Meriton's Infinity to Launch Soon

Meriton's Infinity Tower on Herschel Street must be launching soon. Work has started on site, and advertising is starting.

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Pleasanton Apartments

When doing research regarding apartments, I like to look at what is happening in other markets. One good website, which has floor plans and rents, is the Californian website for Pleasanton apartments.

Have a look at the Pleasanton website.

How can you tell if an apartment has quality finishes

I have been asked by a reader how to tell if an apartment was high quality finishes. Often, you can just tell by looking. Here are some signs that may give you a clue as to whether the developer did a quality job on the apartment:

Are all rooms air-conditioned, or just some rooms?

Central air-conditioning, or an air compressor on balcony (As described by a developer: "Split system air conditioning to living / dining and Bedroom 1 (condensor on balcony’s)")

Full central air, or just a day/night air conditioner (i.e., when air is on it the living room, it is off in the bedrooms)

A plasterboard ceiling with recessed lighting, or a "popcorn" ceilings (i.e., a sprayed finish on the concrete slab above) and oyster lighting (often described as "Texture paint finish to concrete soffit")

Underslung sink, or a sink that rests on the benchtop

900mm wide oven, or 600mm wide oven

1000mm wide space for fridge with water point, or 850mm wide space for fridge

Bathroom wall tiles to ceiling, or tiles only part of bathroom walls

2 pack polyurethane finish to cabinets, or laminate cabinets

Clear balcony balustrades v. concrete or metal balustrades

Ceiling height

Air conditioned common hallway

There are many other items, listed in the schedule of finishes for an off-the-plan apartment, that need careful studying.

Generally, if an apartment is listed as investor quality, this means it is of lower quality. Some buildings have apartments with different quality -- for example, a lower floor apartment may have lesser finishes than an apartment on a higher floor. In the Flow development, the apartments on one side of the building (the river side) have a higher quality finish than the apartments on the other side of the building (the city side). So take care!

Property Risks

Extract from PropertyUpdate

However over the last 9 months or so, some parts of our property market have increased in price by a rate equivalent to well over 20% per annum. That’s boom conditions as far as I am concerned and unsustainable.

This type of property increase normally happens in the boom phase of the cycle when fear, greed and speculation kick in.

Fear drives property booms as home buyers and investors see property prices going up all around them. They are worried that they will miss out on the profits the boom has delivered to others. Many become overconfident, at a time when they probably should be more cautious, and overpay just to get into the property market, pushing up prices to levels that are (in the short term at least) unsustainable.

At this stage of the cycle properties often sell for more than their asking price as eager buyers compete with each other to snap up any property that comes on to the market. Vendors also become greedy, pushing up asking prices and this just feeds the property boom.

Sound familiar? Isn’t this exactly what is happening in some segments of our property markets today? Because if we are already in boom conditions, the next stage to come is the downturn or bust stage of the cycle. I am sure that the market can’t keep rising as spectacularly as it has over the last few months. And if it does the Reserve Bank will bring it to a halt with rising interest rates.

What I do see happening is property values continuing to surge strongly in selected markets for the first half of this year and then growth will slow. I see a few issues on the horizon.

Finance will be a big issue for property investors this year, some will have difficulty getting it and others will have to pay more for it as interest rates rise.

I also see more trouble ahead for the world’s economies. The world’s debt binge is becoming frightening. A number of European economies are starting to unravel and the spotlight is likely to return to America later this year, as it appears to be a long way from working its way through its own economic woes. This means that there is a good chance that the US stock market will fall again and so will ours.

Manning Street Development by Kozmic

Brisbane City Council has approved two major new inner-west developments, including a 20-storey tower at Milton with an environmentally friendly "green roof".

The apartment building on Manning Street, about 200 metres from Milton station, will comprise 126 units, ranging from one to three bedrooms. The plan includes 151 car parks and 158 spaces for bicycles and may become one of the first buildings in Brisbane to house a living rooftop garden.

There were five objections lodged against the proposal, with issues including traffic, lack of contribution to local infrastructure and concerns a 20-storey tower was too big for the local area. However, developers will be asked to contribute $3.1 million in infrastructure charges, some of which will go towards a new CityCat ferry stop in the area.

Source: Brisbane Times

Irresponsible Development

Kozmic Developments brought us the Ferry Road development, Arriva, which has a great view of semi-industrial sheds. In my opinion, not the nicest development. Now, Kozmic is bringing us two apartment buildings in Manning Street, Milton -- with two houses in between. I really pity the poor home owners - how could the Council allow this!

[Update: Reader Dan comments that the Council did not approve the second smaller tower. If so, then that is a relief.]

Body Corporate Levy Rules to Change

From a SSKB Newsletter:

The share that each owner pays to their body corporate levies may change, yet again, when the government commences new laws about how contribution lot entitlements are calculated.

In a major omission that the changes to body corporate lot entitlements made in 1997 were unfair to many, the Queensland Minister responsible for body corporate law, Peter Lawlor, today announced that the basis for setting lot entitlements will revert to the principles used prior to 1997.

Under the 1997 principle the entitlements must be equal unless it is just and equitable for them to be otherwise. This principle changes under today’s announcement.

For standard format plans contribution entitlements will be based on the unimproved capital value of the land – so it will be similar to land tax and your council rates.

For building format plans (apartment style dwellings) the system will be a combination of factors that the minister describes as “market conditions and property value”. The impact of this will need to be considered once the legislation is finalised.

It appears clear that this new “old system” will apply to new developments. However, it is unknown what will happen to developments that are currently being sold off the plan.

Any body corporate where the lot entitlements have already changed from the pre 1997 system to the 1997 system because an owner made an application to have the entitlements altered are in for some more substantial upheaval as the Minister has stated the new law will see the entitlements revert to the way they were before.

At this stage the announcement lacks detail. It is unclear what happens to developments that were completed under the 1997 system and have used that principle for calculating entitlements instead of the new principles.

See Courier Mail

Gold Coast Bulletin

ABC News

NearMaps

Here are some great recent photos from NearMaps of various Brisbane apartment complexes:

• Fresh Toowong & Encore Toowong
• Parklands Sherwood
• Tennyson Reach
• Admiralty Precinct, including Meriton's new development (and here too)
• Newstead River Park
• Hamilton Portside
• Water's Edge site, Flow and Riverpoint
• South Bank, Arbour on Grey

Charlotte Towers, Festival Towers, Felix, Sebel Brisbane: here

Mortgage Stress In Brisbane

Mortgage stress is affecting just as many households in Ascot as it is in Acacia Ridge, according to the experts.

Repossession rates may be on the rise in Queensland but Ben Paris, of Debt Mediators, said the suffering was not confined to outer suburbs.

Source: Brisbane Times

Vision Hole For Sale

"Brisbane's besieged $1 billion mega skyscraper, Vision Tower, may still rise from the ground although the prime CBD site is for sale.

The ambitious Austcorp development, which was to be Brisbane's tallest residential, and commercial tower, was flattened by the global financial crisis in 2008 leaving $25 million of excavation work of the seven level basement behind. The 5,478 square metre site straddling Mary and Margaret Streets will be marketed by Jeff Dolan from Colliers International Queensland and Damian Winterburn of CapLand Real Estate Advisors.

The project, which would have boasted 109,138 square metres of gross floor area and 763 car parks, was originally due to be completed in May 2012, but Austcorp subsidiaries Vision Brisbane and Vision Developer were placed in the hands of voluntary administrators Deloitte last month. Deloitte partner Chris Campbell said there had been interest in the existing development approval, which allowed for seven levels of basement parking, three levels of retail, 15 levels of office space, two observation decks and 53 levels of residential apartments.

"The Voluntary Administrators have already received significant interest in the landmark site, which will be marketed for sale through a six week 'offer to purchase or restructure' campaign," he said.

Mr Winterburn said the original Vision Tower could still rise from the ground.

"It is all speculation at this stage, but it is still an option," he said. "We may have a buyer who wants to pick up where [Austcorp] left off, but we're just not sure at this stage."

However Mr Winterburn would not confirm whether an Australian-based buyer was looking to develop two towers on the site. Yet industry sources yesterday said it was most likely the site would be sold in separate parcels of land for residential development. "It is a really good location, but it will be hard to move as one. I expect it will be sold in two or three parcels of land," one property group head, who declined to be named, said.

....

Developer Metacorp's Empire Square Project on Elizabeth Street also fell victim to the downturn in 2008, as work also stalled on APH Capital's troubled $880 million Trilogy Tower on Queen Street."

Brisbane Times

Another Misleading Focus Advertisement

The advertisement says:

"This 2 bedroom 2 bathroom inner city apartment located in the heart of Brisbane CBD is an unbelievable $499,000."

www.realestate.com.au

This is nowhere near the heart of the CBD. In my view, it is not even located in the CBD. It is the most un-central, and in my opinion badly located apartment development in Brisbane. Great views of trains and highways. Unbelievable!

Market Update from Stockland

Queensland:

• Suffered the greatest slowdown and the mildest recovery to date
• Difficult investment climate; government levies increasing
• New housing starts remain below underlying demand

Stockland's apartment division

Further urban consolidation is inevitable in order to meet the Federal Government’s stated population growth targets

However, Stockland’s Apartments projects have not delivered appropriate returns in recent years:

– Wrong style of project (e.g. high end lifestyle, non urban) that did not reflect our core markets and strengths

– Planning blockages significantly impacted speed to market

Further apartments projects will only be considered as part of mixed-use projects which play to our diversified asset class capabilities:

– Working closely with government approval authorities to resolve planning and delivery blockages

– Focus on right product / place / price with significant amenity and convenience

No Finance Yet for Hamilton Harbour

Devine still has not obtained finance for its Hamilton Harbour development. The AFR reports that it could take up to two months of further negotiations for Devine to obtain finance. The average price of all apartments sold in this development to 31 December 2009 is just less than $520,000 per apartment. For the first tower, the average price is $539,000 per apartment.

From a report to shareholders this week:

"The company’s mixed-use Hamilton Harbour joint venture with Leighton Properties also continues to progress well with over 90% of the first stage being sold by 31 December 2009 with 233 apartments representing $125.6 million in sales.

Following the success of the first stage, the second stage residential tower was released to the market in October 2009 and this has resulted in total sales to date for the two stages of 377 apartments worth $196.6 million with 317 of these sales unconditional with 10% deposit paid. Devine together with its joint venture partner, Leighton Properties, continue to progress securing funding for the construction phase and are confident that this will be achieved."

One or Three Bedrooms?

I have always wondered whether developers know what they are doing. Take this for example.

The El Dorado Village Indooroopilly apartment development seemed to have its advertising targeted at suburban empty nesters. The proposed development included twenty end apartments that were three bedroom apartments, 105sqm internal (not large) and 35 sqm balcony. The lower floor 3 bedroom apartments were originally priced from $785,000 to about $825,000 when first released , but when re-launched recently, were priced in the low $900,000 range. There must not have been much interest, because the developer has reconfigured 10 of these apartments into 20 one bedroom and studio apartments. The new apartments are either 53sqm or 55 sqm internal, with either a 13sqm or 30sqm balcony. Priced from $400,000 to $465,000. So this development has lost ten 3 bed apartments and added twenty 1 bed apartments. Over a year ago, I was told by the developer's agent that the developer had finance and would start construction soon. That doesn't sound like it was right.

On the other hand, the developer for Mosaic in the Valley has combined one bedroom apartments to create larger two bedroom and three bedroom apartments. The developer has taken a couple of one bedrooms on the north side of the building and combined them into a two bedroom plus media room (94sqm plus 10 sqm balcony). The developer has also combined three one bedroom apartments on the south side of the building into a three bedroom apartment (134 sqm plus 17 sqm balcony).

In relation to the 2 bed plus media room, they have 2 car parks and the prices are:

Level 13 $799k

Level 14 $820k

Level 15 $840k

Level 16 $860k

So it seems that El Dorado is creating smaller apartments and Mosaic is creating larger apartments.

Matusik On Rents

"The unfortunate news about rental growth for this year is that there probably won’t be any. In fact, not only do we foresee a dismal year in 2010 for rental growth, we anticipate limited investor interest in residential property to accompany it.

As we have said previously, our analysis shows that the Australian and Queensland rental market is adequately supplied overall, and recent predictions of rental growth exceeding double figures are unlikely to happen. Expect rent rises of 3% to 5% at best, and more realistically, 0% to 2%. ...

To begin with, existing landlords need to temper their expectations, and new investors should be somewhat conservative on a likely rental return. ...

Make sure your property is “share” friendly. The key here is to provide separate ensuites and bedrooms of equal size, positioned some distance away from each other. Adequate storage and off street parking also helps renters share in relative peace. Research shows that when choosing a property to rent, tenants look at the size and number of bedrooms first, followed by car accommodation and then the indoor/outdoor living space/s.

Location and views are important when it comes to capital growth, but are less important when it comes to renting out a property. Don’t expect a lot more rent for a property with a view or in a trendy spot.
Michael Matusik"

Finding a Roommate - take care!

If you are using a room-mate service, such as EasyRoomMate and StudentFlatmates.com.au, take care. There are a few issues.

First, there are a number of scam listings, by people who pretend to have a room available, to scam the deposit or bond from you. For example, a "person" called Heather Buffington Nicole pretends to have a room for rent in Cathedral Place: 41 gotha street, brisbane. This is just a scam. See, for example, this blog.

Second, there can be disputes between flatmates regarding rent and bonds, and they get very messy. Often, one flatmate is held responsible for the conduct of another flatmate.

Soleil Update February 2010

From an email from the Meriton sales agent:

Soleil is the fastest selling development in Brisbane and is set to become the most impressive building in the Brisbane CBD,

offering affordable luxury apartments while maximising outstanding views at every turn.  

Soleil has a selection of Studio, 1, 2 & 3 bedroom apartments 

available for sale.  UNBELIEVABLE VALUE, VERY 

HIGH RENTAL RETURNS AND A MAGNIFICENT 74 STORY TOWER IN THE HEART OF BRISBANE CBD  

One bedroom apartments priced from $334,000 

Two bedroom, two bathroom apartments and parking priced from $545,000 

Two bed & study apartments with parking priced from $618,000 level 50  

Three bedroom apartments with parking priced from $760,000 (level 41) 

Three bedroom apartments with double parking priced from $931,000  

All apartments include floor to ceiling glass, blinds, light fittings, air conditioning, 

Stainless Steel European kitchen appliances including a cook top, dishwasher, electric oven

and a range hood.  The Estimated completion date: mid to the end of 2011, depending on the level of the apartment.

Slumburbia in the USA

"After several days in foreclosure alley, this broad swath of the Central Valley that has been rated by some economists as the most stressed region during the Great Recession, I can’t see such apocalyptic forecasts coming true. Yes, huge developments are empty, with rising crime at the edges, and thousands of homes owned by banks that can’t unload them even at fire-sale prices. But through it all, the country churns and expands, unlike most other Western democracies. That great American natural resource — tomorrow — will have to save the suburban slums."

NYTimes

Roma Street Parklands Auction Result

A three bedroom apartment in the Pradella Roma Street Parklands development went to auction today. A deceased estate. The address is 7110/7 Parkland Boulevard. This apartment is an end apartment, on the southern/city end of the building, with the side view looking into the Pinnacle building. 119sqm internal, with a long skinny living room at the front, and three bedrooms on the back (on the railway side), plus two largish balconies. Sold today at auction for $750,000. The total area (including balcony) is 155sqm, so this sold for $4,840 a sqm. This is significantly less than the price per sqm of many off the plan developments currently being marketed.

Chinese Big Buyers In Soleil

"... let me start this week with four facts about what is happening in the Australian dwelling market that may surprise you.

First, if metals prices keep falling and take the Australian dollar down further (as is widely predicted) some segments of the Australian residential market may actually benefit.

Second, one of the fastest growth markets for apartments is those without garages. There is very little street parking available so many residents are now living without a car – this is a significant change in traditional Australian living.

Third, living intensity is increasing as apartment dwellers are not only seeking apartments without garages but are also seeking a design that will allow them to rent one of the rooms to another party.

Finally, one of our big banks has suddenly decided to fund buyers of middle- or lower-priced Sydney apartments – a market all major banks have shunned for years.

Late last week, the biggest Australian apartment owner and builder Harry Triguboff and I had a conversation about the major changes happening in his Meriton apartment business. The Chinese are currently buying about half of all his apartments because they are much cheaper than equivalent apartments in major Chinese cities. And if the Australian dollar falls, dwellings will be even cheaper for the Chinese.

The Chinese are buying up big in Brisbane, but not in Surfers Paradise, partly explaining the sudden weakness of the Surfers market. Others tell me the Chinese are also very active in buying Melbourne residential property.

The Chinese sometimes buy apartments for their student children or for themselves to live in, but usually they remain landlords and rent the properties out. Most of the focus of Chinese investment in Australia is on the spectacular multi-billion dollar corporate moves which obscure what is happening at the grass roots level. ... "

Business Spectator

Jingle Mail in the USA

"It was April 2006, a moment when the perpetual rise of real estate was considered practically a law of physics. Mr. Koellmann was 23, a management consultant new to Miami. Financially cautious by nature, he bought a small, plain one-bedroom apartment for $215,000, much less than his agent told him he could afford. He put down 20 percent and received a fixed-rate loan from Countrywide Financial.

Not quite four years later, apartments in the building are selling in foreclosure for $90,000.

“There is no financial sense in staying,” Mr. Koellmann said. With the $1,500 he is paying each month for his mortgage, taxes and insurance, he could rent a nicer place on the beach, one with a gym, security and valet parking."

Source: NYTimes

Auction Results

This is supposed to be selling season. APM reports that only 8 properties in Brisbane sold at auction this Saturday. No units were reported as being sold at auction. Although auctions are not as common in Brisbane as in Melbourne, and many agents don't report to APM, this is not a promising sign.

W4

It seems that W4 Apartments by Donovan Hill at Newstead have problems. From a communication from a lawyer in Brisbane: "Our recommendation is that for the time being you do not issue your own proceedings and support the QBSA. It would be unwise to effect full repairs to the building which are likely to be in excess of $1.6M as it will render the QBSA proceedings useless." Temporary repairs were recommended to prevent the situation from getting worse.

This is an example of the risk of buying off the plan.

From Apartment Reviews:

"Poor! Downstairs carpark always floods. Carpark storage broken into. Bird poo everywhere. Poor finish to everything (bathroom tiling loose after 12 mths). Airconditioning problems leading to high electricy bill. Cheap paint on walls. Stupid light (hits your head all the time if you dont put your dining table in that position). Cracked plastering dropping off ceilings. Thats all folks."

"Been in the unit for 4 months now. Very poor finish, everything seems very cheap and tacky.They dont look like new units, more like a renovated unit... The floor is a really cheap vinyl. It comes with some very ordinary light fittings which are supposed to be designed by a famous guy. They look like my five year old made them!"

Timing the Market - Letter to the Editor

A good letter from yesterday's AFR:

"The latest APM report clearly shows that house prices are rising mainly because of resurgent interest in high-end properties; but many people will sadly delude themselves that this is a sure sign of capital growth in their own, low to mid-end houses or investment properties. They should understand that the property markets do not all move in the same way at the same time.

By selling and trading up to a more prestigious area now, there is the real risk of "buying into the rise" and paying a premium to do so. Time in the market , or timing the market? The time to buy into high-end property was when no one could service the debt or sell it - during the middle of the financial crisis. It is very difficult to do well in an asset class when everyone else is interested in it."

Chris Embery, South Australia.

The Milton

FKP has received development approval from the Council for its Milton Railway Station development. This development was once called Union, and is now called "The Milton".

The Milton will be a 31-storey, 303 residential apartment building on Railway Terrace. It will also have a number of retail lots.

RP Data - Rismark December 2009 report

Units outperform houses

2009 saw Australian unit values increase by 13.5 per cent compared with house values up 10.4 per cent. The trend was the consistent across every capital city, with units returning a strong gain over the year.

According to Mr Lawless, “The higher gains in the unit market are a deviation from normal performances. Historically houses have tended to outperform units. The recent reversal in fortunes has occurred due to more buyers leaning towards units because they have a more affordable price tag and are often located in more strategic locations in relation to transport and amenity than many detached housing options. Other factors may also include changing housing preferences, particularly amongst baby boomers, and more highly targeted unit developments being delivered to the market.”

Brisbane The Brisbane market remained comparatively subdued during 2009 with values increasing by 7.3 per cent over the year. The comparatively weak performance can partly be attributed to the strong gains recorded in 2007 where Brisbane values gained 24.6 per cent over the year. Gross rental yields in Brisbane remain above the national average with houses returning 4.4 per cent and units returning 5.0 per cent. 2010 is likely to see Brisbane outperform the national average due to the fact it is in a later stage of the cycle, together with ongoing strong population growth and the benefit of several major infrastructure projects coming to fruition. The median house price in Brisbane is now $463,000 and the median unit price $383,600

See RP Data Report

"December research undertaken by RP Data and Rismark International showed Brisbane property values rose by 7.3 per cent in 2009, well below the national average of 11.5 per cent.

This confirmed the findings of the Australian Property Monitors House Price Report, released earlier this week,which RP Data disputed at the time.

RP Data research director Tim Lawless said better performing capitals in 2009 included Darwin (16.6 per cent), Melbourne (15.6 per cent), Canberra (14.7 per cent), Hobart (12.4 per cent) and Sydney (11.4 per cent).

But Mr Lawless said he expected 2010 to be a very different story for the Sunshine State capital.

"In Brisbane, we have vacancy rates of around three per cent, very strong population growth and not a great deal of new housing being released. So that's the dynamic that's pushing prices upwards," he said.

Brisbane Times

Gold Coast - Colliers Newsletter

"Sellers who have been holding on for the last 2 years, not needing to sell, are now making the decision to sell.

There is good buyer interest however some are still looking to find the bargains, which are almost gone from the market as the competition from buyers increases.

Recent auction results confirm buyers are active in the market, but their offers are sometimes falling short of the owners expectations. The real test for the properties that have passed in at auction is to see if they sell within the next 2 weeks. These sales will occur because buyers realise that they need to pay a little more than their first offer to secure the property or sellers realise the market will only support a certain price level."

This sounds to me like prices are going down.

Median Prices Can Be Misleading

From Chris Joye at Rismark:

“In the first quarter of 2009, some median index providers reported misleading results, claiming that house prices were falling when in fact they were rising rapidly. The medians were being dragged down by a surge in first time buyers purchasing cheap homes in the first three months of 2009. The RP Data-Rismark Hedonic Indices, in contrast, reported strong growth of circa 3 per cent in the first quarter in 2009.

“Since the first quarter, the RP Data-Rismark Hedonic Index has shown stable growth. In comparison, the median price indices are being artificially boosted by the fading of first time buyers and the return of upgraders buying more expensive homes, which drag the medians upwards. At the current time, the true rates of capital gains across Australia are likely to be substantially less than those reported by median price suppliers.”

From Chris Joye

Inner City Rents

"RTA general manager Fergus Smith said median rents for two-bedroom units in the Brisbane City/Spring Hill area rose by $30 a week from $510 to $540."

City Faces Rental Shortage