W Hotels on old court site

It is reported that W Hotels will manage a new hotel that will soon be developed on part of the old State Courts site on George Street.  The three tower development will include residential apartments. Some may remember that Westin Hotels (a sister company) was to manage a proposed new apartment and hotel development on nearby Elizabeth Street, called Empire Square, that never went ahead.

Rental Pain

The Courier Mail has an article today about potential pain for rental property owners.  "A flood of new apartments being built in Brisbane spells bad news for property investors as rents are likely to soften in the competitive market.  New data from Urbis shows nearly 9000 new apartments will settle in Brisbane between now and 2017."  Confusingly, the article states that not all planned apartments will be built (so how could Urbis predict settlement of such apartments?).  Urbis goes on to say "So we are being cautious about predicting too much supply."

According to the article, Brisbane's inner north is by far the busiest precinct, with 1129 apartments predicted to settle in 2014 and a further 926 apartments next year.  It is claimed that 41% of apartments sold int he inner north in the June quarter were one bedroom apartments.

In my view, one must be careful to generalise here.  There may be many new apartments in certain areas, such as Bowen Hills, but few new apartments in other areas, such as downtown Brisbane or St Lucia.  There may be too many small apartments, and not enough 3 bedroom apartments.  So the oversupply may impact some and not others.

I would be careful buying in the Brisbane Showgrounds redevelopment area.  Although reasonably close to the city and the RBH hospital, there is not much within walking distance.  And there is a huge supply pipeline.  This weekend, Lendlease will release The Yards, the next stage of this redevelopment.  The development does not include any large parks, schools, kindergartens, supermarkets or the like.

Project Aparment

The Australian newspaper has a lift out regarding buying and investing in new apartments.  See ProjectApartment.

Housing Boom No Big Economic Threat

From the AFR on Friday, 5 September 2014, p. 17:  "Rising housing prices in Australia require monitoring by regulators but the risk posed to the financial system, are nowhere near as great as in the UK, which is approaching bubble territory.  That's the view of Charles Dallara, who is chairman of the Americas region for the Partners Group.  ... The housing market in Australia is relatively self contained."

Place Apartment Report

Place has released its June quarter Inner Brisbane Apartment Report.  Place also has a property blog.

Which Properties to Avoid

This is a good article by Yardney that sets out which types of investment properties to avoid.  I agree with his lists:  Know Which Properties to Avoid.

Sunland's Toowong Proposal - Grace

Sunland (who developed Q1 and Circle on Cavill on the Gold Coast, and who is developing Abian in  Alice Street) has released pictures showing three towers on its Toowong site.  This is the old ABC studio site.   The development is to be called Sunland's Grace.  (I would have thought that Sunland's Graceland would have been a better name.)

The three towers are a little out of place in Toowong in my opinion.

They are mostly apartments:

Tower A

• 1 Bedrooms: 20
• 2 Bedrooms: 66
• 3 Bedrooms: 40

Tower B will be the same as Tower A.

Tower C 

• 1 Bedroom - 130
• 2 Bedrooms - 104

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

The Milton

FKP's The Milton development is growing over Milton Station.  Workmen tell me you get a good view of the train line and the XXXX brewery from the apartments.  This is being marketed as a luxury development, but I wonder what residents will think when they move in.

Austin on Grey Street

Austin on Grey Street is almost fully built.  The rental campaign has started.  A 2 bed 1 bath apartment on a high floor with "breathtaking views" is listed for rent at $550 a week.  My guess is that this is a bait & switch offer, and that you will not be able to rent an apartment with "breathtaking views" at this rent.  I suspect that the photos in the advertisement are not from this apartment, because the same photos are used for all apartments advertised for rent.  A small two bedroom two bath is listed at "from" $640 a week unfurnished.  This building is very close to a major traffic intersection.

It is worth considering other established buildings, such as Arbour on Grey.  An excellent 3rd level, 2 bed, 2 bath with park & river views is listed for rent fully furnished at $690 a week, much better value in my opinion.

Australians Investing in Brooklyn

I recently came across an article from the NY Times from November 2013, discussing how Australians are investing in residential real estate in Brooklyn, NY.  It is titled G'Day from Bushwick.  It is worth reading.

South Brisbane Redevelopment

If you are thinking of buying in South Brisbane, you should first look at the Kurilpa Urban Renewal Master Plan, published by the Brisbane City Council:

http://kurilparenewal.com.au/

This Plan will have a big impact on views, and it also gives an idea of how many apartments will be built in the next decade in this area.  See video.

Rent Without An Agent

If you engage a real estate agent to look after your property rental, the costs can be rather high compared with the service actually received.  Typically, the cost is a weeks rent to find a tenant, plus GST, and then 8.8% to collect the rent and do the ongoing management.  On rent of $550 a week, assuming that you have a tenant change once a year, the cost is over $3,000 a year.

If you live near your rental property, and don't mind learning how to legally comply with rental laws (the RTA website has good information), then Rent My Estate is a good service for landlords.  It helps manage the realestate.com.au advertising process, and is expanding into other programs for landlords (such as recording rents received).  Readers of this blog will receive a $20 discount via this link shared by a reader - thanks John.  The savings year on year could be substantial, if you are prepared to put in the time yourself to do things properly.  There is also a good blog on that site.

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%.

Blog Statistics

Looking at the number of views of this blog since 2007, December is the month with the lowest number of readers, year on year.  My guess is that less people are doing research or are considering buying an apartment in Brisbane in December.

When should I buy? When should I sell?

The Brisbane inner city apartment market is somewhat strange at present.  Some points to note:

• I mentioned in a recent post that there were fewer apartments listed for sale than in recent times.  That is the case for resales of existing apartments.
• There is a large potential increase in the number of inner city apartments, due to a large number of high rise apartments being developed.
• With spring, more apartment owners are likely to list their apartments for sale.
• Rents are down, vacancy rates are up.
• Sydney and Melbourne are or have boomed.  Brisbane has not.  It is still behind its peak 5 years ago.
• Future capital growth is uncertain, but apartments are currently selling at good prices due to lack of stock available and low interest rates.
• My prediction is that in 3 months time, prices will decrease slightly.  So now may be a good time to sell, but an uncertain time to buy.

High-rise Brisbane

A newspaper article by Matusik in the Courier Mail today reflected on potential changes to the Brisbane inner city apartment market:

"Brisbane is set for an increase in the supply of new inner-city digs.  Brisbane could well face an oversupply of downtown apartment stock.  And that increase in stock might more resemble a tsunami in terms of its impart on the market and potential investment outcomes.

For the past five years, the Brisbane market has been undersupplied, with an underlying demand of about 9000 new dwellings across Brisbane.  However, when we break down future demand by market segment, going rental demand (those who occupy a significant percentage of inner-city apartments) appears likely to fall.  And Brisbane's future demand will more likely be deriven by the increasing downs and retirement markets.  Those folk are, for the main, not enticed by large, high-rise complexes.

Rents are down, the vacancy rate is increasing and some resales in recently completed inner-city apartment buildings are already selling for losses.

Currently, the vacancy rate in Brisbane city is 4.2%.  Two years ago it was 1.2%.

And there are now 276 properties (as at June) for rent in Brisbane/Spring Hill, compared with just 48 two years ago.  For the first time in five years, rents have fallen."

Boom to Bust

I'm watching Australian property: Boom to Bust on  http://www.afr.com/videos/business/australian-property-boom-to-bust-xjbwt3bzqu973akn8pmyigimgj7hl7ql.html via @FinancialReview

Buyer Misses Out Because Notice sent to real estate agent

A recent Supreme Court of Queensland case shows that it is important to be precise when following contractual provisions.  A buyer and seller sign an REIQ contract of sale.  The contract includes a provision that the buyer must give notice to the seller that the building and pest inspection has been satisfied by 5pm on a particular day, and if such notice is not given by this time, then the seller can terminate.  The contract says that notice can be given by fax to the seller or the seller's solicitor.

The buyer's solicitor gave notice at 4.57pm to the seller's real estate agent, not the seller's solicitor.  So the seller terminated the contract at 5.07pm.  This termination by the seller was considered to be valid.

See Simpson v. Jackson [2014] QSC 191

Property Clock

"However I like Brisbane at the moment; it’s the capital city with the strongest potential for capital growth. It’s at about 7.30 on the clock, with plenty of well-priced stock around if you know where to look."

See MRD Partners

Dog v. Body Corporate Committee - Dog Wins Again

Harbour Lights [2014] QBCCMCmr 264 (21 July 2014)

Quote:

In McKenzie v Body Corporate for Kings Row Centre, the scheme in question was a high rise building. Despite this, the Tribunal found the scheme could prima facie be suitable for the keeping of pets. Following this decision, I am not satisfied the unit in question is inappropriate for the keeping of this dog merely because it is a ‘unit’ (as opposed to a house or other dwelling type) or contained in a high density housing area. Further, I note that no evidence whatsoever has been presented to suggest that the dog in question is too large or otherwise inappropriate to be housed in the applicant’s unit. Accordingly, I am not satisfied these arguments form a reasonable basis to deny the applicant’s pet request.

Brisbane has under performed, but is gathering momentum

Double click on the above to make bigger.  Source:  RP Data

Arbour on Grey

One of the better buildings in the South Bank / South Brisbane area is Arbour on Grey, located on Grey St and Little Stanley Street.  It was developed by Mirvac, and is a high quality complex.  It has views of South Bank, and apartments on the higher floors can see the river.  (It is only 4 floors high.)

The two bedroom apartments are typically about 90 sqm internally, with a large balcony of about 20 sqm.  So much larger than many off-the-plan two bedroom apartments currently being marketed.

Some recent sales:

Apt 1307, located on level 3 - 2 bedrooms, 2 bathrooms, 1 car, facing the river - $735,000
Apt 1215, located on level 2 - 2 bedrooms, 2 bathrooms, 1 car, facing Grey St - $620,000
Apt 2204, located on level 2 - 1 bedroom, 1 bathroom, 1 car, facing Grey St - $467,250

Some apartments currently for sale in the complex:

Apt 1110, located on level 1 - 1 bedroom, 1 bathroom, 1 car, large apartment facing Grey St
Apt 2218 - under contract
Apt 2312 - under contract
Apt 2214 - 3 bedroom floor-through apartment on level 2