REIQ - December Qtr 2009

Locality	Median Dec Qtr 09	Change over qtr"	Median 12 months to end of Dec 09	Change over 1yr"	Change over 5yrs
BRISBANE (SD)	$381,500	4.5%	$362,000	2.3%	42.5%
BRISBANE CITY (LGA)	$400,000	2.7%	$386,500	1.0%	38.0%
ALBION	N/A	N/A	$395,000	6.8%	59.6%
BOWEN HILLS	N/A	N/A	$418,250	-1.6%	28.7%
BRISBANE CITY ~ *	$456,000	2.0%	$423,500	-7.9%	10.6%
FORTITUDE VALLEY	$421,000	8.8%	$402,500	7.9%	33.6%
GAYTHORNE	$336,250	-3.7%	$342,000	0.0%	57.2%
INDOOROOPILLY	$472,500	8.6%	$435,000	12.4%	40.3%
KANGAROO POINT	$497,500	5.2%	$450,000	-2.6%	23.3%
NEW FARM ~	$549,000	20.3%	$460,000	-3.2%	29.0%
NEWMARKET	N/A	N/A	$416,000	6.4%	44.7%
NEWSTEAD *	$545,000	2.6%	$530,000	-1.2%	43.2%
SHERWOOD *	$400,000	-16.0%	$427,700	N/A	71.1%
SOUTH BRISBANE ~ *	$388,750	-5.2%	$399,250	-8.2%	19.5%
SPRING HILL ~	$347,500	-13.1%	$390,000	5.8%	47.2%
ST LUCIA ~	$403,000	-12.4%	$448,750	-1.4%	60.8%
TARINGA	$422,500	6.4%	$399,500	8.0%	53.6%
TOOWONG	$430,650	1.3%	$415,000	0.4%	43.1%
WEST END *	$504,500	-2.0%	$509,000	-9.9%	64.2%

Apartment Sales Soften - REIQ

Continuing a trend in Queensland’s residential property market, the number of sales of units and townhouses reduced markedly during the tail end of 2009, according to the Real Estate Institute of Queensland (REIQ). The REIQ research report, Queensland Market Monitor (QMM), has found the number of preliminary sales of units and townhouses fell 24 per cent between the September and December quarters last year.

The number of sales under $500,000 was also down 28 per cent over the period.

REIQ managing director Dan Molloy said the drastic reduction in sales – especially in the affordable price range – mirrored the retreat of first home buyers from the market.

“Unit and townhouses are popular with first-time buyers as they provide a less expensive way into the property market, especially in South East Queensland,” he said.

“However, first home buyers have now fallen to lows not seen since the high interest rate environment of mid 2008 which means demand for this segment of the market has lessened.”

The latest Australian Bureau of Statistics housing finance figures show that lending for all Queensland buyers fell dramatically in January to be down some 20 per cent on the year before.

“The recent batch of interest rate rises, even though inflation appears to presently be under control, is obviously having an impact on the Queensland market with sales numbers well below what they were during the global financial crisis last year,” Mr Molloy said.

Across the State, the December quarter median unit and townhouse prices edged upwards as sales in the affordable end of the market softened.

Views and off-the-plan contracts

In a recent court judgment, the purchaser was able to get out of an off-the-plan contract, because the ocean views were obstructed. This purchaser was smart enough to put in a special condition into the contract dealing with this issue. Most purchasers however look at brochures and listen to the sales agent, but don't put what was promised into the contract.

Court Judgment

Courier Mail

Selecting a 2 bed apartment

I am often asked what to look for when buying an apartment in Brisbane. Here are some general rules of thumb and issues to consider.

• How many apartments are in the building in total? If there are more than 200 apartments in the building, my opinion is that the building is too big. This creates many issues. One problem is that if you try to sell or rent your apartment, you will be competing with too many other apartments in the building. And there will be too many people using the shared facilities.
• How many elevators in the building, and what is the ratio of elevators to apartments. Moreover, the higher the building, the more elevators are needed. For some of the better buildings in Brisbane, there are 32 or 38 or 44 apartments per elevator. This is good. So using these ratios, a building with 400 apartments should have 9 to 12 elevators.
• How many apartments per floor? A larger floor plate usually results in a less friendly building and more security issues. I think that 6 apartments per floor is a good number.
• Is there a pool, gym and common room?
• Where is the building located? Avoid main roads and highways.
• Is there an onsite and live-in manager.
• How much money is in the building sinking fund. For a large building, this would typically be more than $500,000 (depending on age and size). A new building has a smaller sinking fund, and should have less problems.

For a two bedroom apartment, here are some additional considerations:

• What is the total internal size? Anything less than 85 sqm internal is too small for a two bedroom. There are good two bedroom apartments in Brisbane where the internal size is over 100 sqm.
• What is the total size, including balcony? This should be at least 95sqm. Here are some typical sizes of good 2 bed apartments in Brisbane that I have looked at recently - 132 sqm, 116 sqm, 128 sqm, 119 sqm. I would avoid any apartment without a balcony. (I saw a new Mirvac apartment on the Gold Coast that was 150 sqm internal, plus a 25 sqm balcony.)
• What is the width of the living room. Ideally, the living room should be at least 4 metres wide. A typical living room is 4m wide x 6m depth.
• A corner or floor-thu apartment will usually have better breezes and more light.
• Do all bedrooms have windows?
• Each bedroom should be at least 3m by 3.2m in size, plus built in wardrobe. Ideally, the main bedroom should have a wall that is at least 4m long.
• What is the external length of the apartment? This determines how much natural light the apartment will have. A good two bedroom apartment will have an 11 metre frontage, or more. (This is typically 4m for the living room, and 2 bedrooms of at least 3m each.) A two bedroom apartment in Admiralty Towers has a 12.3 m frontage on one side, which is great, plus another 7m down the side of the apartment -- a real bonus. I saw a 2 bedroom apartment recently that had only 7.7m frontage -- not enough -- the second bedroom was dark! A corner apartment or floor-thu apartment will have much more external frontage. For example, a corner two bedroom apartment at Parklands Sherwood has a 16.7 m frontage. Keep in mind that 1m makes a big difference here.
• Does the apartment have an internal laundry & store room in the apartment, or is the laundry in a cupboard?
• How many storage and linen and broom cupboards? Some apartments have none!
• Is the floor plan well designed. Not too much wasted space (e.g., hallways). Ideally, I like the bedrooms to be separated.
• What are the views, and could the views be built out?
• What floor? A higher floor is usually better, but not always. In the downtown area, try to be above the 6th floor at least.
• Two bathrooms are better than one bathroom. Some two bed apartments in Brisbane have two ensuites, plus a powder room for guests.
• Is there a both a shower and a bath?
• Does the apartment have a car park allocated to it. An apartment without a carpark is much harder to sell or rent. Sometimes, but rarely, a two bedroom apartment will have two carparks.
• Is there extra storage (for example, in the basement) allocated to the apartment.
• What are the quality of the finishes. See this post.

Not all apartments will be super apartments, and sometimes compromises have to be made. Price is also relevant! A two bed apartment for $450,000 will not be as good as a two bed apartment for $725,000! Or at least, I would hope so. So also look at price per sqm when comparing apartments.

Lack of Privacy

In some apartment buildings, there is no privacy. I was in Waterfront Place recently, and had a great view into the bedrooms and living rooms of many Felix apartments. I could see a person asleep in bed. You can see Waterfront Place offices clearly in this photo taken from the Felix apartment building.

Indooroopilly Shopping Centre Expansion

Indooroopilly Shopping Centre is expanding again. It will be a negative impact to apartments on Belgrave Road. But this will probably add value to apartments a little further away, such as on Station Road or Riverview Terrace.

The plans are on the Shopping Centre website.

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.

Domain Advertisement

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.