Brisbane Investment Apartment

Don't forget to read, Investing in Brisbane Apartments - A Guide for Successful Investing, recently published and available at Amazon for immediate download delivery.

Milton

Milton has recorded the highest growth in median apartment prices of the 21 suburbs in Brisbane’s inner city, outstripping some of the city’s most prestigious areas, new research shows.

Resolution Research found apartment prices in Milton had recorded the highest median price growth in the inner city precinct over both the past decade and the last 12 month research period from 2009 to 2010.  Milton posted a median price increase of 12.3 per cent per annum over the last 10 years, with apartment prices jumping from $171,000 in 2001 to $544,000 in December 2010. 

It trumped the next best performers of East Brisbane at 11.8 per cent and Dutton Park at 10.5 per cent, and the average across the inner city precinct of 7.3 per cent.

Milton also came out on top for price growth between 2009 and 2010, with a 22.5 per cent median increase during that time, ahead of Herston at 20.8 per cent and Hamilton at 20.5 per cent, and well ahead of the average inner city growth of 7.7 per cent.

Resolution director Diana Howes said properties in the suburb were expected to continue to perform strongly, with very limited new supply on the horizon.  “The inner west, which includes Milton, is one of the most undersupplied markets in inner Brisbane,” she said.

“Currently, The Milton is the only high-density residential apartment project on the market in the inner west, and that is not likely to change, based on current approvals, until at least 2013 to 2015.

“At the same time, demand from those wanting to live in this area is strong, particularly renters looking to take advantage of the convenience of its near-CBD location and lifestyle amenities.

“Traditionally, demand for inner city apartment living has predominantly come from professional couples, those without children and lone person households, but we are increasingly seeing more young families wanting this style of home.”

Ms Howes said inner city suburbs like Milton were sought after because of their combination of proximity to the CBD, public transport and amenities like restaurants, cafes, shops and entertainment.

“Brisbane’s apartment market is once again the most affordable capital city on the east coast, ahead of Melbourne and Sydney,” said Ms Howes.  “This  is not only making Brisbane a popular choice with southern buyers looking for their next investment property, but is likely to stimulate interstate migration, particularly on the back of the vast employment opportunities on offer across Queensland.

New Development - Centrus One

A new off the plan development, Centrus One, has recently launched.  It is located in Eight Mile Plains.

Floor plan grid here, showing that 3 out of 38 apartments have sold.

One bedrooms priced from $315,000.  Two bedrooms from $385,000.  Three bedrooms from $445,000.

These prices seem relatively reasonable, when compared with suburban six pack developments.

I looked at the floor plans for a 1 bedroom plus study alcove.  The smaller one bed (54 sqm internal plus 13 sqm balcony) was $325,000.  A larger one bed with a bigger study area (64 sqm plus 13 sqm, which is a good size) was $335,000.

A two bedroom, two bathroom apartment was 74 sqm internal with 14 sqm balcony.  It was a "floor through" apartment, with the living room at the front and two bedrooms at the rear.  Some of the floor area was taken up with hallways.  This was $395,000 or $402,000, for example, depending on the level.

A larger two bedroom, two bathroom apartment was 77 sqm plus 13 sqm balcony for $417,000.  Again, a floor through apartment, with the bedrooms separated from the living area.  This appears to be the most popular of the sold apartments.

Apartments Becoming More Popular

Across the country there is generally a wide gap between the price of house and a unit, a factor that is likely to become increasingly attractive to first home buyers and other budget conscious property buyers.

Housing affordability remains a topical issue across most housing markets around Australia and many prospective home buyers are looking to minimise their debt by either purchasing a house in the outer fringes of the city or choosing an apartment located closer to the city.  Both options have their pros and cons, however units are becoming an increasingly popular option, particularly amongst younger market segments like Gen Y’s and DINKS who like to live close to where they work and play.

Across the other large capital cities (Melbourne, Brisbane, Perth and Adelaide) the price gap between the median house and unit price is much less at around 18%. In dollar value terms that still represents a sizeable price gap; generally around a $70,000 difference and slightly more than $60,000 in Adelaide. Going forward we are likely to see apartments continue to garner a larger share of the market.

Twenty years ago apartments comprised only about 25% of all sales. More recently the proportion of apartment sales peaked at 36% in mid 2009. The fall away since that time is most likely attributable to both a slow down in investor and first home buyer purchases as well as ‘off the plan’ sales yet to settle which do not appear in the figures.

Extract From RP Data Premium Property Pulse 

Currently in Brisbane, apartment sales are 27% of all sales.

Settlements Start At Soul

ANYONE who thinks Soul is heading for receivership because buyers won't settle will be "sadly disillusioned", veteran developer Graeme Juniper says.
The $850 million Surfers Paradise project has been 11 years in the making and Mr Juniper plans to see it through to the end.
"We have the complete support of our financiers and we are with this journey all the way through," the co-managing director of Juniper Group said.  "We will be delivering this building and Juniper will be there -- it's that simple."
Settlements of the first stage of the apartment project began on Tuesday, a process expected to take months to complete.

The family-owned Juniper Group has contracts on 173 apartments in the first stage, but Mr Juniper could not disclose how many had settled.

He confirmed Juniper Group was still finding buyers despite the dire Gold Coast apartment market and that he had secured an unconditional 30-day contract for an apartment yesterday.

See Gold Coast Bulliten

I am not sure why settlement will take months.  Usually, all settlements (even for a large building) are done in less than a week.

NAB Blackists 127 Queensland developments

According to The Age, the NAB Bank has blacklisted 127 Queensland developments, and will not lend money in relation to them (or at least, will take extra special care before doing so).  Most of the properties on the list are serviced apartments, resorts or student accommodation. The list also includes inner-city apartments.

The list indicated the unnamed bank barred financing for all developments associated with the federal government's National Rental Affordability Scheme, an initiative designed to boost housing for low-income earners around the country.

It has been reported that most other banks have also refused to finance investors or buyers for NRAS properties, apart from St George, which accepts borrowers for one project in Queensland.

It has long been known that lenders often decline to provide finance for buyers of apartment buildings once they reach pre-set exposure limits, commonly when 15% to 25% of the total number of apartments have already been financed by the lender."

See Property Observer and The Age

Brisbane House Rents

The median weekly asking rent for houses in Brisbane, according to RP Data, is $398 per week.  The indicative gross rental yield for Brisbane houses is 4.7%.  This is for houses, not apartments.

Brisbane Property Rebound Unlikely Until January

"January may mark a turnaround in Brisbane's flagging property market, but there is no sign of conditions improving before then, according to leading economic forecaster BIS Shrapnel.

The forecast reflects a sluggish start to the spring property season, as households are wary of taking on more debt and potential home buyers hold out for interest rate cuts."

Source: Brisbane Times

Gold Coast High Rise

The headline of an article on page 21 of the Weekend Australian Financial Review this weekend is "Gold Coast high rise gets a nose bleed."

The article reports that more than $1 billion of apartments purchased at the top of the market are due to settle soon in The Oracle and Juniper's Soul developments.

Lawyers are apparently circling to try to get buyers out of contracts.  For example, it is said that Nyst Lawyers believe buyers can get out of their Soul contracts because the Soul development is now being managed by Mirvac under the Sea Temple brand.  What a crazy argument.  The buyers want to get out of the contracts because the contract price that they promised to pay is now too much.  The buyers took a risk, and lost out.  You have to be very careful when buying off the plan.

The AFR reports that prices in Soul are down about 17%, based on one resale of a 23rd floor three bedroom apartment, 161 sqm, that sold off the plan for $1.8 million and resold in February this year for $1.5 million.

Infinity

According to an advertorial in this Saturday's Courier Mail, Meriton's Infinity apartment building has about 200 residential apartments remaining for sale, out of a total of 548 apartments.  That sounds too good to be true to me.  One bedrooms are priced from $380,000; two bedrooms from $550,000; three bedrooms from $949,000.   According to the newspaper, many buyers are from Sydney and China.  Meriton staff are currently attending property seminars in China to promote this building.

Completion is expected in late 2013 or early 2014.  Construction is underway, with the seven level underground carpark complete, and work up to level 1 above ground.

Fish Lane Apartments

Launching this month is a new apartment development in South Brisbane, Fish Lane Apartments.

Located on Melbourne Street, this development will have 48 apartments.  One bedroom apartments are priced from $360,000.  Two bedroom apartments are priced from $560,000.  There will be only 5 apartments per floor.  The building is 9 stories high.

New Book: Investing in Brisbane Apartments

This is a plug for a new book published this week, Investing in Brisbane Apartments - A Guide for Successful Investing.

Currently, this book is available only via the Amazon Kindle store. If you don't have a Kindle, then you can download for free Kindle software apps for an iPad, iPhone, Mac or PC. If you can read this blog, then you can use Kindle software to read this new book. Click on the following link for the software to read this book:

Kindle Reading Apps

The Chapters include:

• Apartments as Investments
• Buying Decisions
• Off the plan apartments
• Renting Your Apartment
• Foreign Investors
• Legal Structures for Apartments

Investing in Brisbane Apartments - A Guide for Successful Investing

REIQ Brisbane Apartment Report

Queensland’s unit and townhouse market shrugged off this year’s natural disasters and the current economic conservatism to record mostly positive results over the June quarter, according to the Real Estate Institute of Queensland (REIQ).

The REIQ June quarter median unit and townhouse report found the preliminary number of sales rebounded robustly across most of the State with median prices also holding firm.

REIQ managing director Dan Molloy said unit and townhouse sales were up about eight per cent compared to the March quarter courtesy of increased first home buyer and investor demand particularly.

For the Brisbane downtown area, the medium price for the June 2011 quarter was $448,000. This was up 0.1% on the previous quarter. The medium price for the 12 months to June 2011 was $475,000, up 6% on the 12 months to June 2010 (which was $448,000.)

Inner Brisbane Does Best

"Of all the capital cities, house values in Brisbane recorded the largest declines over the 12 months to June, falling by -6.9%. As the accompanying table shows, not one region of Brisbane has recorded positive growth in house values over the past 12 months. The magnitude of value falls has varied from a -0.1% fall in Inner Brisbane to a -13.9% fall in values within Beaudesert Shire Part A which comprises the southern suburbs of the Logan council region."

Source: RP Data Newsletter.

More details in Brisbane Times article, which concludes:

"“The subdued capital growth across the detached house market compared with units is reflective of changing lifestyle patterns as well home buyers seeking more affordable alternatives such as units over houses,” he said.

Inner Brisbane Vacancy Rates Under Pressure

Vacancy rates in Inner Brisbane are under pressure, as population increases and a shortage of new supply sees available properties dwindle, says leading property researcher Michael Matusik. Mr Matusik, director of Matusik Property Insights, said the tight vacancy rates could be attributed to a relative lack of new development in inner Brisbane, which is experiencing a resurgence in its popularity with new residents. “Inner Brisbane is attracting an average of around 5,000 new permanent residents per annum, and that is expected to continue over the next decade, whereas in the 1990s it was losing permanent residents,” he said. “The change can be credited to a shift in demographics, with an increase in lone person households and couples without children in the precinct, who are looking for a lifestyle of convenience close to amenities and transport to the CBD.”

Inner Brisbane suburbs Milton, Paddington and Rosalie are leading the charge, with figures from the Residential Tenancies Authority showing rent in these areas have risen by about 5.6 per cent over the past 24 months.

Mr Matusik said Milton was a prime example, where vacancy rates had plunged to just 0.7 per cent, with a vacancy rate under 3 per cent considered to be undersupplied. He said about two-thirds, or 62 per cent, of households in Milton were renting, which was representative of other inner city precincts. Mr Matusik said dwindling vacancy rates were not expected to improve in the short term, with the undersupply of new stock set to continue.

“For example, Milton has recorded the second highest population growth in Inner Brisbane at 4.4 per cent per annum over the past five years, just behind Kelvin Grove, which has led to its extremely low vacancy rate,” Mr Matusik said. “It is part of the Inner West precinct, which is one of the most undersupplied markets in Brisbane.

“Just 10 per cent of the current supply of new apartments for sale in Inner Brisbane are located in the Inner West, with FKP’s The Milton the only project currently selling off the plan.”

Sad news - 2 balcony deaths

This weekend was Riverfire, and sadly, two people died in separate incidents, both due to falls from apartment balconies. A young man fell from Pradella's Allegro apartments at South Brisbane. Another man fell from River Plaza, in Dock Street, South Brisbane.

Full details in this story.

Soul to be branded as Sea Temple

The Juniper Soul building on the Gold Coast will be managed by Mirvac under the Sea Temple brand. With settlements due very soon, it will be interesting to see how many actually settle. Or will we have another Oracle problem? There are already dark shadows and issues about soul food. Even the development debt is for sale.

Sunshine Coast Not Investor Friendly

Property valuers Herron Todd White report that the Sunshine Coast is not investor friendly. High taxation, and no representation. Not a good long term situation.

"Holiday units are typically returning a gross yield in the vicinity of 7% to 7.5% however after management fees etc, the net yield would be in the vicinity of 5%.

One of the drawbacks of owning investment property on the coast continues to be the additional levies that are being charged by the Sunshine Coast Regional Council. these are charged on all non-owner occupied properties, even when they are holiday homes which are not rented. this leaves a sour taste in the mouths of investors, most of whom are not locals who don’t have the opportunity to cast a protest vote."

Source: HTW Report

HTW Market Update

If you purchase a flooded property, you may find yourself paying 5% to 20% discount on what similar but non flooded properties are selling for in the same suburb and without a dramatic discount in rent. ...

That said, there are some suburbs that were tarnished by the flood that offer excellent value for non-flooded stock due to the overall lack of buyer confidence. For example, st Lucia has a ready source of student renters, is close to the CbD and enjoys good local services, but its riverfront areas copped a hiding in January. As a result, the dry property (and there is plenty) has also had a downturn. not too long ago, one of our valuers had a look at a two- bedroom, three-level townhouse that sold for $400,000 and will easily see $430 per week in rent. A 5.5% gross return in this location is a very nice earner indeed. ...

General market conditions across the Gold Coast are very tight. only those properties where the vendor is willing to meet the market are selling. there is generally an oversupply of similar properties listed for sale. Feedback from locals within the property industry indicate that the market may not yet have bottomed out which is concerning potential buyers. Our opinion is that we are bumping along the bottom similar to the late 1990’s and that properties will sell within a wider value range depending on the circumstances of the vendor.<
Source: HTW Report

Growth Slows in last 5 years

"Over the past ten years capital city home values have increased at an average annual rate of 6.8%, however it has been a tale of two distinct five year periods: the boom times during the first part of the decade and more subdued growth recently. ...

The recent superior performance of units as opposed to houses continues today and is reflective of changing lifestyle patterns. In particular, first home buyers and young professionals are likely to be much more attracted to an inner city unit rather than a house 20 plus kilometres from the city centre, especially if they work centrally and they also work long hours.

Overall the data highlights the impact of the property 2001-2004 ‘property boom’ which has well and truly lifted the annual growth rates across the first half of the decade. The two recent growth phases (ie 2007 calendar year and 2009/2010) were much more sublime compared to the meteoric rate of growth early in the new century. Looking to the future, with housing credit growth constrained and affordability a barrier to market entry, property values are likely to grow at a slower pace and the likelihood of large spikes in value growth over a 12-24 month period as witnessed at times during the past decade is less likely. Basically, property value growth fundamentals are largely returning to normal conditions after being abnormal for much of the last decade. "

Source: RP Data

Property collapse talk is taken out of context

"RPData’s index suggests that maybe the worst is behind us, with the monthly and quarterly results starting to trend upwards. This recovery, however, is likely to be slower than those in the past, as many markets are now priced over $500,000, which presents an affordability barrier to many households and especially investors and first home buyers. It will take some time before wages grow enough to start pushing dwelling prices."

Source: Matusik

RP Data Home Value Index Released Today

Based on approximately 178,000 home sales over the year to July, the market-leading RP Data-Rismark Hedonic Home Value Index recorded a seasonally-adjusted fall of -0.6 per cent in capital city home values over the month of July (-0.9 per cent in raw terms).

Over the first seven months of 2011, Australian capital city home values were down -3.4 per cent. According to RP Data research director Tim Lawless, this national result conceals wide divergences across the individual cities.

Over the 12 months to July 2011, Australian capital city home values are off -2.9 per cent. Mr Lawless said that it looks like a multi-speed housing market: Brisbane (-6.6 per cent), Perth (-6.3 per cent), and Melbourne (-4.3 per cent) have all experienced significant declines over the last year, whereas the 35 per cent of Australia's capital city population that lives in Canberra (+1.9 per cent) and Sydney (+0.5 per cent) had realised capital gains.

"If rates do remain on hold, or begin to fall, we would expect to see Australia's housing market find a base and begin to generate capital gains again. If the RBA has really come to the end of its tightening cycle - which we would find surprising given the high core inflation revealed over the last six months - 2011-12 will likely be judged one of the best buying windows seen in quite some time. The turning point will arrive when otherwise hawkish Australian consumers accept the notion that rates are not going to inexorably increase," Mr Joye said.

Mr Lawless said that the current weakness in housing market conditions is related to the ongoing anxiety consumers have about their future finances as reflected in the latest consumer confidence data.

Despite some improvements in selling times in previous months, the average number of days it takes to sell a home has increased in June and July. Other key leading indicators also imply that market conditions remain soft.

Extracted from Press Release

From RP Data

"Australians are choosing to own their homes for longer with the average time frame between house sales increasing from 6.8 years 10 years ago to 8.6 years in 2011. [For Brisbane apartments, the average hold period is 6.8 years, which is an increase of 7 months over the past ten years.]

The RP Data-Rismark Home Value Index results for July 2011 will be released on Wednesday next week. We anticipate that the results aren’t likely to show much deviation from the past month to month trend; the market is flat to falling, Sydney is the best performer while Brisbane and Perth are the laggards. In recent months the rate of value decline has been slowing with a fall of just -0.2% during June across the combined capital cities. We expect fairly similar conditions when the July results are released next week. Certainly with low levels of consumer confidence we would not expect an improvement in sales volumes or return to value growth so long as consumers continue to act in a cautious nature.

---

The total number of properties listed for sale remains at elevated levels, increasing by 4.3% over the week nationally and by 5.4% across the combined capital cities. Total listings remain at elevated levels, 33.1% higher than they were last year nationally and 32.0% higher across the capital cities. It will be interesting to see what happens with listings in the coming week, given the weak market conditions and inflated listing volumes an increase coming in to spring would not be beneficial for the market."

House Price Crash

This is a good article on property investment, and points out some of the risks of off-the-plan purchases and dealing with developers.

House Price Crash

Rent apartment for "free" lottery scheme

Have a look at Keys to Brisbane, where a Brisbane apartment owner has a competition or lottery to win the apartment rent free for a year. The owner is reported as saying that if he does not get a substantial number of entrants who pay $20, he will cancel this lottery and refund the $20.

Wall Street Journal Report on Australia Housing

"Locally, buyers have already started to wane. In the last year, there were 90,210 first-home buyers across Australia, 35% lower than the previous year and a seven-year low, according to BankWest, a Western Australia-based lender and unit of Commonwealth Bank.

Mr. Donnelly, whose firm has sold residential property in Australia worth more than A$1.2 billion to mostly overseas investors, says the market in Sydney and Brisbane could sidestep some of the weakness, largely because both fell behind in the recent development push.

Brisbane has also been weak, with prices off more than 6% this year, but much of the drop stems from the devastation to the capital of Queensland state earlier in the year from a series of floods."

Extract from WSJ report on decline in Australian property market

Oversupply of Apartments in Brisbane, especially Hamilton and Albion

THE number of apartments planned for Brisbane's inner north is the biggest threat to the success of the city's apartment market.

The June quarter report by real estate agent Place Advisory on inner Brisbane's apartment market says new developments planned for this precinct, which includes suburbs such as Bowen Hills through to Hamilton, threaten to create an oversupply in coming months.

Large multi-density communities are being approved almost on a weekly basis, while new mixed-use communities are poised to enter pre-release marketing campaigns before Christmas.

Place Advisory says that if many of these projects are not an overwhelming success, it will add to an already pessimistic local dynamic, ultimately driving away buyers from off-the-plan sales. The success or failure of only a few will affect the wider Brisbane property market in the longer term, it says.

Almost 70 per cent of the unconditional sales during the quarter were priced under $550,000. Only 6 per cent were above $750,000. Total sales were about $136 million, in line with the average total quarterly sales in the past five years.

There were 2144 new residential apartments for sale, or about 27 months' of stock, in inner Brisbane at the end of the financial year.

Of these, 50 per cent were two-bedroom, 33 per cent are one-bedroom apartments, and only 12 per cent three-bedroom configurations.

Place says most of the unconditional sales in the quarter were to interstate or international buyers.

Source: The Australian

Brisbane property market "reasonably depressed"

"RP Data research director Tim Lawless does not expect a big pick-up in the number of properties being offered for sale. His figures show there are about 30,100 properties for sale across greater Brisbane - about 26 per cent more than at the same time last year.

Throughout the state there are about 88,900 homes being advertised for sale, about 31 per cent higher than at the same time last year.

"The Brisbane market is still reasonably depressed, so I would be surprised if the spring selling season sees a dramatic influx of homes added to the market," he said.

"It is not a great time to be selling a property.

"Transaction volumes are about a third lower than what they have averaged over the past five years, houses are taking a longer than normal time to sell (about two months on average) and vendors are having to offer larger than normal discounts from their asking prices in order to make a sale (about 8.1 per cent) in June."

Mr Lawless said there might be a modest boost in listing volumes in spring. "And we are probably also going to see a revamp of marketing activity for those homes that have been available for sale over an extended period."

Source: Courier Mail

Devine's Brisbane City and Teneriffe Plans

Devine reports that it has secured the opportunity to build a 107 apartment project in Teneriffe, launching in the first half of 2012.

Devine also has two pending apartment projects in the Brisbane CBD, one on Albert Street at the corner of Margaret Street (the Camelot site) and another nearby on Margaret Street opposite the synagogue. From Devine's reports, it looks like these two city buildings are a long way off.

Devine's Hamilton Harbour

Devine reports to the Australian Stock Exchange, as at 25 August 2011, the following in relation to its Hamilton Harbour apartment development:

"Continued strong sales performance

• HarbourOne - 98%sold ($137 million in value)

• HarbourTwo - 86% sold ($92 million in value)

• Riverside - 60% sold ($57 million in value)

Construction on schedule for all three towers:

• TowerOne 78% complete

• TowerTwo 63% complete

• TowerThree commenced

Significant progress on mixed-use elements of Hamilton Harbour with strong retail and commercial leasing underway

Construction on Hamilton Harbour is ahead of schedule and under budget with completion of first two towers in first half of FY12

• Hamilton Harbour TowersOne and Two are both ‘topped out’, with fit-out complete on over 60% of apartments

• Construction delivered revenue of $108 million

• Devine Construction awarded $60 million contract to build ‘Riverside’ – the third tower at Hamilton Harbour."

So, Riverside is costing $60 million to build (including profit for the builder); and 60% sold gives $57 million in sales. Looks like a good profit margin here for Devine.

Sunland's Brisbane Development

Sunland reports that it was holding discussions with Cbus Property about a joint venture for $250 million Carrington Tower on Alice Street (also known as the French Quarter site -- that Devine sold to Sunland). The new tower (B1??) is awaiting final approvals. Mr Abedian of Sunland is reported as saying:

"With a project as unique as Carrington and given its proximity to the city and entry into the Botanic Gardens, we will ensure that the timing of the launch is one where we have the greatest confidence. We think 2012 is the more appropriate time to launch such a project. But we are no in a hurry and we won't rush a flagship project such as this."

It sounds to me like this apartment development will not start construction for some time.

Southpoint at South Bank

The Australian Financial Review had an article yesterday about developer Anthony Jones Group. Most of the story was about the Emporium Hotel, built on the old bus depot in The Valley. Despite its poor location in the middle of two major roads and a car park, its glitzy fitout has proved popular.

The story mentions Anthony Jones Group's proposed development at South Bank, called Southpoint, that has been promised for a number of years now. It is said to be at 17 storey retail and office block, 458 apartments, and a 180 room Emporium hotel (that no doubt will have over the top decor too.) It was reported that early works started last year, but there has not been much happening on the site this year.

Suncorp supposedly has short listed Southpoint for its new headquarters.

REIQ Press Release

Queensland’s residential property market has regained some of the ground it lost following the natural disasters earlier this year, according to the Real Estate Institute of Queensland (REIQ).

The REIQ June quarter median house price report (that deals with houses, not apartments) found that preliminary sales numbers in many areas across the State are on the road to recovery, however, property price growth remains relatively subdued.

While the preliminary number of house sales in Brisbane over the June quarter was up seven per cent compared to the March quarter, the standout for increased house sales in South East Queensland was the Logan region, which recorded a 22 per cent increase over the period.

Tennyson Reach Contract Cancelled Due to Flood

Mirvac lost a legal battle in the Queensland Court of Appeal this week, in relation to an apartment at Tennyson Reach that flooded in January. Mirvac had two senior counsel to argue this appeal - it flew up Alan Myers QC from Melbourne and also used a local Senior Counsel -- both very expensive barristers. But that did not assist. The buyer was allowed out of the contract. See Judgment and The Australian.

Soleil Update

Meriton's Soleil building in Adelaide Street, Brisbane, appears to have reached full height. It is tall and skinny. The building is 74 floors, 234 metres, and has 464 apartments. Meriton is not selling the top 10 floors or so, and will rent them out (I suspect on a short term basis).

I have looked at the sales board, and tried to work out the number of apartments for sale. This is my estimate:

Studios - 27 in total, 12 remaining for sale

One bedrooms - 234 in total, 132 remaining for sale

Two bedrooms - 168 in total, 45 remaining for sale

Three bedrooms - 35 in total, 17 remaining for sale

Thus, in total, there are 206 out of 464 remaining for sale, or 44%.

(These numbers assume that the top 10 floors, or 42 apartments, are not for sale.)

So one can conclude that since the launch of the selling campaign for this building in October 2008, 46% of the apartments in the building have sold. At this selling rate, it will take another 2 to 3 years to sell the available unsold apartments in this building. Anyone who buys off-the-plan and needs to sell soon will be competing with the developer selling new stock for some time to come.

The building has some downsides. Having so many apartments, there will always be apartments for sale or rent. The facilities, such as the gym, will have to service a huge number of residents. Image trying to book the 12 seat theatre or the meeting room, when you are competing with 460 other apartments. Also, are there enough elevators? Also, there is no ducted air-conditioning -- there are split system air-conditioning units, with headends in some rooms, and the fan unit located in a service area on the floor.

Example pricing:

• Apt 1802, 1 bed, 51 sqm = $402,000
• Apt 2207, 1 bed, 51 sqm = $426,000
• Apt 2703, 2 bed, 70 sqm = $572,000
• Apt 5701, 2 bed, 80 sqm = $807,000
• Apt 5002, 3 bed, 103 sqm = $852,000

In my view, for this size and quality apartment, the pricing is expensive.

Adjusting property value growth for inflation

Brisbane has been the weakest performing capital city market over recent times with property values down -7.3% from their March 2010 peak. When the results are adjusted for inflation, the fall in values from the March 2008 peak is much more pronounced at -12.3%. Similarly in Perth, the fall from the market peak is more than double (-5.4% versus -11.3%) when the results are adjusted for inflation.

On the flip-side these conditions are likely to impact on negatively geared investors. Given this, RP Data anticipates that investor activity is likely to remain relatively subdued and those investors which are active in the market are likely to have a much greater focus on yield maximisation rather than negatively geared properties. At least for the short term, investors chasing substantial capital gains are likely to be disappointed given the anticipated market conditions.

Source: RP Data Property Pulse

Flood - backflow valves

From a Brisbane City Councillor:

I have been campaigning for months (along with local residents) for Council to take action on backflow valves as a means of potentially reducing some forms of flooding. As you would know, much of the January 2011 flooding in Central Ward was the result of floodwaters travelling back up Council stormwater drains. If backflow valves are installed it is more than likely that in the future that type of flooding could be avoided. While back-flow valves are not a "silver bullet", they at least hold the prospect of reducing future floods in similar circumstances.

The Council has finally agreed to conduct an inquiry, and will be holding some information sessions in September for residents of New Farm and the CBD.

While the dates haven't been set yet, if you want to attend these sessions apparently you have to register. So, I encourage anyone who has an interest to register online. You will be notified when session details are available.

http://www.surveygizmo.com/s3/604972/Backflow-Registration

Regards

David Hinchliffe

Councillor for Central Ward

Brisbane City Council

Phone: 07 3403 0254

Fax: 07 3403 0256

Email: central.ward@ecn.net.au

Housing Market Outperforms Shares

From Chris Joye:

"The chart suggests that a national portfolio of housing has comprehensively outperformed all other investment categories over this tumultuous period. What is also fascinating is that AAA-rated Australian government bonds have delivered almost the same returns as Australian shares (plus dividends) with vastly lower risk.

On the question of risk, the table below shows us that there have been five months over the last 11 years where Aussie shares have fallen in value by more than 5% (the worst being a stunning 14% loss). None of the other asset classes have had a single monthly loss of five per cent plus.

This just hammers home the point that if you get your market-timing wrong with shares, you could be underwater on your investment for many years. Think, for example, of all the poor folks who piled into Aussie shares around the market apogee in 2007 (see the peak of the red line in the chart above)."

See Property Observer

Oracle Litigations

There are a number of litigations against people who signed off the plan contracts to purchase apartments in The Oracle development at Broadbeach, and who failed to settle once the building was complete. The developer is now suing the purchasers for breach of contract. One of the trials is partially complete. Some examples:

• South Sky Investments v Prins
• South Sky Investments v Groves & Gough
• South Sky Investments v Ryan

480 Queen St

A new building has been proposed for 480 Queen Street, on the site of the proposed Trilogy Tower. It is an office building. No apartments. 36 levels high. It will block some of the northeastern views of some of the Aurora apartments on the lower floors.

Off The Plan The Tips and Traps

See this article about buying off the plan apartments:

Seven traps for unwary off-the-plan buyers

103 Mary Street - new development

This is a rendering of the new apartment hotel complex being constructed at 103 Mary Street, between the 111+222 hole and RiverCity apartments. 212 Margaret St is shown at the rear. So some people will have their views impacted.

At Vacant Homes, Foraging for Fruit

Things in the USA don't look so good. People are harvesting the gardens of vacant homes. See NYTimes.

Matusik's Blog

Matusik's blog has a number of posts regarding the Brisbane apartment market. matusikmissive.wordpress.com

Annual Change in House Values: USA v Australia