360,000.

With interest rates falling again this month, the improvement seen in November may continue through the summer months.  BOQ has passed on a 0.2% rate cut, effective 21 December 2012.

HouseNet - real estate social media

An interesting new website is HouseNet -- a social media site for property people.  The cost ranges from nothing to $79 a month, depending on what you want to use the site for.  The site is promoting itself as a replacement for Domain and RealEstate.com.au.

As an aside, RealEstate.com.au only takes listing from real estate agents.  If you are looking to rent, then don't forget to look at Domain.com.au, which also takes listings from private individuals.  So there are different opportunities available on Domain.

El Dorado Indooroopilly

With PCM, the South African property developers, going bust, the El Dorado Cinema complex at Indooroopilly has been sold.  It is not entirely clear if the new owners will develop the same type of complex - apartments, shops, offices and cinema -- on this site.  See Courier Mail

Skyline Sale

Recently, a 3 bedroom apartment in Skyline Apartments sold for $700,000.   Many of the same type of apartment sold off the plan a number of years ago for more than this.  The pricing dropped at around settlement time to just over $700,000, and now it appears that $700,000 is market price for these three bedroom Skyline apartments.

The trouble with Skyline is that it is not direct riverfront, and is crowded out by other buildings.

Flood Check

Before buying, it is worth checking the Floodcheck database and map.  See Floodcheck.

Mirvac Cancels Foreshore Hamilton

Things can't be that good in the property market in Brisbane.

"Mirvac has confirmed its refunding off the plan deposits for Brisbane and Townsville residential projects.  Construction was scheduled to commence on two key apartment projects this financial year, but given the limited sales and concerns on the off the plan market's immediate future looked, Mirvac's John Carfi confirmed to The Courier Mail that contracts had been cancelled and deposits refunded.

The first stage of Foreshore Hamilton was to be a 23-storey building with 263 apartments. Only three of the apartments had been sold, the paper noted. Prices of one bedroom apartments started from $345,000.

 It was possible within about 18 months that Mirvac would reconsider a fresh start on both projects. Mr Carfi said despite there being strong economic fundamentals evident in Queensland, confidence was at an all-time low.  "With the Queensland market, it is difficult to see what the catalyst is going to be (to improve confidence),'' he said."

 See Property Observer

Noise

The following is a note from a reader:

Think you’ve found a nice quiet unit or apartment near the CBD, buyer beware!. I’ve found agents like showing near CBD properties in the quite weekday afternoon or Saturdays. This is because noise is generally at a minimum at those times and more importantly, no garbage trucks. But beware the 3.am week-night nightmare – industrial garbage trucks. 

Most  apartment complexes have large industrial type bins these days as opposed to the traditional Council-type gray and green bins. Traditional Council-type gray and green bins are usually collected after 6.am onwards. With for example, 30 or more units in a complex, industrial bins will require emptying twice a week. My block has 80 apartments. The garbage trucks come 4 times per week. (Luckily, I had checked this out beforehand and found in advance that our Corporate Body let the contract on the basis they come after 7.am.) The big industrial bins need a big garbage truck and generally, no traffic or strings of parked cars to obstruct entry by these big trucks. These big garbage trucks usually start around mid-night precisely for the above mentioned reason, ease of access. And they make a LOT of NOISE. 

I know many people who have found themselves in this predicament – the 3.am garbage collection three times weekly.  I have experienced it myself, woken up every night by the industrial bin collection rampage. I know people who sold up and left apartment blocks in both South Brisbane for exactly that reason. My friends in Milton did the same, sold up and moved because of the nightmare 3.am garbage truck four times per week, twice at their block and twice at the neighbouring block. My friends at Teneriffe did the same, sick and tired of “bang crash bang crash” at 4.am in the morning.  Hundreds of residents woken up long before the wee small hours, four times EVERY week.  And if your apartment block is near restaurants, expect even worse, hundreds of bottles being dropped into a steel garbage truck bin from the skip raised 3 meters above the truck. I once lived in a apartment block in New Farm. It was a nightmare. Every morning, industrial garbage trucks started banging and crashing as of 2.am. It went on and on till daybreak as they went around the area servicing all the apartments  and restaurants.  Every day of the week including Saturday. I never slept one single night right through, at that unit. And I had to close the windows to sleep. I was glad to leave for good.     

So, do some homework. Remember, you are about to part with $400-600K, or more. If you are seriously looking at buying a particular unit or apartment, ascertain the location of the industrial bin collection area. Is it right below your bedroom windows? Is it the large industrial type?  Is it accessed by large trucks? Do they arrive between 1.00am and 6.00am? Because if so,  run a mile.  Don’t bother asking the manager, he/she will tell you there is no garbage truck noise because they are well aware of the joke. Do ask to check the Corporate Body records to see if they have arranged day-time garbage collection. Even so, if the neighbouring apartments have not, you are still sunk. So go there yourself in the early hours of the morning with a coffee and a book, sit in your car till day break, Sunday to Saturday and wait it out to see what time the garbage trucks arrive and the noise level they make. Note what happens at what time at the apartments next door and within your area. You will be very well rewarded for just a few hours of your time.

Regrets and Traps

What main regret did homebuyers have?

Although the percentage of first homebuyers* who had regrets about their property purchase is fairly low, at 17.7% nationally (but up to 20.1% in Queensland), the main regret (with over 27% nationally) was that they wished they'd bought in a different area. This was followed by: they wish they'd shopped around more for a property; and, they wished they'd waited until they could afford a property that was closer to their ideal property. 

Three 'traps' for first homebuyers

Paul Osborne highlights three other 'traps' that, in his experience, first homebuyers may fall into:

·         Buying a property that is too common and has limited scarcity.
“These include new construction apartments and generic housing estates".

·         Buying too far away from the CBD.
“Buyers often have remorse about getting something bigger – but located further out.  They find they don't really need the extra space but truly value the convenience of being close to the city."

·         Emotional buying.

“Many purchasers who engaged in emotion-filled auctions in 2009 and 2010 find themselves sitting in negative equity.  Some buyers regret how they bid at auction for their property." 

Matusik's views on apartment bedrooms

You see, we undertake between 40 and 50 Project Definitions every year – this is a service which helps make a new residential project work better – and we have found that in almost every case, one-bedroom apartments show a better gross rental return than larger ones.  This is particularly the case when you include a quality furniture pack.  Now before I get a bunch of emails outlining this and that, keep in mind I am talking about rental return here and not capital gain; although the statistics regarding one-bed resale performance versus larger apartments are pretty good too.

So in short – the smaller the apartment type, in concert with the inclusion of a single car park, the better the gross rental return.  This rule of thumb is even more evident when you add furniture.

See Gross

Agents Touching Up For Sale Photos

An article in a Fairfax publication about agents editing and manipulating photographs in real estate listings.  See Article.  So take care when looking at listings online.  The property may not look as good in real life.  Maybe such agents should be called Unreal Estate Agents?

Risks of Buying Off The Plan: NY Advice

The Take-It-on-Faith Condo

 Rising demand and a scarcity of new apartments are creating something of a rush on new luxury condominiums, with buyers increasingly signing contracts for spaces even before they are built.

 This article includes advice about buying off-the-plan in New York.

 http://nyti.ms/U4mQnI

Recent Apartment Sales in Brisbane CBD

Riparian Tower - Apt 4101 - 9 November for $3.3M after owner purchased it in June 2012 for the same price. [A reader has emailed me to say that this is incorrect.  I obtained this information from the RP Data database.  The 9 November sale information is as reported to RP Data by North South Realty.  The June 2012 sales data is from government records.]

MacArthur Chambers - 229 Queen St - Apt 205 - 1 bedroom - sold for $540,000
Apt 402 - two bedrooms - sold for $725,000

M on Mary - 70 Mary Street - Apt 2302 - 1 bedroom, no car - sold for $341,000

Festival Towers - 108 Albert Street - Apt 4105 - 2 bedrooms - sold for $452,000 (seller had paid $515,000 in 2007 off-the-plan buying from Devine).

Riverplace - 82 Boundary St - Apt 167 - 2 bedrooms - sold for $495,000

River City - 79 Albert Street - Apt 2706 - 2 bedrooms, 1 bathroom - $420,000

Metro's Central Village

Metro Property Development has announced a new project with over 1,000 new apartments.  It is called Central Village and is located at 66 Brunswick Street in the Valley.    This is a busy road.   It is not the greatest location either.  Even through it is called "Central Village", according to Google, it is an 18 minute walk (1.5 km) to the Emporium Hotel (shown in the photos on the website) and 1 km to the main part of the Valley.  Neither of these would be pleasant walks.  You should try the walk before buying!

The first stage, called Cambridge Towers, has 163 apartments over 18 levels, mostly 1 bedroom apartments.

See also Brisbane Times story.

Resiprofile - matching buyers and sellers

Here is an interesting website, that aims to cut out the middleman (e.g. real estate agents):  See Resiprofile.  I have many examples of real estate agents not returning my calls or emails when I want to buy.  So I move on.  I wonder if the seller knows how hopeless their real estate agent may be.  It is always good to do a "mystery shopper" experiment on your real estate agent.

Brisbane Transaction Volumes Increase!

As shown in the above chart from RP Data, Brisbane transaction volumes for houses and apartments jumped recently.

But the Brisbane property market is still well below its peak.

There has been negative annual value growth over the past five years for Brisbane property.

And no growth over the past year in Brisbane.

High Hope for Bowen Hills

There is talk that Bowen Hills will be the next boom area in Brisbane.  I am not sure that I agree.  There is little infrastructure at present, and no sense of community or neighbourhood.  It is a semi industrial area, surrounded by major roads, that is slowly being redeveloped with mostly low quality highrise apartments.  See AFR.  If the pricing was 30% of what developers are asking, then I may be interested, but at present, it seems way overpriced for what is in existence today.  My advice is to wait, and you could be waiting some time.

Aircraft Noise

Aircraft noise in some Brisbane suburbs is a serious concern.  With the new runway being proposed for Brisbane airport, there will be more noise in my suburbs.  It is so much of a concern that REIQ now has a tool to try to ascertain if a property is now or will soon be impacted by flight noise.  From an REIQ press release from Friday:

The Real Estate Institute of Queensland (REIQ) and Brisbane Airport Corporation (BAC) announced a ground-breaking partnership aimed at empowering property buyers and agents through mutual education around current and future flight paths.  The partnership, which is believed to be the first of its kind in Australia, is the result of both organisations’ desire to prevent situations where buyers make an investment without fully understanding current and future flight activity near that property.

Through this partnership, both the REIQ and BAC will use a collaborative approach to promote online tools that outline current flights paths and noise levels, in addition to future flight paths and areas of higher aircraft noise.

BAC CEO and Managing Director Julieanne Alroe said: “We consider REIQ to be an excellent partner and we were delighted they welcomed our invitation to form a partnership for the good of the state and the industry.  With the REIQ’s property website, reiq.com, going from strength to strength and the Institute being a leader in Queensland, we were impressed by both their reach and their focus on educating the industry.  It’s no secret that buying a property for residential or investment purposes is one of the most intensive and stressful things a person can do. The last thing we want to see is someone going through that process, only to find that they are not aware of a current or future flight path. These are long term decisions and we want people to feel as informed and empowered as possible."

Juniper's Fire Sale of Retail Assets

The collapse of the Soul development at Surfers Paradise must be really hurting the Juniper empire.  Juniper has listed what appears to be all its retail investments for sale, looking for offers this month.  Looks like a fire sale.  The Sea Temple Gold Club at Port Douglas is also for sale through the same agents, but it is unclear if this is also a sale by Juniper.  Many investors have lost money over the years buying from Juniper.  Now it is Junipers turn.

To buy or not to buy a Queensland Unit?

See here for a transcript of a conversation with property analysts, as to whether it is too risky to buy an apartment in Qld due to the changing strata laws and levy entitlements.

Brisbane Apartment Median Sale Price Down Slightly

The RP Data-Rismark Home Value index results for October recorded the first month-on-month decline since May 2012, with the eight capital city aggregate index falling by -1.0 per cent over the month. The fall was broad-based, with falls being experienced across each of the capital cities apart from Perth and Darwin. Both Sydney and Brisbane markets recorded a -0.9 per cent fall in values over the month, while Melbourne values experienced a larger -1.1 per cent fall.

On an annual basis, only Sydney (+0.6%), Perth (+3.5%) and Darwin (+8.6%) have shown a rise.

“Whether the October decline is a blip on the path to a recovering market, or a sign of further weakness is yet to be seen. Other indicators are suggesting the market has gathered some strength, with auction clearance rates holding firm around the 60% mark across the two major auction markets and owner occupier housing finance numbers showing steady improvements since February 2012, albeit from a very low base."

While unit markets showed a more resilient performance across the combined eight cities aggregate index, with values down -0.6 per cent in October, compared with a -1.0 per cent decline across the detached housing market, the cities of Melbourne and Adelaide both recorded a larger -3.2 per cent fall in unit values over the month. In particular, Melbourne unit values have shown a greater decline in values than any other mainland capital city over the past twelve months, recording a 6.0 per cent drop.

Brisbane apartment prices (to 31 October 2012):
October 2012 - down 0.3%
Quarter - up 1%
Year to Date - down 2.9%
Year on Year - down 4.4%
Median price based on settled sales of Brisbane apartments over the quarter - $363,000.

Property or Shares?

According to RP Data, on a capital appreciation measure over the past decade, the past half-decade, and over the past three years, residential property has well and truly outperformed shares.  Over the most recent twelve month period shares have outperformed the housing market.  Property has less volatility than shares, but less liquidity.