Mortages and United States Residential Property

"MUCH has been said about the high rate of home foreclosures, but the most interesting question may be this: Why is the mortgage default rate so low?

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David G. Klein

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Weekend Business: Richard Thaler on strategic defaults and home foreclosures.

After all, millions of American homeowners are “underwater,” meaning that they owe more on their mortgages than their homes are worth. In Nevada, nearly two-thirds of homeowners are in this category. Yet most of them are dutifully continuing to pay their mortgages, despite substantial financial incentives for walking away from them."

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Will Brisbane Apartment Prices Rise or Fall in 2010?

I do not know! The messages are mixed at present. My predication is that some buildings will have average price growth, while other buildings (e.g., those with a large number and % of investor apartments -- e.g. Aurora and Charlotte Towers -- or those that were aggressively sold off the plan during the boom -- e.g. Evolution) will have no price growth or price decreases.

Factors suggesting price increases for Brisbane apartments include:

• increased migration to Brisbane
• mining sector likely to remain strong
• few large new apartment buildings being completed in the next 18 months
• net returns of 5% or better for some apartments

Factors suggesting no price increases (or possible price decreases) for Brisbane apartments include:

• likely interest rate increases in 2010
• rents unlikely to increase significantly in 2010, and may even decrease for some buildings/areas
• lack of first home buyers, many of whom purchase apartments
• investors only purchasing when the price is right or the seller is desperate
• difficulties for investors getting loans
• banks are requiring a higher % of down payment, so investors have less to spend
• valuations are more conservative, making it harder for investors to obtain highly geared loans
• difficulties redrawing against existing loans to invest, because property prices have not increased significantly in recent times

Risks for the investor in Brisbane include:

• foreign students loosing interest in Brisbane or Australia -- as they make up a significant percentage of renters
• wages stagnate -- affordability (% of wages spent on property) already stretched, so unless wages increase, it is unlikely that property prices will increase significantly
• council rates increasing
• body corporate levies are already high (over $6,000 a year in some buildings), and may increase more this year
• federal government limiting or removing ability to negatively gear or claim depreciation
• unemployment increases

Quattro - "New" Spring Hill Apartment Building

Apartments in a new apartment building are currently being marketed, with the official launch next weekend.

The building is Quattro. All the apartments are two bedrooms, two bathrooms, about 84sqm internal. There are 4 apartments per floor, over 13 floors. There are 52 apartments in total. They have ducted air-conditioning.

The pricing starts at $450,000 and goes to $600,000, depending on floor and view. Expressions of interest have been submitted for all apartments below $500,000.

I suspect that some of the apartments will get a lot of noise from Turbot Street.

It appears from the website that the building manager plans to rent out apartments on a short term and overnight basis. The development is associated with Balmain Trilogy. The building has been sitting empty for a year, due to financial and legal issues.

Rents in 2010

• 2009 weak year for rent growth
• Still down in 2010
• But will rise within months

RENTS across Australia stagnated and in some cases even fell in the December quarter, but are expected to rise later this year.

A report to be released by Australian Property Monitors today says last year was the weakest for national rental growth since 2002.

While APM flags a strong lift in rents is likely this year, property managers and landlords reported that the market had remained soft so far this month, which is typically the busiest month for the rental market.

Chris Rolls, managing director of the Gold Coast and Brisbane residential property manager Rental Express, said: "We have found this is the slowest start to the year for the last five years."

Mr Rolls, who owns a four-bedroom rental property in Brisbane suburb Kelvin Grove, said the contract for the property came up for renewal in 10 days and he had opted to keep the rent at $520 a week in the hope that the current tenants would not leave.

"The risk is that if you increase the rent, and they don't pay it and instead move out, I won't get the same rent. It was top rent 12 months ago," Mr Rolls said.

Source: The Australian

Harcourts New Farm owner and property manager Kylie Pridham agreed the tenant's reprieve - brought about by the global financial crisis - would not last long, with vacancy rates in Brisbane to remain about three per cent.

"We have had to reduce [the rent] on some properties by $50 a week, but that won't last," Ms Pridham told theAustralian Financial Review.

"As soon as the lease finishes in six months time those rents will be back up."

Source: Brisbane Times

Interest in the sale may be strong but the general property outlook for the year is a little more sobering, according to property analyst Michael Matusik. Mr Matusik warned that property was likely to be oversupplied this year. He cited factors including a shrinking average household size, less impact than expected from overseas migration and lots of empty houses around the country.

Mr Matusik said that after decades of overconsuming property, the past year had seen a more frugal mindset which could continue.

And he said the rental market was not as tight as some commentators claimed. Rental analyst Louis Christopher of SQM research said claims of an imminent increase in rents were optimistic.

"There is no evidence to suggest we will see significant increases in rents," Mr Christopher said. "Despite recent aggressive forecasts, increases of between 3-5 per cent in most areas are more likely, depending on what you are renting and where," he said.

His calculations put Brisbane's vacancy rate at 3.4 per cent last month, with 8603 homes available for rent. This is up nearly half a per cent from the previous month.

Source: Courier Mail

South Bank Student Accommodation

Urbanest is operating a student dormitory accommodation building at South Bank, near the TAFE. It has a total of 713 rooms and studios, which are furnished and air-conditioned. The rooms are small and tight -- for example, 5 bedrooms will share a kitchen. And the pricing is amazing -- for example, a studio for one person is listed on the website as being $435 a week, or a bedroom in a 4 bedroom hallway is $336 per week.

For $650 a week, you could rent a large two bed furnished apartment in the Arbour on Grey, or for $750 a luxury two bed furnished apartment in Saville South Bank. So two students sharing a two bedroom apartment would do much better than renting in Urbanest.

Infinity

Meriton's Infinity Apartments has a webpage. It dwarfs nearby buildings, including Evolution.

Coming soon to Brisbane's CBD, Meriton's latest and most impressive apartment development to date - Infinity: 236 metres / 77 levels / views - unmatched. Welcome to where your new life starts but the horizon never ends. Soar across 360 degree views from sunrise to sunset, high above the Brisbane River and enjoy the best of Brisbane City living, day and night.

Rents and Medium Prices - Comment from Matusik

"Despite rents rising by 14% - according to the official figures (during 2008) - 70% of renters that year did not pay more rent and 60% of renters have never paid any more rent from the day they moved into the accommodation. Beware of any rent or even end price analysis based around median results. All that shows is what type of property sold or rented rather than a change in actual values. Resales analysis and lease renewals are the only way to truly understand what is happening in the residential market."

Source: matusik.com.au

Are more high rise apartments needed in Brisbane?

Brisbane will need an apartment building boom on the scale of Dubai if it is to accommodate a forecasted growth in population by 2030, the State Opposition claims. However, he estimated as many as 1725 20-storey buildings would need to be built before 2031 in order to cope.

"It is areas like Indooroopilly, Chermside, Mt Gravatt that are designated to do it," he said.

The plan also nominates the Brisbane CBD, Carindale, Toombul, Mitchelton, Wynnum Central and Toowong. Mr Gibson said the difficulty was finding the land in these areas to build thousands more apartments.

"You go through street by street and you identify where you can build 82 new 20-storey building every year for the next 21 years and the land is not there right now," he said.

Brisbane Times & The Australian

Vision Brisbane Finally in Administration

It is not a surprise to learn that the companies developing the Vision apartment tower in downtown Brisbane went into administration yesterday. I wonder when the off-the-plan purchasers will get their deposits back?

See GCB.

Proposed Milton Development on Milton Road

More than 10 years after it was closed down and sold by Tennis Queensland, the Milton Tennis Centre, together with the adjoining Milton Bowls site, has a development application on it to create a new "Emporium" style precinct, with residential, retail and commercial facilities.

The Seymour Group, owned by Queensland business identity Kevin Seymour, put in their application to the Brisbane City Council just before Christmas and although it is "extremely early days", the group are very excited about their plans for this famous parcel of land, according to a company spokesperson.

"The Milton Tennis Centre site is iconic in Brisbane and it has been vacant for so long. We’ve written into the code that we’ve submitted to council that there will certainly be a reference to the original centre somewhere in the new development," the spokesperson said.

Located at Frew Park, Milton Rd was the home of Queensland tennis from 1915. It consisted of 19 hard courts and four grass courts and hosted eight Australian Opens and 16 Davis Cup ties (including three finals). It hosted its last Davis Cup tie in 1990, the quarterfinal win over New Zealand featuring John Fitzgerald and Wally Masur.

Lindsay Davenport won the last world tour event at Milton in 1994, after which the wooden grandstands were declared unsafe. The Milton Tennis Centre closed in 1999 when Tennis Queensland sold the property to cover more than $1 million in debts. Doncaster Holdings sold the site to Multiplex for a reported $5.9 million in April 2002. Derelict and having suffered two fires, the stadium was demolished in May 2002. It has sat deserted and derelict since then.

It is understood the Seymour Group paid a total of $30.15 million for the tennis and the bowls sites in 2008. It currently has approval for 174 residential apartments but the Seymour Group wants to create a whole new precinct for both plots of the land, which total about 3.2 hectares.

"We’re thinking it would be a modern version of the Emporium in the Valley," the spokeswoman said.

Brisbane Apartment - medium price increases

The medium apartment price for Brisbane, as reported by RP Data - Rismark, is up 10% for the period January to November 2009. This is better than the increase in the medium price for Brisbane houses.

See RP Data Press Release

The medium price for Brisbane apartments is listed as $375,000, and the time on market for apartments in Brisbane is said to be 29 days.

Devine

The Courier Mail has recently published two stories relating to David Devine, founder and major shareholder of Devine Ltd. One story showed Mr Devine living in a penthouse in Kangaroo Point (not built by Devine). The story in today's paper was not flattering.

Two days ago, there was a story titled "Devine sues former employee over espionage claims" which started "Devine Industries Pty Ltd is suing the former personal assistant of founding..." Links on other websites include the summary: "TWO of Queensland's biggest construction firms are in a legal battle involving claims of commercial espionage, fraud and embezzlement of more than $500,000."

The Courier Mail has removed this story from its website and did not include today's story on its website. I wonder why?

The link to the story that has been taken down is:http://www.news.com.au/couriermail/story/0,23739,26553326-952,00.html

"Devine Ltd said is not a party to a case before the Supreme Court being reported in the media, but rather Devine Industries Pty Ltd, a privately-owned entity by David Devine.

The company was responding to the media articles published in The Courier Mail and The Herald Sun." See Business Spectator.

See also http://comsecllc.blogspot.com/2010/01/devine-sues-former-employee-over.html

Here is a link to the Court file.

Interestingly, both David Devine (currently listed as managing director of Devine) and Ken Woodley, marketing director and also a major shareholder, do not live in Devine built buildings. According to RP Data, Mr Devine lives in a penthouse apartment in a building at 55 Darragh Street, Kangaroo Point that is over 1000 sqm in floor area, has 4 bedrooms, 4 bathrooms, 4 car parks - that he paid $2.5M in 1998. Mr Woodley lives in a subpenthouse in a Mirvac building, Quay West on Alice Street in Brisbane.

(Photo of Ken Woodley, on the right.)

A few years ago, both Mr Devine and Mr Woodley started legal actions to change the body corporate fees that they paid for their homes. They were successful in having their body corporate fees decreased. As a result, the body corporate fees for the owners of smaller, less expensive apartments in these buildings increased.

Property Directories

House Hunters Directory
Real Estate agents

Worldwide real estate companies directory and property buyers and sellers guide.

Google Search - Shows Less Interest in Real Estate

Google Insights allows you to examine what people search for on Google. In the real estate category, Google shows that searches are down for 2009, particularly in December 2009. (Google shows that the peak month for searches for real estate in Queensland and Australia are January followed by September). December 2009 was worst on record.

Real Estate Marketing Technology

This is an interesting websites for real estate agents, involving the use of technology.

Business2

New Development on Ann Street

MacLachlan & Ann -- a new development in a central area of the Valley, selling off the plan soon.

www.mac-ann.com.au

Charlotte Towers For Sale

Following on from the post listing Charlotte Towers apartments that sold in 2009, I noticed that there are a huge number of 1 bedroom apartments currently listed for sale in this building. Most do not have a car park. In my view, a one bed in Charlotte Towers without a car park is worth about $305,000 to $325,000, depending on floor and view. There are a number of other buildings in the city area where there are no apartments for sale at all.

• $365,000
• $369,000
• $389,000
• $400,000
• $350,000
• $365,000
• $400,000
• $440,000 with car
• $370,000
• the list goes on and on

Take Care!

Misleading Market Commentary

There is interesting market commentary from Chris Joye from Rismark, rebutting silly and factually incorrect statements published by the stock spruikers, Morning Money.

See Chris' blog entry, located here.

Alderley Square

PCN Projects, who are the developers of the proposed El Dorado Village at Indooroopilly, have launched a website for a new project at Alderley, called Alderley Square. There are little details about the project on the website.

"Alderley Square will provide a village-style, mixed use community that is set to revitalize and reinvigorate the heart of one of Brisbane's most established suburbs. It will combine the finest of residential apartment living, a thriving retail centre and bustling commercial precinct, all centred around a fully integrated transport network. Its restaurants, cafes and public gathering spaces will be evocative of those found in European capitals. And it's all just 15 minutes from the CBD."

Review of My Predictions

I made predictions at the beginning of 2008 and 2009. Both times, my predictions were mostly wrong! I guess I should stop making predictions about real estate.

In 2009, the Brisbane apartment market went backwards in the first half of the year, and regained some of the lost ground in the second half of the year.

In the new apartment market, there were more cancellations of projects then new projects starting. Most developers struggled to achieve off-the-plan sales. The new luxury apartment market died. Most of the pre-sales were achieved for budget priced developments, of small apartments. A number of people who purchased off the plan in the boom times were unable to settle in 2009 -- often because the bank valuations came in much lower than the contract price. Developers dropped prices and cancelled projects.

Prices dropped in the resale apartment market. Rents did not rise, and in some instances, took a minor step backwards. For a number of sales, the vendor lost money on the resale.

The Gold Coast and Sunshine Coast markets were harder hit than Brisbane.

Charlotte Towers Sales in 2009

Charlotte Towers, at 128 Charlotte Street, Brisbane has had over 40 sales in 2009, which is almost one a week. Most of the owners are investors who do not live in the building. The building has one and two bedroom apartments. Some do not have carparks.

• Lot 502, sold in June for $522,500
• Lot 603, sold in May for $410,000
• Lot 604, sold in April for $317,000
• Lot 701, sold in March for $345,000
• Lot 704, sold in March for $305,000
• Lot 807, sold in September for $450,000
• Lot 1005, sold in March for $295,000
• Lot 1107, sold in March for $450,000
• Lot 1202, sold in June for $480,000
• Lot 1203, sold in April for $437,000
• Lot 1502, sold in May for $480,000
• Lot 1503, sold in June for $445,000
• Lot 1508, sold in July for $473,000
• Lot 1510, sold in March for $325,000
• Lot 1609, sold in October for $358,000
• Lot 1703, sold in February for $450,000
• Lot 1706, sold in February for $325,000
• Lot 2006, sold in October for $328,000
• Lot 2101, sold in October for $420,000
• Lot 2107, sold in September for $495,000
• Lot 2210, sold in January for $312,000
• Lot 2302, sold in March for $468,000
• Lot 2307, sold in May for $490,000
• Lot 2308, sold in February for $485,000
• Lot 2310, sold in July for $346,000
• Lot 2408, sold in April for $495,000
• Lot 2501, sold in June for $418,000
• Lot 2604, sold in July for $348,000
• Lot 2608, sold in August for $492,500
• Lot 2708, sold in May for $490,000
• Lot 3007, sold in February for $485,000
• Lot 3302, sold in August for $320,000
• Lot 3310, sold in February for $358,000
• Lot 3401, sold in July for $355,000
• Lot 3412, sold in May for $360,000
• Lot 3811, sold in September for $347,000
• Lot 4110, sold in April for $433,000
• Lot 4112, sold in August for $463,000
• Lot 4209, sold in April for $425,000
• Lot 4308, sold in February for $717,000

Skyline sales in 2009

Skyline, at 30 Macrossan Street, has had 16 sales in 2009, mostly from the developer clearing unsold stock of 3 bedroom apartments. Most of the owners are investors who do not live in the building. At least 2 investors lost money when reselling this year.

• Lot 12, 3 bedroom 2 level "townhouse" with outdoor area - sold in October for $950,000 (previous owners reportedly paid $1,240,000)
• Lot 82 - 2 bed, 87 sqm internal, 15 sqm balcony - sold in January for $645,000
• Lot 95 - 1 bed, 50 sqm internal, 11 sqm balcony - sold in February for $335,000
• Lot 134 - 3 bed, 2 bath - 101 sqm internal, 19 sqm balcony - sold in June for $694,000
• Lot 211 - 3 bed, 2 bath - sold in February by developer for $720,000
• Lot 221 - 3 bed, 2 bath - sold in February by developer for $776,000
• Lot 231 - 3 bed, 2 bath - sold in February by developer for $725,000
• Lot 254 - 3 bed, 2 bath - 101 sqm internal, 19 sqm balcony - sold in March for $782,000
• Lot 271 - 3 bed, 2 bath - sold in February by developer for $750,000
• Lot 281 - 3 bed, 2 bath, 114 sqm internal with 22 sqm balcony - sold in March by developer for $755,000
• Lot 291 - same as above - sold in March by developer for $795,000
• Lot 391 - 3 bed, 2 bath, total size 142 sqm - sold in October for $875,000 (previous owner paid $910,000)
• Lot 441 - 3 bed plus study, 225 sqm internal plus 16 sqm balcony - sold in August by company related to developer for $1,800,000
• Lot 442 - sold in August by developer for $1,800,000
• Lot 451 - same as 441 - sold in August by developer for $1,800,000
• Lot 452 - sold in September by developer for $1,750,000

Matusik Turns Bear!

RELIEVED property sector experts are optimistic about future growth for the industry after residential values seem to have dodged a bullet in the fallout of the global financial crisis.

Experts across the country are predicting capital increases of about 5 per cent. Some are warning of problems associated with an undersupply of property.

But Brisbane-based property researcher Michael Matusik has gone against popular opinion to suggest that developers should be cautious. "I have been banging on about an undersupply for close to 10 years, but circumstances have changed in the past six months to suggest that maybe we are, firstly, already building enough dwellings to cater for demand, and that we might even be heading for an overbuild if current trends continue," Mr Matusik said.

He said increased foreign migration hadn't resulted in as big as demand as expected due in part to large household arrangements.

RPData researcher Cameron Kusher is more bullish than many commentators and predicts 7 to 8 per cent growth in Brisbane next year. He cited availability of finance as the wildcard that could affect how many investors get into the market. He predicted many would look at older stock that needed renovating.

Source: Courier Mail

Midwood Report

UNIT sales are leading an improvement in turnover within Brisbane's property market, with 260 deals in the three months ending November.

It compares with 174 the previous quarter. The sales show Brisbane's unit market is becoming balanced with only 13 months' supply, according to the latest Midwood Investment Report.

Report author Bill Morris said that with approvals already in place for shelved development sites, there was the opportunity to quickly reintroduce them to the market. The unit resurgence follows some improvement in the more prestige end of the housing market, which had been lacklustre for more than a year.

Courier Mail

A leading Queensland property expert says there is an oversupply of apartments for sale on the Sunshine Coast.

The author of the Midwood Queensland Investment Report, Bill Morris, says only 71 apartments were sold in the latest November quarter. He says the Sunshine Coast has many more apartments ready and waiting for sale than Brisbane and the Gold Coast.

"The current figures show there's about three years of supply sitting there in new apartments at the current take-up rate or demand," he said. "The Gold Coast has got around 18 months supply and Brisbane's even less. Brisbane's about 13 months supply. So Sunshine Coast has a lot more apartments for sale in terms of take-up or sales."

ABC News

Projects are falling by the wayside as developers struggle to obtain finance, Bill Morris said, and this is contributing to the housing supply demand deficit.

Source