TDD Peninsula at Kangaroo Point

Peninsula at Kangaroo Point is currently being marketed by TDD.  One bedroom plus study from $370,000; two bedrooms from $425,000 to $620,000.  Video here, that doesn't really say much.  This is being marketed as a "riverside" development.  Take care -- this is not a riverfront development.  In fact, it is much closer to the highway that goes across the Storey Bridge and the exit to the Clem7 tunnel than it is to the river.  See map here.

Matusik touts 38 High Street development

An interesting video regarding the 38 High Street apartment development in Toowong, next door to the RE pub.  Look here.  One bedroom apartments from $339,000.

FKP's Albion Project

FKP is promoting its The Hudson at Albion Hill project.  See www.themillalbion.com.au.

Quote from Courier Mail advertorial, 8 June 2013 from FKP's general manager of developments:

"Overwhelmingly pivotal in all deals has been the size of apartments...  This difference is real, it matters and its definitely a deal-maker.  People want space in an apartment."

The advertorial highlights a 2 bedroom, 1 bathroom apartment that is 67 sqm.  In my view, a 67 sqm two-bedroom apartment does not have space!  This is a tiny apartment.  One of these apartments is advertised at $399,000.

BOQ warns about one bedroom apartments

"Bank of Queensland is worried about a surge in people borrowing money to invest in small apartments, citing Brisbane and Melbourne as concerning spots.

Of particular concern was self-managed super funds (SMSF) engaging in the tactic, BOQ CEO Stuart Grimshaw said.  He said the assumption was these one-bedroom apartments would appreciate in value, but it was  a "risky part of the market" for heavily borrowed SMSF funds.

"I don't think it's long before ASIC will start looking at some of the sales methodology," he said."

Source:  Courier Mail, page 77, 8 June 2013.

Be warned!

Ryder says Brisbane apartment market is heating up

A commentator named Terry Ryder says that the Brisbane apartment market heats up.  See story on Property Observer website.  However, take care reading this.  The article is based primarily of sales of new and off-the-plan apartments.  What is not stated is that these sales often made to foreign investors, who cannot purchase existing apartments due to FIRB rules.  When looking at resales of existing (i.e., not new) apartments, the story is different.  For example, the REIQ report, mentioned in a post yesterday, shows that less than 1 apartment per day sold in the March 2013 quarter in downtown Brisbane.

Ryder also says that consumers (I suspect he means foreign investors) have a preference for 1 bedroom apartments over 2 bedroom apartments.  My guess is that this is because new two bedroom apartments being sold by developers are overpriced.

Brisbane Property Prices

RP Data reports that Brisbane property prices are increasing, but looking back five years, the annual change in capital values is still negative.  That means, on average, a person who purchased five years ago has made a capital loss in Brisbane.

Property Sales in Brisbane

RP Data reports that the number of sales of houses and apartments in Brisbane is more than 15% below the rolling five year average.  The number of sales is slowing increasing.

HTW Valuer's Month in Review Report

HTW Property Valuers say in their recent monthly report that, for apartments, the Brisbane market is improving, the Gold Coast market is declining, and the Sunshine Coast market has bottomed out.

[Click chart to view]

REIQ reports that apartment demand is increasing

Sales of units and townhouses across Queensland have strengthened further over the last year, according to the latest Real Estate Institute of Queensland (REIQ) data report.  Over the March quarter, the preliminary numbers of unit sales in Queensland increased by 2 per cent compared to the same period last year.

But it is sales in our major tourism centres of Cairns and the Gold and Sunshine coasts that are the real story with sales sky-rocketing over the past year in these areas.

“The popularity of units and townhouses in our major tourist precincts has returned,” REIQ CEO Anton Kardash said.  “These areas have experienced the highs and lows of the GFC, and the strength of the Aussie dollar, more than most over the past four years so it is heartening to see them stepping back into the light.  Many of these areas have also become more affordable, even those with unique seaside locations, so this is no doubt spurring buyers into action before the tide has turned to the positive completely.” 

In Brisbane, the median unit price was steady at $390,000 over the March quarter. Solid performers over the period were Upper Mount Gravatt and Kelvin Grove which posted price growth of 9.6 per cent and 8.8 per cent respectively. 

[Click on chart to enlarge]

A Declining Market

For the month of May, dwelling values declined by -1.2 per cent across the RP Data-Rismark combined capital city index. The May fall was the second consecutive month-on-month decline, with values down -0.5 per cent in April following a 2.8 per cent rise in values over the first quarter of the year.

"Given the weak housing markets of 2011 and 2012 were followed by a very robust 2013 first quarter, we may well be seeing some natural market volatility associated with vendors acquiescing and taking the opportunity to sell."

Brisbane apartment prices (to 31 May 2013):

May 2013 - down 1.7%

Quarter - down 0.4%
Year on Year - up 1.5%
Year to Date - up 1.1%

Median price based on settled sales of Brisbane apartments over the quarter - $375,000.

With a number of businesses in Brisbane continuing to make employees redundant, or implementing a wage and hiring freeze, it is hard to see things getting better in Brisbane any time soon.

Pet Disputes

It is becoming common for owners to seek permission to have a pet, for the body corporate committee to refuse, and for the body corporate committee to be overruled.  See recent cases:

• Cat allowed in Eden by the Bay
• Cat allowed in Horton Apartments
• Decision not to allow dog by body corporate suspended for further review
• Dog allowed and bylaw prohibiting animals struck out

Car Spaces

According to Matusik in the Courier Mail today:  "The premium for a car space within a new inner Brisbane development ranges in prince depending on the location, but the average cost is close to $75,000."  He said that apartments without carparks are harder to sell.

Brisbane Rental Report

Brisbane Letting Agent RBCX has issued the following rental report for Brisbane City and inner Brisbane:

"The CBD market seems to be like no other.  Apart from short periods here and there, the demand for rental properties in the CBD is very strong.  There may not be the 20+ attendees at every ‘Open Inspection’, but there are generally eight to 10 interested parties.

The rental demand is strong for units up to $800 per week – and this includes furnished units.  Above that level, the market shrinks significantly and vacancy periods can be three to four weeks+, unless the property is new and/or modern, with fixtures, fittings and décor to match. River and City views are essential.

The CBD buildings that experience less demand are those that offer short-term letting, as well as long- term residential. These buildings can be very noisy with a pervasive party atmosphere.

The Inner-City market is not faring as well as the CBD market.

In the last quarter of 2012, the rental market tightened markedly with the first signs of the downturn in the Resources Sector. There has been further erosion to rents in 2013.  There are many reasons why the rental market is flat and rents have contracted: the gradual 2012 exodus of Corporate tenants, who were the bread-and-butter of Inner-City rentals, gained momentum. In some areas, they have almost disappeared from the rental landscape; the announcement of the Federal election almost six months out from 14 September 2013 has seen many businesses go into semi-hibernation; job shedding in the Public Service market; the fallout from a Resources Sector seemingly in increasing decline; job insecurity; rising unemployment due to a flat economy; and loss of consumer confidence.

Also, many people who were Inner-City tenants have moved to the suburbs. They are prepared to sacrifice proximity to the city for more affordable rents. This trend is increasing with properties, particularly houses within 10 kms of the CBD being in heavy demand.

Our experience is the Inner-city renter wants everything within walking distance: transport, shopping, entertainment. They do not want to have to drive to services, facilities, infrastructure and entertainment precincts.  There is also a great deal more competition from new developments in the Inner-City areas, including Kangaroo Point, Teneriffe and New Farm. New building stock with all the aforementioned criteria is offered at rents below those of older, established buildings. New buildings with trendy, contemporary interiors and more attractive rents are appealing to the sought-after Corporate market, as well as private renters."

Buyer's Market says RP Data

"The survey was conducted across 1,030 respondents who were located across the capital city and ‘rest of state’ regions around the country.  The headline findings showed 80% of Australians think it’s a good time to buy a home but only 37% think it’s a good time to sell.  The results suggest, at least from a consumer perspective, that housing remains a buyers market."

See RP Data Blog

"There has been clear evidence of weaker housing market conditions over the second quarter of 2013. The housing market is highly seasonal and we anticipated a slowing of conditions over the current period however, it is likely that the magnitude of the slowdown and subsequent value falls has been heightened by falling consumer sentiment. Should this continue, it is reasonable to anticipate a less active housing market where value growth is lower than when confidence was much more buoyant."

See RP Data Report

U.S. Home Prices Rise

The U.S. is in a more positive mood.  See NY Times:

"Americans are in a buying mood, thanks largely to the housing recovery.  The latest sign emerged Tuesday as the Standard & Poor’s Case-Shiller home price index posted the biggest gains in seven years. Housing prices rose in every one of the 20 cities tracked, continuing a trend that began three months ago. Similar strength has appeared in new and existing home sales and in building permits, as rising home prices are encouraging construction firms to accelerate building and hiring."

Vida West End

PointCorp is developing an apartment complex at 101 Riverside Drive, West End.  This is next door to Pradella's Left Bank development, and near to Pradella's Tempo development.

This new development is being marketed as Vida.  It consists of two towers of about 10 floors each, with about 150 apartments.  Some apartments will look West across the river.  About half the apartments will look East towards West End.

The Courier Mail says that for the apartments on the riverside, 1 bedrooms will be from $460,000; 2 bedrooms from $660,000; and three bedrooms from $1.2 million.  It will be interesting to see how expensive the apartments on the higher floors will be.

Compare a recent listing in Left Bank next door -- two bedrooms on a lower floor with river views for $599,000.

Darkness on Alice Street

Sunland has obtained development approval for its apartment tower at 140 Alice Street, on the corner of Albert Street.  Recently, barricades went up around the existing unit block.  I suspect that demolition will start soon.

It appears that this skyscraper will contain 139 luxury apartments and will tower over and shade the Botanical Gardens.

"With apartments priced between $700,000 and $4 million, there would be a pool, gym, a 24-hour concierge for tenants, business centre and a Turkish hammam."

Sunland has branded this complex as Abian Apartments.  Have fun when dealing with Sunland:

"The Victorian Supreme Court dismissed Sunland's claims in June 2012 because their key witness was deemed untrustworthy."  Sun Herald

Investors Returning to the Market?

"With lower interest rates and home value growth remaining moderate we would expect that the basis point spread between official interest rates and gross rental yields on houses to increase further over the coming months which would subsequently make investing in housing potentially even more attractive for those investors focussed on yield."

See Why Are Investors Returning to the Housing Market?

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