Brisbane home prices increasing, but are still behind

Brisbane Apartment Sales Up

According to RP Data, Brisbane unit and apartment sales (that is, the number of sales) is up 16% than the same three month period a year ago.

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Based on RP Data’s estimates, there were 9,639 Brisbane house sales over the three months to October 2013 and 3,671 apartment sales.

How long does it take for property to double in value?

There is a common saying that Australian property double in value every seven years.  RP Data's recent Pain-Gain report suggests that they doubling takes longer.  And this does not take into account stamp duty and real estate agent's fees.

"Of those homes sold throughout the September 2013 quarter, those held for a short period of time have been much more susceptible to loss. Despite home values having risen over the past year, 17.6% of owners who purchased and sold in the same year, sold at a loss. The greatest proportion of loss making sales has occurred across those homes re-sold after three to five years (20.2%). If an owner wishes to double their initial outlay upon re-sale they generally need to hold the home for at least a decade. 56.2% of homes re-sold between 10 and 15 years after purchase sold for double the purchase price and 94.0% of resales after 15 years were for more than double the initial purchase price."

Brisbane Apartment Capital Growth Summary - December 2013

From RP Data:

Brisbane apartment prices (to 31 December 2013):

Month of December 2013 - up 0.4%

Quarter - up 2.4%
Year on Year - up 3.5%
Year to Date - up 3.5%
Median price based on settled sales of Brisbane apartments over the quarter - $383,000.

Mr Kusher from RP Data said that it is clear that as the market enters 2014 and as values rise across each capital city, the rate of growth will vary greatly. He said that the main challenges in 2014 are likely to be the impact of a forecasted higher unemployment rate, affordability constraints for the more price sensitive sectors of the market (particularly in Sydney, Melbourne and Perth) and whether any regulatory changes will be implemented by APRA and the RBA to cool the near-record high levels of investment activity.

RP Data December 2013 Report

Highlights over the three months to December 2013

• Best performing capital city: Sydney +4.1 per cent 
• Weakest performing capital city: Canberra, -1.3 per cent 
• Highest rental yields: Darwin houses with gross rental yield of 6.0 per cent and Darwin Units at 6.2 per cent 
• Lowest rental yields: Melbourne houses with gross rental yield of 3.4 per cent and Melbourne units at 4.2 per cent 
• Most expensive city: Sydney with a median dwelling price of $655,250 
• Most affordable city: Hobart with a median dwelling price of $330,000

Each capital city housing market recorded positive home value growth in 2013, however, the cities driving the capital growth have been Sydney (14.5%), Perth (9.9%) and Melbourne (8.5%). Brisbane was the only other city to record value growth in excess of 5 per cent (5.1%) with each of the remaining capital cities recording annual value growth of 3.5 per cent or less.

Brisbane – house values have increased by 5.3 per cent over 2013 compared to a 3.5 per cent increase in unit values. Value growth has only slightly outpaced rental growth however it has resulted in gross house yields falling from 4.7 per cent a year ago to 4.6 per cent currently and unit yields easing from 5.6 per cent to 5.5 per cent.

Pradella developments

Pradella has a number of apartment developments in Brisbane that are currently being marketed.  These include:

Riverside, West End
1 bedrooms from $400,000
2 bedrooms from $540,000
3 bedrooms from $929,000
These apartments will be located behind the Waters Edge complex.  Project website.

Skyview, Kelvin Grove
1 bedrooms from $335,000
2 bedrooms from $524,000
3 bedrooms from $789,000
Settlement expected late 2014.

Canvas, South Brisbane
1 bedrooms from $346,000
2 bedrooms from $575,000
Settlement expected mid 2014.

Urban Edge, Kelvin Grove -- development completed
1 bedrooms from $429,000
2 bedrooms from $539,000

Waters Edge, West End -- development completed
2 bedrooms from $600,000
3 bedrooms from $889,000

Parklands at Sherwood - development completed
from $395,000

Infinity Brisbane by Meriton

Meriton's Infinity tower in Brisbane is now at its full height -- 81 levels -- and is now the tallest tower in Brisbane.  The internal fit out in the upper levels is not complete.  Lower levels are being occupied.  Meriton is selling apartments up to level 64.

A two bedroom, two bathroom, 1 car apartment in the middle for the building will sell for around $665,000.  These apartments are being offered for rent at $690 a week.  No balcony.  Internal size is 86sqm to 90sqm, which is not large.  I suspect many of the buyers are not Australian residents.

The Glass Factory Apartments in West End - Sold Out

CBRE was marketing The Glass Factory at West End.  It is reported as being sold out.  The current website states:

"West End’s fastest selling boutique development is now 100% SOLD.  After an incredible response from the market, the limited opportunity to purchase an apartment within The Glass Factory has passed."

Here is a price list from August 2013:

Apple Store Comes to Brisbane City

As previously reported in this blog 20 months ago, an Apple Store is coming to the Brisbane City.  It will be in MacArthur Chambers, the site of Douglas MacArthur's headquarters, and most recently a Dymocks bookstore.

Recent Sales in Brisbane's Admiralty Precinct

Admiralty Towers One (35 Howard Street)

• Apt 93, 2 bedrooms, 2 bathrooms, 2 car parks - sold in September for $880,000
• Apt 58, 2 bedrooms, 2 bathrooms, 1 car park - sold in September for $900,000

Admiralty Towers Two (501 Queen Street)

• Apt 108, 3 bedrooms - sold in September for $938,000
• Apt 132, 2 bedrooms - sold in August for $760,000
• Apt 26, 2 bedrooms - sold in July for $662,000

Admiralty Quays (32 Macrossan Street)

• Apt 100, 2 bedroom 2 bathroom - sold in October for $800,000
• Apt 12, 1 bedroom - sold in August for $590,000

Skyline (30 Macrossan Street - not riverfront)

• Apt 125, 1 bedroom, 1 car - sold in December for $347,000
• Apt 13, 3 bedroom - sold in October for $1,131,000
• Apt 172 - 2 bedrooms - sold in July for $590,000

Riverplace (82 Boundary St)

• Apt 215, 1 bedroom - sold in December for $510,000
• Apt 140, 1 bedroom - sold in November for $435,000
• Apt 316, 2 bedrooms - sold in October for $750,000
• Apt 54, 2 bedrooms - sold in October for $647,000
• Apt 146, 1 bedroom - sold in September for $370,000

Pain and Gain

RP Data has issued its December 2013 Pain and Gain report, comparing sales prices with the actual purchase price for the same property.  A summary:

"Over the third quarter of 2013 RP Data recorded 69,949 residential property re-sales nationally; of these 11.1% recorded a gross loss from the original purchase price. The gross value of the losses associated with these loss making re-sales totalled $488.1 million. Conversely, 88.9% of all September quarter re-sales recorded a gross profit relative to their original purchase price. The gross profit from these re-sales equated to $12.6 billion.

 Lifestyle regions continue to show the largest proportion of loss making re-sales, particularly within the unit markets as opposed to detached housing markets. Queensland’s Far North has overtaken the Gold Coast to record the largest proportion of loss making re-sales, with 33.9% of all September quarter re-sales transacting at a price lower than what the home was purchased for."

El Dorado Redone

A few years ago, a South African developer tried to redevelop the El Dorado cinema site in Indooroopilly.  The developer, PCN, went bust.  Now, a new development is planned, not just for the El Dorado site, but for neighbouring sites as well.

The development that has been proposed consists of two towers, as well as a podium containing cinemas, a bowling alley and possibly an open air cinema.

The first tower is 16 storeys, with 78 residential apartments.  (These will be mostly two bedroom apartments.)

The second tower is 21 storeys, with 255 residential apartments and 70 short stay suites.  There will be 135 two bedroom apartments, with the remainder being 1 bedroom or studios.  The second tower also has a round Skybar on level 21!

There will be no three bedroom apartments.

See www.eldoradovillage.com.au

300 George Street

The site of the old Supreme Court and District Court buildings at 300 George Street have been sold by the State Government to a property developer.  Three towers are planned for the site, including an office tower, a residential tower and a hotel.  There will also be a shopping mall at ground level.  The residential tower will be 82 levels high, and consist of 428 apartments.  There are two recreation decks (level 4 and level 45) that will include pools, gyms etc.

The developers are a joint venture between Shayher Group and Bao Jia Development.

38 High Street

A new apartment development is currently being marketed off-the-plan in Toowong.  It is 38 High Street, overlooking the R.E. Hotel.  It even has a floor plan painted on the side of the sales suite.  the sign says that 2 bedroom apartments are available for under $500,000.  There are a number of sites in central Toowong earmarked for development.

Sunland's Abian ready for sale

Sunland has completed a very fancy display building for Abian, on site, on the corner of Alice Street and Albert Street.  See photo below.  There was an advertisement in the AFR magazine this weekend, inviting prospective purchasers to register.  I suspect that this building will be marketed as a high end building, at very high prices.  Sunland's apartment buildings on the Gold Coast are glitzy, and the apartments are large.  In my opinion, quality is average.  Q1 supposedly has a number of problems.  Sunland's honesty (or at least, that of a key executive/owner) has been questioned in a law suit in Melbourne -- see prior posts.  It will be interesting to see how successful Abian will be.

Brisbane Apartments

A Brisbane real estate agent who sells CBD apartments (Hannah Schuhmann) produced an interesting map that shows some of the larger apartment buildings in Brisbane city.  Those buildings were designed for residents and long term tenants.  However, most of these buildings are now mixed -- the onsite manager is running a short term rental pool, and is pretending to operate a hotel.  (Oaks is the predominate manager of the listed buildings on the map.)

It is interesting that this same real estate agent, who is selling an apartment in Metro 21 states, as a feature of Metro 21:

"No hotel-style accommodation within the building".

New hotel in Mary Street

Currently under construction, but almost complete, at 103 Mary Street is a new hotel, to be branded as a Four Points by Sheraton.  It is 33 storeys.  It is impacting the views of River City and 212 Margaret, both which are neighbouring apartment buildings.  It is also adjacent to the 111+222 site in Mary/Margaret Street.

103 Mary Street is the second building from the left.  212 Margaret is on the left.  Quest River Park Central can be seen second from the right.

Rent My Estate

For landlords who do not like real estate agents, a new service -- Rent My Estate -- allows landlords to list on real-estate.com.au.  It provides a good interface for landlords to create and manage online advertisements.

Where the rent is about $650 a week, an agent will typically charge more than $4,000 a year for property management services.  Most agents, in my opinion, do a poor job on the rental side.  So if you have the time and skills, and live near your rental property, you can save a substantial amount and get a better result using Rent My Estate.

What is now normal?

"But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?"

See http://nyti.ms/I0oEw2

What if low interest rates continue for a number of years.  What if there is little employment growth or wage growth for a number of years?  Rents will not increase. Capital growth will be less than past averages.

Those negatively gear and making losses will continue to make losses. And so housing prices will gradually decrease.  Is this possible?

Property Losses

Taking into account inflation, property has performed badly in recent times.  See article by RP Data.  Brisbane is down about 17%.  Taking into account transaction costs (e.g., duty) and holding costs (rates, body corporate fees, maintenance and repairs), the situation is very grim for property investors.  And I suspect that inflation is actually higher in Brisbane than the official figures show.

Buying of the Plan

At present, it seems that off-the-plan apartment developments are overpriced, and buying off the plan carries significant risks.  A series of commentaries in Property Observer discusses this issue.  See also this Kindle Book for more detail.  My recommendation is to look at existing apartments, rather than off-the-plan apartments.  The off-the-plan market appears to be fuelled by foreign investors, who are required to buy new properties under FIRB rules.

Will property growth come to Brisbane?

The release yesterday of the RP Data and Rismark International October housing market results confirmed a 1.3 per cent rise across the combined capital cities index over the month with the rolling 12 month combined capital cities index growth rate recording its fastest pace in three years.

Rismark CEO, Ben Skilbeck, added that while Sydney has eclipsed its previous cyclical high and Melbourne is near its peak, Brisbane remains 8.4% below its highs. “There is, however, evidence that growth conditions may be spreading to Brisbane."

Brisbane apartment prices (to 31 October 2013):

October 2013 - up 0.6%

Quarter - up 2.3%
Year on Year - up 1%
Year to Date - up 1.6%
Median price based on settled sales of Brisbane apartments over the quarter - $375,000.

Recent Brisbane City Apartment Sales

A list of some recent reported apartment sales in Brisbane CBD area, since June 2013.

Admiralty One

- Apt 93, 2 bedrooms, 2 bathrooms, direct river views, large 132 sqm - $880,000

- Apt 125, 2 bedrooms, side river views - $600,000

Admiralty Towers Two

- Apt 132 - 2 bedrooms, direct river views, 116 sqm - $760,000

- Apt 26 - 2 bedrooms, direct river views - $662,000

- Apt 124 - 2 bedrooms, direct river views - $705,000

Admiralty Quays

- Apt 104 - 3 bedrooms - $960,000

Riverplace

- Apt 146, 1 bedroom - $370,000

- Apt 82 - 2 bedrooms - $750,000

- Apt 165 - 1 bedroom - $500,000

- Apt 31 - 2 bedrooms - $650,000

Metro 21

- Apt 283, 1 bedroom on level 28, no carpark - $307,000

- Apt 301, 2 bedroom on level 30 - $553,500

Felix

- Apt 312, 2 bedrooms, 2 bathrooms - $555,000

- Apt 294, 2 bedrooms, 1 bathroom - $485,000

- Apt 324, 2 bedrooms, 1 bathroom - $475,000

Quay West - construction starting next door, and disharmony in building

- Apt 86, 2 bedrooms - $655,000

- Apt 129, 3 bedrooms - $1M

Saville South Bank - reports of two bedroom apartments selling above $900,000.

It appears that pricing is picking up.  In some instances, apartments are selling for record highs.  In other instances, prices are still below the 2007/2008 peak.  Volumes of sales in the period June to September do not appear to be high, although in recent weeks, this may have changed.  The high end sales appear to be to owner occupiers.