Off-the-plan apartments and international buyers

Many apartments that are sold off-the-plan in Brisbane are marketed to buyers outside of Australia.  Examples include Meriton and Metro Property apartments.  A recent article points out the dangers of buying in such buildings:

"Overseas buyers can and often do pay too much for property because they do not fully understand the market they are entering. ...

The lesson here is developments where the sales are heavily skewed towards international buyers should set alarm bells ringing for local buyers."

See:  Hype

Bad real estate agents

I heard another story about real estate agents ripping off a client.  It is worth considering this story, especially if you are thinking of selling, as it is not uncommon.  The agent, who is well regarded, advised the seller of a potential sales price, lets say $900,000.  The agent then sold an advertising and promotional package to the seller, at a cost of more than $20,000.  The agent recommended an auction.  The highest bid at the auction was about $700,000.  The agent then bullied the seller to sell at that price.  The seller refused, and the property did not sell.  It is still on the market.  The agent over-estimated the sales price to get the listing, and made a good profit from the advertising package.  The seller is unhappy, as she would never have tried to sell the property if it was only worth $700,000.

Take care when an agent recommends an auction and an expensive advertising package.

Ask the agent to provide you with a CMA (Competitive Market Analysis) to justify the agent's view of the selling price, and get that in writing.  Study it careful.  And take care!

Recent quote from Warren Buffett:  "It is a lot easier to buy than to sell."

Infinity Tower

Nice story in the Sunday Mail regarding Infinity Tower, being built by Meriton.  I will not be buying in Infinity, but there are cool photos of the construction.

See Sunday Mail.

Real Estate Rort

The Courier Mail recently had a story regarding a real estate rort that is said to be ruining the lives of thousands.  An extract:

"Using cold calls, home visits and high-pressure seminars, marketing agents ramp up fear of an impoverished retirement to push gullible mum and dad investors into buying investment real estate.

They promise a low weekly cost to negatively gear properties, high rents and the certainty of strong capital growth in suburbs well outside of the Brisbane CBD.

But many of the units and townhouses' capital growth has been largely absent, with most buyers only learning the sad truth if they go to list the property for re-sale.

Investors have also found their weekly costs are higher than expected, putting pressure on household budgets. Rents are often far less than predicted and supposed waiting lists of tenants never materialise...."

Brisbane Under-performs

Recent charts from RP Data show that Brisbane is under performing compared to the other Australian capital cities.  Does this mean that a boom is coming for Brisbane houses and apartments?  Interest rates are currently low, but long term, there is a significant risk of inflation.  So what does that mean for Brisbane apartment prices?

Warning on Aussie Bank Bubble

From the NZ Herald News.

"However, following the significant leveraging of Australian and New Zealand households over the last 30 years they are now low growth and remain heavily exposed to housing, funding markets and unemployment risk."

RP Data April Index Report

Capital city home values fell by 0.5% in April however, they have increased by 2.3% so far in 2013

Capital city dwelling values increased fell -0.5% in April and on an annual basis, they have now increased by 2.7%.   Home values fell in April across every capital city except for Adelaide (2.8%) and Darwin (0.2%).  Over the three months to April 2013, home values increased by 1.1% across the combined capital cities with every capital city except Brisbane (-0.9%), Perth (0.0%) and Hobart (-1.6%) recording value growth, the largest of which occurred in Darwin (5.0%).  Home values remain -3.6% below their historic highs across the combined capitals with falls from the peak ranging from -11.5% in Hobart to Sydney where values are -0.4% lower than their previous peak.  Looking at value movements across broad price segments in the market to March 2013, the broad ‘middle market’ has been the strongest sector with values increasing by 1.9% over the year and the most expensive and most affordable suburbs have each recorded value increases of 0.8%.

Annual sales activity is higher than it was a year ago and trending higher

Estimated sales volumes for  the 12 months to February 2013 were -10.8% below the five year average nationally.   Compared to volumes over the 12 months to February 2012, sales volumes are 2.1% higher.  Sales activity has increased by 1.2% over the most recent six months compared to the previous six months.

Rents continue to edge higher across the combined capital cities however, value growth has been stronger than rental growth over the past quarter

Capital city unit rents have increased by 3% over the 12 months to April 2013.  Gross rental yields for units have remained at 4.9% over the year.

Pet Bylaws

A recent article about bylaws regarding keeping pets: Common Ground - Pets

New Apartment Developments in Brisbane

New developments:

• 38 High Street, Toowong
• Arena South Brisbane
• Riverpoint, West End
• Urban Edge, Kelvin Grove
• Park at Newstead
• Pinnacle at Hamilton
• Vida, West End
• Hamilton Reach
• Mowbray, East Brisbane
• Aspect on Benson, Toowong
• Savoir Faire, Milton

The above is only a partial list of new and off-the-plan apartment developments in Brisbane.  Take care when buying new and off the plan, as often the pricing is much higher than existing near-new apartments in a similar location.

It is also worth reading the following book, available on the Amazon Kindle and Apple stores.  

Buying An Apartment Off The Plan in Queensland - A Guide For Successful Buying

Recent Apartment Sales in Brisbane Suburbs

Ciana Indooroopilly (all sales from original developer)

• Apt 29, 2 bed, 2 bath, 2 cars, top floor, sold on 21 February 2013 for $555,000
• Apt 86, 2 bed, 2 bath, 2 cars, top floor, sold on 1 February 2013 for $560,000
• Apt 58, 3 bed, 2 bath,  top floor, sold on 1 February 2013 for $652,500
• Apt 49, 2 bed, 2 bath, 2 cars, top floor, sold on 1 February 2013 for $450,000

Riva Indooroopilly (Pradella development)

• Apt 5, 1 bedroom, ground floor, sold in February for $376,000 (seller had paid $245,000 in 2004)

Parklands Sherwood (Pradella development)

• Apt 202, 2 bed, 2 bath, large study, ground floor, sold for $370,000 (seller had paid $476,000 in 2009).

USA real estate - note from a reader

This is a note that I received from a regular reader of this blog:

I’m currently visiting USA again for another 3 months.  (You’ll recall my visit to USA and subsequent visit to China last year). I like to try and get a feel of the real estate market and the economy in the U.S. since Australia appears (at least to me) to follow the U.S by about 18-24 months. Things are considerably worse here on the ground, than last year, in my opinion.  Looking at housing and units, empty units are everywhere in every town city, state, just everywhere. I researched this and read here that according to the U.S. Goverment, there are now 18.7 million units vacant in the U.S. Ref: http://www.thefiscaltimes.com/Articles/2011/08/04/9-Worst-Recession-Ghost-Towns-in-America.aspx#page1

Talking with estate agents (if they’ll engage in a conversation - most are in denial) affordability seem to be the lead problem; people cannot afford or will not commit to buy, and people cannot afford to rent at any price. Mortgage rates here are 3.25-3.75% for a 30 year fixed mortgage!. Their parents are telling them not to commit to a mortgage since they themselves now owe more than they paid for their own property and have subsequently become the “near-retirement working poor”.  Some apartment managers (if that’s what they are) are advertsing $500 in cash to sign-up to a lease. Last time I mentioned large numbers of shopping centres and motels were empty and closed up. This time round it’s more motels, an abundance of empty apartments and, restaurants. Restaurants is new for this visit, they have been hit badly, every town/ city along the way has scores of empty closed down restaurants. These were the mid-range market restaurants that offered good meals in the $15-$30 range. They’re closed. For example, where I stayed a few minutes from the Old Downtown Scaramento area, five in the street were shut along with 3 motels. I got talking with the manager of the Motel6 I stayed at which had 7 cars in the carpark on a Saturday night for a complex of 56 rooms.  On asking him the question about the restaurants, he simply stated “No one will spend any money now, even if they’ve got it. They’re all spooked and shell-shocked by the GFC. I don’t know when this will end, if it does.” he said.

I wonder if what’s occurred here will find it’s way to Australia.

Time on Market in Brisbane

Brisbane still has a very high "time on market" for apartments.  On average, 80 days to sell from first listing.  This is about double what it should be, and shows that the market is still stuggling.  Chart from RP Data.

National Property Trends

"Overall, the data highlights that although the housing market has started the year strongly in terms of capital growth nobody should expect the same rate of growth to be carried throughout the remainder of the year. This is already evident when you look at the results of the rpdata-Rismark Daily Home Value Index. Home values across the five major capital cities have fallen by -0.1% over the first fifteen days of April despite the recent strong capital growth conditions. The housing market is likely to continue along a recovery path, however, we anticipate slower capital growth conditions throughout the remainder of 2013 than those which have been recorded over the first quarter of the year and the slowdown is already becoming evident in our daily index data."

See RP Data report on seasonal trends

Recent Apartment Sales in Brisbane City

• Charlotte Towers, Apt 1504, 1 bed, 1 car, sold on 9 April 2013 for $410,000
• Felix, Apt 116, 2 bedrooms, sold on 30 March 2013 for $515,000
• Aurora, Apt 234, 2 bedrooms, sold at auction on 24 March 2013 for $548,500
• Charlotte Towers, Apt 501, 1 bedroom, 1 car, sold on 21 March for $415,000
• Skyline, Apt 61, 3 bedrooms, sold on 13 March for $710,000

As safe as houses?

"If it's profitable and seems riskless, it's a business you don't understand."

Not Back to Boom Time

"AMP Capital’s head of investment strategy, Shane Oliver, also predicts “a year or two” of house price gains but “not a lot”.  “It’s not back to boom time,” he says. “House prices are high relative to income, lending is constrained and borrowers are cautious.

“Everyone knows the story of housing in the US, the UK and Spain. I think Australians are well aware that prices can go down. That realisation was not there pre-GFC.”

The global crisis has changed the psyche in other ways. No longer is buying and renovating a home the No. 1 ambition.

“We are a long way from the time when the The Block was the most popular show on TV,” Oliver says.

Of course, if mortgage rates fall much further, all bets are off. If the cash rate drops to 2 per cent, as one lead strategist predicts, the lure of cheap money and rising property prices will be hard to resist.  But it is unlikely. Most analysts predict one or two more cuts to the cash rate and some competitive offers on mortgages."

See AFR - Preparing for lift-off

More Sales in Brisbane

RP Data Reports

Information from RP Data

Two bed sale in Charlotte Towers - a record!?

A real estate agent is promoting a recent sale in Charlotte Towers:

"RECORD SALE OF THE YEAR! Being the only two bed, two bath apartment available in Charlotte Towers. This one went fast! Selling in less than a week, the high demand and professional approach allowed for another Record sale of $530,500 in this ever popular building.."  See here.

I guess it is only 8 weeks into the year, so it is probably not hard to get a records sale for the year in that period.

REIQ Reports that apartment activity grew at end of 2012

Queensland units and townhouses have followed the positive lead of the house market, according to the latest Real Estate Institute of Queensland (REIQ) data.

The REIQ’s December Queensland Market Monitor (QMM), released today, showed the numbers of unit and townhouse sales across the State continued the property market’s upward trend compared to the year before.  The numbers of unit and townhouse sales increased 8.9 per cent in the December quarter 2012 compared to the same period in 2011.

REIQ CEO Anton Kardash said the driving force behind the improving sales volumes was the southeast corner.  “Compared to the December quarter in 2011, the numbers of sales in Brisbane and the Gold and Sunshine coasts continues to trend upwards, which of course partly reflects the concentration of, and demand for, these types of properties in South East Queensland,” he said.

“Also this quarter, there has been an increase in the numbers of affordable unit sales across the State, especially for properties priced between $250,000 and $350,000, as buyers take advantage of some attractively-priced properties.  And Brisbane has posted its second quarter where the annual median price change has been in the positive, which is another sign that prices are heading in the right direction once more.”

According to the QMM, the numbers of sales in Brisbane was up 16 per cent compared to the December quarter in 2011; sales on the Gold Coast were up 8 per cent; and on the Sunshine Coast, the sales numbers increased an impressive 23 per cent over the same periods.

“The median price of units and townhouses on the Sunshine Coast also increased 1.1 per cent to $328,500 over the quarter with Noosa Heads and Noosaville also both recording price growth,” Mr Kardash said.

The Brisbane median unit price decreased 4 per cent to $389,000 over the quarter but posted an increase of 0.3 per cent over the year ending December. Over the period there was also a marked rise in the numbers of sales between $250,000 and $350,000 which reduced the overall median price.

“Inner Brisbane suburbs continue to do well with median prices in New Farm and South Brisbane all posting solid price growth,” Mr Kardash said. 

Recovery?

"Australia’s housing recovery, which is seven months young, is solidifying. The question is how hard and long it will run. In January last year I wrote that if the Reserve Bank of Australia cut rates again, one could expect the rebound in this interest rate-sensitive sector to accelerate. ...

With banks dulling earlier policy easings, Australia’s housing market did not get any real relief until the RBA’s hefty 75 basis point cuts over May and June. The response was almost immediate: home values in most Australian cities began appreciating in June last year. Since then they have risen about 4 per cent across the five major capital cities, with better growth again in Sydney, Melbourne and Perth.  Additional cuts in October and December ensured that the cost of housing has accelerated more rapidly this year. Based on the latest data to March 7, Australian dwelling values have climbed more than 2 per cent already in 2013."

See Chris Joye in AFR:  Property Stuggles Back

Unemployment

Employment is a key factor impacting apartment prices.

"So what could trigger an overdue shift in rhetoric? Watch the jobless rate. Economists and the RBA forecast it will drift towards 6 per cent. While I think there is scope for it to soften in the near term, I suspect it could start falling again in 2013. This would be a game-changer. An unambiguous decline in the jobless rate, propelled by an ageing population that shrinks the pool of productive labour, will force the RBA to remove its extreme stimulus."  See AFR

Recent Brisbane City Apartment Sales

• Evolution Apartments, 18 Tank Street, Apt 225, 2 bedrooms, 2 bathrooms, sold for $500,000 (previous owner had paid $762,000 off-the-plan from Citimark)
• Skyline Apartments, 30 Macrossan Street, Apt 333, sold for $750,000 (previous owner had paid $810,000 off-the-plan)
• Midtown Apartments, 127 Charlotte Street, Apt 1203, sold by developer for $432,500
• Aurora, 420 Queen Street, Apt 376, 2 bedrooms, 2 bathrooms, 107 sqm, sold for $585,000
• Riverplace, 82 Boundary Street, Apt 275, 1 bedroom plus study, sold for $481,000 (previous owner had paid $525,000 in 2008).