Brisbane or Spain?

"Mar de Canet’s 308 units were sold in less than 30 days last spring, mostly gobbled up by eager Spaniards finally getting a deal they could not resist: choice holiday homes for less than half the price of similar properties on the market. ...

So many people showed up on the first day the Canet apartments went on sale here that Jesús Martínez and his wife, who were at work and planning to look the next day, called their parents to rush over and lay a claim for them. The couple bought a two-bedroom unit with a terrace and a parking place for $92,000."

See Spaniards Grab Deals in Bank Sell-off of Homes

Infinity Retreats to Serviced Apartments

Meriton Apartments builds more than 1,000 units a year – recently it has shifted its attention to serviced apartments, holding back nearly half of the apartments in its 81-storey Infinity tower in the Brisbane CBD to be offered as serviced apartments.

Meriton boss Harry Triguboff says Chinese buyers are retreating from the market due to the high Australian dollar and uncertainty in China as its economy cools.  Triguboff says that in the last three months Chinese buying has subsided, replaced (in Sydney) by first-home buyers taking advantage of new state government handouts.

No one is sure why Brisbane did not immediately respond but it would seem that the severity of the state government cuts and the fears about what will happen to coal mining would have played a role. Again it is early days and addition a large part of the Brisbane building skills base is employed constructing the mines.

See Property Observer and Business Spectator

Smaller May Have Big Future

The headline in a story today in the Courier Mail property advertorial section:  "Smaller may have big future".  Some points made in this article:

• Buyer demand for new apartments in Brisbane is for smaller apartments
• Owner-occupiers prefer larger apartments
• But in the current market, most of the new apartment buyers are investors (about 85% of buyers) and investors are very price sensitive at present.
• "With no desire to live in the property they are buying, they are purely looking at the return, and the best returns can currently be found in one-bedroom apartments."
• In the current market, one bedroom apartments range from 45 sqm to 52 sqm and are priced from $345,000 to $425,000.
• "The ideal mix [for a new development] is 70% one bedroom apartments and 30% two bedroom apartment."

My strategy is never to buy an apartment that I would not live in myself.  I would not live in an apartment that was less than 70 sqm.  When owner occupiers decide to buy, there will be a shortage of larger two bedroom and three bedroom apartments in Brisbane.

In another article today, Matusik says that Brisbane's CBD has 24% few apartments on the market compared with this time last year.

Recent Brisbane Apartment Sales

Recent sales:

• Riparian, 71 Eagle Street, 3 bedrooms on level 44, sold for $2.3 million
• Charlotte Towers, 128 Charlotte St, Apt 1903, 2 bedrooms, 1 bathroom, sold for $465,000 (after being on the market for some time)
• River City, 79 Albert St, Apt 2706, 2 bedrooms, 1 bathroom, sold for $420,000
• River City, 79 Albert St, Apt 2106, 2 bedrooms, 1 bathroom, sold for $430,000
• Admiralty Towers One, 35 Howard Street, Lot 110, 2 bedrooms, 2 bathrooms, sold for $535,000
• Roma Street Parklands, Apt 6008, 3 bedrooms, sold for $1,220,000
• Riverplace, 82 Boundary Street, Apt 82, 2 bedrooms, sold for $645,000
• Casino Towers, 151 George Street, Apt 1604, 1 bedroom, sold for $347,000
• Festival Towers, 108 Albert St, Apt 3402, 2 bedrooms, 2 bathrooms, $495,000
• Aurora Towers, 420 Queen St, Apt 568, 2 bedrooms, $750,000

Gold Coast Down

HOUSE and apartment sales levels on the Gold Coast have dropped to the lowest level in more than two decades. The city's residential property market continues to endure "a relentless downturn" in the wake of the global financial crisis, according to a 30-year market review by PRD Nationwide.

See Gold Coast Bulliten

The Capitol Apartments

Forrester Properties is marketing The Capitol Apartments at South Brisbane.  Construction is under way, and according to documents provided by the sales agent, 70 of the 77 apartments have sold.

The development is located at 35 Peel Street, and backs right onto the rail line.  Peel Street is a busy access street for the Grey Street Bridge, and is not a residential neighbourhood.  So this is a pretty poor location in South Brisbane.

Although it is being sold as an apartment building, it is already being marketed as a hotel.  The sales agent says the the apartments are designed to be hotel rooms.  For example, looking at apartment 408, this is 68 sqm internal, and is a 2 bed 2 bath dual key apartment (i.e., a hotel room and a studio with a kitchen area along the wall).  One of the bedrooms does not have windows -- it is the back of the apartment, but as it is a hotel room, that probably doesn't really matter.  Although dual key, there is only one car park.  It is on level 4 and looks onto Peel Street.  If buying, care should be taken, because some banks will not lend for hotel room purchases.

Apat 408 is listed for sale at $608,000, including furniture.  This seems to be extremely expensive.  Better located better quality larger two bedrooms can be bought in near new buildings for about $100,000 less.

This apartment has a rental guarantee of $37,370 a year after agents fees, but before rates and body corporate.  So a net of about $31,500, or a return of 5% once stamp duty is taken into account.  (The developer misleadingly says that the net return is 6.15%, but ignores stamp duty, body corporate and rates when calculating the net return!)  At today's interest rates, this is still a loss.  And once the rental guarantee expires, I doubt that this small apartment will have a gross rent of more than $800 a week, which is what will be needed to accomplish similar returns to the rental guarantee.  (One can rent a furnished luxury 2 bedroom apartment at Saville/Mantra, which is 120 sqm, with river and city views, for less than $800 a week today.)

But it seems that Forrester did a good job marketing The Capitol Apartments, if 70 have been sold to date -- poorly located, small apartments that are really nondescript unbranded hotel  rooms for high prices.

Ugly Brisbane

Chris Joye had APM (a division of Fairfax) conduct an analysis to determine in which markets most buyers have lost or made money.  APM looked at all properties sold since January 2009, and conducted an EVR (electronic valuation) on each of these properties to determine if the current valuation was more or less than the purchase price.  In Brisbane 71% of properties sold since January 2009 were now worth less than the purchase price, according to APM's valuations.  Who says that you can't have a capital loss when buying property?

From my brief review of the property market in Brisbane (e.g., looking at listings and actual sales, talking with agents, making offers on properties, etc.) it seems to me that the situation in Brisbane is somewhat dire.  And it may not improve soon, and could get worse.  Even though interest rates are falling, a more important factor is employment -- and unemployment in Brisbane is on the increase.

See Chris Joye's Another Cut article.

Soul's Last Legs?

Juniper agents are doing the ring around, with the "price has dropped" call for Soul at Surfers Paradise. Sounds like signs of desperation.  How long until Soul goes the way of Hilton and Oracle, and heads into receivership?

Protest over Lot Entitlements Change

GOLD Coast association Voice of Unit Battlers is marshalling its troops to ensure the Newman Government hears the concerns of unit-owners about its community-title Bill.
President Philip Williams said the Bill "has the potential to make small units almost worthless" and their owners needed to make a stand.The organisation last week staged meetings at the Pinnacle and Q1 towers to encourage unit-owners to make submissions on the Bill to parliament's legal affairs committee.
See Article and Prior Post

RP Data update

If you are buying or selling in Brisbane, is your real estate agent telling you how bad the market actually is?  And it may not improve.  And it may get worse!  Click on slides above for bigger view.

Harry Dent says Brisbane is Biggest Bubble

"The greatest bubble in developed-country cities starts with Brisbane, Australia at 210% followed by 180% in Miami, 170% in L.A. and 165% in Vancouver. There are many cities that could see real estate drop 70% to 85%!"

See Forbes

Apartments v. Houses

"The apartment market is not just more affordable to enter than the detached housing market but apartments are growing in prevalence in inner city areas and along the transport spines of many large cities. These unit markets are typically located close to major working nodes and nearby to entertainment and dining facilities as well as being close to public transport amenity. This week’s Property Pulse looks at the median ‘value’ of houses and units across suburbs nationally and determines the suburbs where you can make the greatest savings if you choose to purchase a unit rather than a house."

from Sometimes it pays to choose a unit by RP Data

Brisbane Apartment Prices Still Going Backwards

Australian capital city home values continue to rise with a 1.4% jump in September.

The September RP Data Rismark Home Value Index results marked the fourth consecutive month-on-month rise in home values, further cementing the fact that a housing market recovery is underway.

Capital city dwelling values rose by 1.4 per cent over the month of September, the largest month-on-month rise recorded since March 2010.  Adelaide led the way with the strongest results where values were up 2.4 per cent, followed by Perth at 1.6 per cent over the month, Sydney at 1.5 per cent, Melbourne at 1.4 per cent and Brisbane values up 1.1 per cent.

Highlights over the quarter
Best performing capital city: Darwin
Weakest performing capital city: Hobart
Highest rental yields: Darwin houses with gross rental yield of 6% and Darwin Units at 6%
Lowest rental yields: Melbourne houses with gross rental yields of 3.6% and Melbourne units at 4.3%
Most expensive city: Sydney with a median dwelling price of $522,000

However, Brisbane apartments did not do so well.

Brisbane apartment prices:
September 2012 - down 0.8%
Quarter - down 0.8%
Year to Date - down 2.7
Year on Year - down 4.5%
Median price based on settled sales of Brisbane apartments over the quarter - $385,000.

Meriton Infinity - Under Construction

Some recent photos of Meriton's Infinity apartment building in Brisbane, currently under construction.  When complete, this will be Brisbane's tallest residential tower, at 81 floors.  So I guess it is about half way now.

Infinity on the left, with Evolution Apartments on the right.  This was taken about two weeks ago.

Infinity behind Evolution Apartments, with Federal Court building in the foreground.  Taken this weekend.

From Roma Street Parklands, with one of the Pradella Parkland apartment buildings on the right.

From Roma Street Parklands

Many Property Clocks

"There are some signs of a recovery in the Brisbane property market, but it still remains firmly in a downswing , with investors seeking bargains in the unit market as new apartment projects are completed, says WBP Property Group. WBP places the Brisbane housing and unit market at five o’clock on the property clock.

“Many purchasers who have bought off the plan have seen prices come off from original date of contract. Investors still remain wary as to when the bottom will be and are on the lookout for a bargain buy,” says WBP

See Brisbane Downswing

So we have some commentators saying that Brisbane is at 12 noon (top of the market, and set to fall) and others saying it is "on the cusp of improvement", and now at five o'clock.  Who really knows?  These are all just guesses.  Your guess is as good as theirs.

Decline in Proportion of Apartment Sales

"Although units offer a significantly lower price point at which to enter the housing market, the vast majority of sales across the country are for detached houses as opposed to units. The recently released 2011 Census data showed that 75.6% of occupied dwellings were houses highlighting that they well and truly remain the dominant housing type.

Over recent years there has been a decline in the proportion of units sold, both nationally and at a capital city level. The decline can partially be attributed to the fact that more recent off-the-plan unit sales don’t enter into our figures until they reach settlement. The decline may also be as a response to first home buyer grants and stamp duty concessions that have been available, as well as recent falls in home values which has improved affordability. Unit values have typically recorded lower value declines than that of houses and this may be leading to buyers taking the opportunity to buy houses as opposed to units."

RP Data: Why has the proportion of unit sales declined since 2009?

Self managing landlords

One issue for landlords who self manage is obtaining access to RealEstate.com.au.  REA only allows agents to list properties for rent.  Domain.com.au allows individual landlords to list a property for rent.  In Brisbane, more people seem to use REA than Domain (although I suggest to people looking to rent to search both sites.)  Now there is a service that allows self-managing landlords to list on REA.  See eezirent.com.au

Ten Percent Under Water in Queensland

"Ten percent of Queensland homes are currently worth less than or equal to their purchase price while 36 percent are worth more than double the purchase price.  At the same time a year ago, 5.3 percent of homes were worth less than or equal to their purchase price and 39.3 percent of homes were worth more than double their purchase price.  These results highlight the growing impact of the continued underperformance of the Queensland housing market."

From RP Data Accumulation Report, June 2012 Quarter (Report released September 2012)

Brisbane is slightly better than the Queensland statistics.

Kings Row, Milton Development

Investa has gained approval for a property development on busy Coronation Drive in Milton, backing on to McDougal Street.  The three office buildings currently on the site will be demolished, and replaced with two residential buildings containing 293 apartments and two office buildings.  I wonder how these buildings will impact the views from FKP's The Milton project.  Details here.

Hilton Surfers Paradise Price Slice

Hilton Surfers Paradise Apartments advised "up to 34% off":

• Level 29, 2 bedroom, 119 sqm, was $1,185,000, now $840,000
• Level 38, 3 bedroom, 147 sqm, was $1,750,000, now $1,300,000
• Level 30, 2 bedroom, 100 sqm, was $1,000,000, now $685,000

According to Ray White Surfers Paradise, "the Chinese and Singaporeans have saved the Gold Coast property market" because "Australians have stopped buying over the last three years" in projects such as The Hilton and The Oracle.

Advertised Rents

In today's Courier Mail and on REA, the following new developments had apartments that were advertised for rent:

• Mirvac's Park apartments at Newstead - 2 beds at $700 a week; 3 beds at $1000 a week; 1 bed furnished at $650 a week
• Pradella's Urban Edge at Kelvin Grove - 1 bed from $345 a week; 2 beds from $485 a week
• Metro Property's The Chelsea at Bowen Hills - 1 bed for $405 a week; or $324 via NRAS; 2 bedrooms from $510 a week

Brisbane Apartment Recent Auction Results

River Place - 82 Boundary Street, Apt 192, 2 bedrooms, sold for $605,000
Aurora - 420 Queen Street, Apt 286 - passed in
Skyline, 30 Macrossan Street, Apt 304 - passed in
Admiralty Quays, 32 Macrossan Street, Apt 95 - passed in

Recent Sales - Arbour on Grey

Some recent sales for Arbour on Grey, at Grey Street, South Bank.  This building was developed by Mirvac about 10 years ago.

Apt 2103, 3 bedrooms, 2 bathrooms, 2 car parks, level 1: $800,500
Apt 2223, 2 bedrooms, 2 bathrooms, 1 car park, level 2: $610,000
Apt 2320, 2 bedrooms, 2 bathrooms, 1 car park, level 3: $660,000
Apt 2225, 1 bedroom, 1 bathroom, 1 car park, level 2: $400,000

This complex rents well.  Currently, there are no apartments available for rent in Arbour on Grey.

There is a 2 bedroom apartment currently for sale for $630,000.

Increase in Sales of One Bedroom Apartments in Brisbane

"Research from Colliers and Place Projects reveals that there were 1,065 new project apartment sales Brisbane in 2007 and 1,278 in 2011.  The average sale price in 2007 was $688,000 with 54% of new units being 2 bed, 22% were 1 bed, 18% were 3 bed and 6% were penthouses or the like.

The average sale price in 2011 was $560,000 with 45% of new units being under $550,000 (mostly 1 beds), 46% between $550,000 and $750,000 (mostly 2 beds) and only 9% for larger units. The sale of more affordable 1 bed units jumped from 22% to probably near 40%.  This accounted for the drop in the average sale price."

Who Is Buying Inner City Apartments in Brisbane in the Current Market

One57 in New York

"One57, a 306-metre tower under construction in Midtown Manhattan, will soon hold the title of New York's tallest building with residences. But without fanfare from its ultraprivate future residents, it is cementing a new title: the global billionaires' club. The buyers of the nine full-floor apartments near the top that have sold so far — among them two duplexes under contract for more than $90 million each — are all billionaires, Gary Barnett, the president of the Extell Development Co., the building's developer, said this week. The other seven apartments ranged in price from $45 million to $50 million. The billionaires' club includes several Americans, at least two buyers from China, a Canadian, a Nigerian and a Briton, according to Barnett and brokers who have sold apartments in the building, at 157 West 57th Street."

Full story here

SkyView Apartments at Urban Edge

Pradella has commenced a soft marketing launch of Skyview Apartments, the third building in the Urban Edge development at Kelvin Grove.  Priced from $345,000.  Settlement expected in late 2014.

Prices Up? But sales volumes are down

""Real estate is a confidence thing and confidence gets zapped by uncertainty and all the information we've been getting from overseas and at home has certainly zapped confidence."  Mr Kardash also noted the median house price provided a limited snapshot of the property field, because the figure could often be skewed by an inordinate number of sales at either the low or top end of the market in a given time period.  Like Mr Matusik, he said the 4.7 per cent drop in the median house price in the 12 months to June this year reflected the majority of activity which occurred at the lower end of the market.

Mr Kardash said the Brisbane market was on the "cusp of improvement", although he noted the middle price range remained relatively stagnate.

"Just recently the market's seen a little bit of a pick-up in the very top end ... but for us, we'd be looking at all three price ranges to be showing an improvement before you could call that the industry was on the way up," he said.

Brisbane Times

Brisbane Apartments Prices to Fall

"The Brisbane inner-city apartment market is heading into a downswing due to the large numbers of off-the-plan projects currently being marketed in the Brisbane CBD and surrounding suburbs, according to property investment adviser Michael Yardney.

Yardney, the director of Metropole Property Investment Strategists, places the Brisbane unit market at two o'clock on the property clock – 12 o’clock indicates the property market has peaked while 3pm indicates the market is in a downswing.

Yardney expects there to be an oversupply of inner-CBD and near-CBD apartments in Brisbane for the next few years, causing prices to fall slightly.

Most recent data put out by the Real Estate Institute of Queensland has unit and townhouse prices in Brisbane up 3.8% over the June quarter to a median of $402,500 – but down 1.5% year-on-year.

Yardney says many of the Brisbane projects being currently marketed will remain unsold and this oversupply of properties will put downward pressure on prices and rentals.

“Many of the apartments that have been sold off the plan are coming on stream in the next few years and have been purchased by investors.  Some will have difficulty getting finance and settling their purchase. Others will be disappointed to see the end value of their properties is less than their purchase price,” he says.

Yardney assesses the Brisbane detached house market to be between four o’clock and five o’clock – still in a downturn but on the way to bottoming out.

“House prices have dropped for the last two years in Brisbane.  Brisbane buyers are lacking confidence to re-enter the market and are sitting on the sidelines waiting for signs that the market has bottomed before they make a purchase. Many were waiting for the resources boom to reignite their property market, but recent negative media has again dampened confidence,” says Yardney.

According to Yardney there are signs that the inner and middle-ring Brisbane home market is picking up, with more buyers returning and many properties now selling under a multi-offer scenario.

“Brisbane is entering the stabilisation phase of its property cycle, but prices are unlikely to start rising until 2013.”

Full Story on Property Observer

Changes to Lot Entitlements, Again

The Campbell Newman Queensland Government has decided to change the lot entitlement laws, yet again.  This adds more uncertainty for apartment owners and people intending to buy apartments.  It also enables a body corporate to reverse any recent changes made to their lot entitlements under the prior law.  So some apartment buildings will end up having 4 lot entitlement schemes within 4 years.  As a direct result of these changes, some apartment owners will have their body corporate levies increased, and a minority of apartment owners will have their body corporate levies significantly decreased.

The Newman Government is clearly favouring rich penthouse owners over those owning the less desirable apartments in a building.  These changes will create further disharmony in some apartment buildings.

Before buying an apartment in Queensland, you should make sure you fully understand the implications of these changes.

Details see:  SSKB newsletter   (Story about old law that has now been repealed is here.)

Home Truths of the Leverage Game

An interesting article by Chris Joye in the Weekend AFR, worth reading:

The Perils of Leveraging Property Investment

Newman State Budget

• An increase in stamp duty: Increase in the transfer duty threshold from $980,000 to $1 million; rate to increase to a whopping 5.75 per cent.
• FHOCG:  For first home owner buyers who buy a new or off-the-plan apartment or house in limited circumstances.  Terry Ryder thinks it is a bad idea.  Will it just add $15,000 to the price of  new properties?  It is just another payback to developers who supported Newman, including the apartment developer who is Newman's father-in-law.  Why is the government trying to encourage young people to buy overpriced new apartments?

Agents to Vendors: Get Real

An article in the Weekend AFR:  Agents tell vendors to get real.

"Because prices haven't improved, only about 20% of sales are actually achieving what the vendor wants.  ... a lot of homeowners are still discounting to sell."  Click on image below to get full size story.

REIQ June Quarter Apartment Report

From an REIQ Press Release:
"The Real Estate Institute of Queensland (REIQ) June quarter median unit and townhouse price report has found healthy price increases across many parts of the State.  The solid median price growth was despite decreased numbers of unit and townhouse sales – similar to the house market over the June quarter.

Over the June quarter, there was increasing numbers of first home buyers and investors in the market, compared to owner-occupier activity which was reduced, so this is partly behind this good price growth.
“As was the case with the house market, there was reduced unit and townhouse sales activity over the June quarter as many buyers waited for the return of the stamp duty concession on 1 July,” REIQ CEO Anton Kardash said  “However, as first home buyers and investors were unaffected by the stamp duty change, these buyers were more prominent over the June quarter.  Given the affordability of units and townhouses, as well as their often more central locations, first-time buyers and investors often compete for this type of property which may be partly responsible for the increases in median prices we experienced over the period.”

The preliminary number of unit and townhouse sales across Queensland decreased 15 per cent in the June quarter compared to the March quarter.  

Brisbane recorded a median unit and townhouse price increase of 3.8 per cent to $402,500 over the June quarter.  Over the period there was also an increase in the number of high-end unit sales in Brisbane city and city-fringe suburbs which augurs well for confidence levels amongst buyers." 

The chart below is from REIQ.  It says March, but it should be June Quarter I suspect. Click on chart to make larger.

Quay West Sales

There have been three recent sales of one bedroom apartments in Quay West, at 132 Alice Street, Brisbane.  These are large one bedroom apartments, about 74 sqm including balcony, which is the size of many two bedroom apartments.  These apartments have views of the Botanical Gardens.

The recent sales have been for $450,000 (two apartments) and $460,000.  It is not clear if the apartments are being sold furnished or not.  These are prices at 2009 levels.  There was a dip back to the $420,000 mark in 2011, but now pricing has recovered.

By comparison, a number of 1 bedroom apartments in Admiralty Quays have recently sold for $580,000, and one at $595,000 in August 2011.  (In September 2009, a one bedroom sold for $612,500, so not yet back at that peak.)  Admiralty Quays is a high quality building with direct riverfront.  These one bedrooms are about 76 sqm.

Unrealistic List Prices and Lowball Offers

A nice article:  "Lowball offers for property not uncommon in current soft market and hard for vendors to swallow".  I am often surprised by the list price for an apartment.  For example, I have seen some apartments recently where the list price is $100,000 more than the sales price of a similar apartment a few floors away that recently.

Extract:

"Many vendors (irrespective of the value of the home) can be fixated on achieving a particular price for one reason or another. Owners of premium properties are no different and can sometimes be stuck on an unrealistic price. Quite often when sales agents call to inform me of silent listings, the first thing I ask is how the price has been determined. Very often they openly admit that it has been hard to set the price and ultimately it has been dictated by the vendors. In these instances, it can take time to condition the vendors to accept a significantly lower price than they originally hoped for."