West End Overpriced?

What would you pay for a new 2 bedroom apartment at the southern end of West End, with nice views of a factory roof, surrounded by industrial buildings, walking distance to nothing, an irregular bus a few times a day, brown carpets and "a minimalist look"? How about $579,000 in Ferry Road, West End? That just seems extremely high to me. Buyers beware!

Rate Increases For Brisbane Apartments

"A ceiling on rate increases for Brisbane's CBD unit owners under Brisbane City Council's controversial new rates policy will be debated at today's last council meeting for 2008.

Lord Mayor Campbell Newman promised to introduce the policy from the third quarter of the 2008-09 financial year, which starts on January 1.

The scheme was proposed at June's Brisbane City Council budget and - suggested lifting the general rate paid by unit owners so they pay an equivalent rate to home owners in a property of the same value."

Brisbane Times

Time to Buy

According to the NY Times: See New York Times for this interesting story.

Meriton on Herschel Street

Meriton has applied to build a second apartment building in Brisbane. It is located at 43 Herschel Street, Brisbane, near Roma Street Station. It is 73 stories, with over 400 apartments, and a basement 10 floors underground parking.

Gold Coast Not Golden

I am always surprised to read commentary about Gold Coast apartments which is so positive -- when the market is very dead, nothing is selling, and prices are falling for what is selling. For apartments that are holiday rentals, most owners will receive low returns, not enough to cover outgoings. Yet, agents still talk the market up. Here is a more realistic story:

"December 3rd, 2008

GOLD Coast real estate may fall a further 20 per cent over the next year, according to one of the city's leading property forecasters. Author of the Midwood Report Bill Morris said while the Gold Coast's median house price fell by only 3.7 per cent in the September quarter, it marked the start of a long and consistent drop in property values that could last 18 months.

Mr Morris last night told a group of property watchers at a seminar unveiling his November-quarter Queensland Investment report his gloomy projection was based on the skewed correlation between house prices and rental returns.

Mr Morris said that while rental returns languished around 4 per cent, house prices would continue their downward slide. "Because of the increase in house prices over the past five years, which has been about 100 per cent, despite declining demand, it has meant rental returns have gone down significantly and are now unacceptably low," said Mr Morris. "They are currently about 4 per cent gross which is stifling the investment market. Really, 5 per cent is acceptable and to do that you can either increase rents by 20 per cent or have a decrease in house prices by 20 per cent."

Investors would only return to the market once rental returns became more attractive, he said.

Mr Morris's analysis came on the same day that AMP chief economist Shane Oliver also predicted a rough ride for Gold Coast property. Mr Oliver yesterday told The Gold Coast Bulletin he expected property nationwide to fall an average of 10 to 15 per cent, but predicted the Coast may fare worse. "I see coastal locations where people had a holiday home coming under pressure," said Mr Oliver.

Mr Morris expected a market recovery would take 12 to 18 months."

Gold Coast Bulletin

Not all Doom & Gloom

"THE economics of Australia's $3.3 trillion housing market is widely misunderstood, with sensationalist claims that a housing bubble caused the global credit crisis and that Australian house prices will fall by 30 per cent to 50 per cent. In fact, the latest RP Data-Rismark Index results show that Australian house prices declined by just 0.8 per cent in the 12 months to October this year, and increased during the most recent three months.
...

In Australia, the hyperbolic predictions of economists Steve Keen and Gerard Minack that house prices will fall by 30 per cent to 50 per cent have been relentlessly recycled in newspapers and purportedly credible programs such as 60 Minutes and The 7.30 Report.

The doomsayers' claims are based on the assumption that housing affordability is at an all-time low.

They dismiss the fact house prices are determined by supply as well as demand (affordability is a demand-side factor) and conclude that prices must fall by some arbitrarily large margin. Keen likes to shock by quotingstatistics about the rise in household debt without acknowledging that debt-servicing ratios have remained unchanged thanks to vastly lower real interest rates, the emergence of two-income households and higher real incomes.

Recent analysis by the Reserve Bank of Australia has comprehensively demonstrated that housing affordability is not at an all-time low. According to one of the Reserve Bank's benchmarks, the representative household in June 2007 had more real disposable income left over after purchasing a home and servicing a 90per cent mortgage than at any other time since June 1982.

The bank also found that the representative household could afford to buy 33 per cent of all homes in June 2007, which, although less than the historical average of 45 per cent, was markedly better than the 13 per cent of homes available to it in June 1990.

Importantly, the Reserve Bank's present 4.25 per cent cash rate is considerably lower than the 6.25 per cent rate that existed in June 2007. Since mortgage rates peaked at 9.6 per cent in August, the Reserve Bank has pushed them down to about 6.7 per cent, with markets predicting that they will be less than 5 per cent by mid-2009. At the same time, house prices have not appreciated...."

"The Reserve Bank believes Australia's housing market is leading the US by three years, having entered into its downturn in 2004. There is also a consensus between the Reserve Bank and most economists that the doomsayers' predictions will be proven wrong. A striking counterfactual is the 1990-92 recession, when unemployment hit 10.9 per cent yet house prices rose by 2 per cent a year according to the Australian Bureau of Statistics.

The media would do well to interrogate sensationalism."

Source: The Australian

Water's Edge Update

From a Pradella newletter:
"Despite Brisbane's uncertain property market, buyer confidence remains strong for Waters Edge with an unprecented $40 million in sales made since its launch. Forty-eight of the 221 apartments have sold to a mix of investors and owner-occupiers, as buyers look to quickly capitalise by purchasing at the unique site."

"Consisting of two eight-storey buildings, named Drift and Reach, one, two and three bedroom apartments are available, priced from $540,000.In addition to the apartments, there are 32 premium absolute riverfrontage apartments called the Riverfront Collection that have a total area of between 188-332m2, consist of 3 bedrooms, 2 bathrooms plus a separate multi-purpose room and study, priced from $1.795 million are for buyers searching for the ultimate in inner-city luxury living."

October 2008 Property Index

"Claims that the Australian property market would in 2008 experience a major downturn have been proven incorrect based on the most recent findings of the RP Data-Rismark Hedonic Property Value Index, which in October again showed that Australian capital city property prices had increased for the second consecutive month. ...

Based on RP Data-Rismark Index results, RP Data head of research Tim Lawless believes that the doom and gloom merchants have misunderstood the fundamentals and the diversity of the Australian residential property market by predicting that Australia was headed for a market-wide implosion in 2008.

“The facts are that over the past 12 months Australian property values have declined by just 0.8 percent which is a phenomenal result when compared to the S&P/ASX 200 index which reported a decline of 40.5 percent,” Mr Lawless said. “The October RP Data-Rismark Index results reinforce my suggestion that the Australian property market has moved through the bottom of its cycle.” ...

For savvy investors the timing to enter the market is now better than ever according to RP Data’s Tim Lawless – “For investors who are willing to go against the flow, buying conditions are exceptionally strong and yields are improving every month,” he said.

“The fundamentals underlying the Australian property market are extremely robust. Investors need to take into account current supply constraints, infrastructure delivery, immigration, vacancy rates, rising rents and expectations that interest rates will continue to fall. These are the basics that should fuel capital gains for investors.”

Melbourne, Brisbane & Sydney
In the 10 months to October 2008, Melbourne residential values have been flat (+0.2 percent) while Brisbane (-1.7 percent) and Sydney (-1.9 percent) are off slightly. However, during August, September and October 2008 Melbourne (+1.1 percent) and Sydney (+0.5 percent) property values have increased consistent with the overall market recovery following the Q2 contractions.

See Press Release and Details

Value of Brisbane Car Park?

A car park in down town Brisbane appear to add about $60,000 to the value of an apartment. A two bedroom apartment without a car park is virtually unsaleable.
FindACarPark is a good site to look at to see the rental value of a car park in Brisbane - seems to be about $400 to $500 per month to rent. When I looked, no car park was listed for sale in Brisbane.
See also this site.

Brisbane In Summer

www.brisbaneinsummer.com.au

What My Bank Manager Told Me This Week

• Investors are re-entering the Brisbane property market
• There are bargains in Brisbane property
• Rents are good, and increasing
• Interest rates are low, and decreasing
• Investors are getting more than 5% gross returns on recently purchased Brisbane apartments
  

Hamilton Harbour - 4 Buildings Proposed

New website for Hamilton Harbour residential building, called Harbour One. It is behind the Bretts Wharf development, on Kingsford Smith Drive.

"A 19-storey tower and 22-storey tower will house a total of 416 apartments, and the developers have already committed to selling a percentage of residences in the low-to-medium price range.

The budget apartments will be "space-efficient" while other one-bedroom offerings will come without a car space.

"This will enable these units to be offered for sale at a considerably lesser price to those who would otherwise be unable to afford housing in such a well-serviced location," the project plan details."

Brisbane Times

View from the air

Gold Coast vs Brisbane

"The apartment market on the Gold Coast is more problematic because conditions there are still very tight and after Sydney, the Gold Coast is more dependent than any other city on the apartment market," he said. "Investors have been fleeing that market and combined with a decrease in buyer confidence, apartment prices may continue to come down."

Mr Anderson predicts unit prices will stabilise in the first half of 2009 before again beginning to rise.

"We are expecting to see growth again in the apartment market but it won't happen until 2010, it will take longer than the housing market, and probably not as quickly as in Brisbane," he said. "There could be a really strong rebound in that market in the first half of 2010 but it will be coming off a fairly low base."

Source: GoldCoast.com.au website

Amother Apartment Complex near Milton Brewery

"A $19 million highrise near Milton's Fourex brewery has won council approval, but new residents are warned complaints will fall on deaf ears. The development on Railway Terrace consists of a 20-storey unit block and an eight-storey retail and commercial building."

See Courier Mail and Skyscraper Life

Admiralty Towers Two - Blog

Have a look at this Blog: http://atowers2.blogspot.com/

Indooroopilly Riverbend Tower

Riverbend Tower was supposed to be an all rental building. However, it appears that the developer has now decided to sell some of the apartments.

Example pricing:

• 2 bed, 2 bath, 6th floor, 95 sqm internal, 31 sqm balcony, 126 sqm total, 1 carpark = $600,000
• 3 bed, 2 bath, 5th floor, 125 sqm internal, 36 sqm balcont, 161 sqm total, 2 carparks = $735,000

Some apartments will have river views. However, the eastern facing apartments look over the railway station at Indooroopilly (so noise from trains and cars), the southern facing apartments look at the Walter Taylor Bridge, and the western facing apartments will get the western sun.

What is in store for Brisbane Apartments?

"Matusik notes Brisbane respondents are more optimistic than property professionals on the Gold and Sunshine coasts. In turn, Gold Coasters are more bullish about a recovery in 2009 than those on the Sunshine Coast, where about half of the respondents think sales will continue to fall in the new year. Matusik says about 30 per cent of those surveyed think an inner-city pad in Brisbane will be the best residential investment."

The Australian, 22 November 2008

"Paul Braddick, head of property and financial system research at the ANZ Banking Group, says: “There is certainly a problem with sentiment and with construction finance at the moment. But for property investors I would instead focus on rising rents, the lower interest rate environment, the subsequent improvement in affordability and the increase in the first-home buyer’s grants. These all point to a brighter future for residential property, even if the next six to 12 months prove slow.”

I believe a halt in the construction of new apartment towers is a sign that it’s time for the wise investor to start researching the market and getting to know it thoroughly. First-class investment properties are available at a fair price, but there’s only a minuscule chance they will be in multi-level city buildings."

Smart Company, 20 November 2008

"If you want a swimming pool now, buy a unit in Queen Street. If you live in the outer suburbs, houses don't often have room for swimming pools," Professor Hall said.

Courier Mail, 17 November 2008

"Brisbane's CBD recorded 17 new apartment sales during the quarter, from a possible 178 units on the market.

"In terms of rental vacancies for residential apartments, inner-city Brisbane retained the lowest vacancy rate of only 1.4 per cent," Mr Walker said. "This suggests that rental rates will continue to rise as demand for accommodation increases and rental stock supply dwindles."

Brisbane Times, 19 November 2008

M on Mary in liquidation

"M on Mary provides buyers with a golden opportunity to purchase stock at prices which are well below replacement value. Which Property? have been appointed as agents under instruction from Receivers and Managers acting for Willahra Pty Ltd, and as such the balance of properties remaining in M on Mary must be sold."

Brisbane Apartment Videos

Meriton's Soleil

Trilogy

Festival Towers

Charlotte Towers

Please Take Me To Brisbane

Brisbane

Sherwood Parklands

I have previously written about Pradella's development "Parklands at Sherwood" which is high on a hilltop overlooking parks and Oxley Creek, with city views in the distance. See prior comment.

I visited again this week. Apartment Building 1 (AP1, marketed as Jacaranda) is almost complete. The bottom floor is at lockup stage, and the top floor apartments are being tiled. Looks like about 2 to 3 months work until completion. Apartment Building 2 (AP2, marketed as Brookline) now has a roof. The bottom floor has internal walls, the top floor has frames for internal walls. Probably 6 months more work till completion. There are also terrace house and detached houses.

I am very impressed with the apartments. Even the smaller two bedroom apartments seem large. Maybe this is because at least half the apartments have great park views. The design and outlook is good. I am less impressed by the detached houses -- they are in the worst location in the development, and the rooms seem smaller than I would have liked.

There are some resales already listed:

• smaller 2 bedroom, 2 bathroom, study nook, 2 cars, top floor, park & city views - listed at $530,000
• smaller 2 bedroom, 2 bathroom, study nook, 2 cars, top floor, village green views- listed at $520,000
• 3 bedroom townhouse - listed at $798,000

Some of the developer stock in AP1, at the rear of the building, is discounted. For example, a 2 bedroom apartment for sale in the mid $400,000s. There is good buying to be had, and this development will impress when complete.

Gabba Central Apartments Bowled Out

"Gabba Central's 270 luxury apartments, retail space and 300 underground carparks were slow to sell and value plunged as a result of Brisbane's stagnant property market and the global credit crunch."
"The Brisbane property is now in the hands of financiers UCIS, which is responsible for selling the remaining space at Gabba Central for market rate in order to recover the $31 million.

If the sales fail to cover the total debt, PKW is liable to hand over up to $10 million in cash or assets. Potentially this will involve Taranaki land and buildings held by the dairy giant."

Full story is here.

My view was that this was a poor property.

Building Classifications

How will this impact Oaks, and apartment owners who are doing short term rentals in buildings that are not designed for short term rentals:
http://www.dip.qld.gov.au/resources/newsletter/newsflash-327-guideline.pdf

Low Ball Skyline

Skyline is selling new 3 bedroom apartments for $650,000. This is less than some of the two bedroom prices in Skyline. These apartments were recently marketed for $720,000 plus. They are nice city apartments, but will be crowded out by Meriton's Soleil and Macrossan towers.

South Point and Buranda

"ARCHITECT-developer Tony John is willing to bet $1 billion that the run-down suburb of Buranda, in Brisbane's inner south, will be the next New Farm.Mr John has a scheme for a massive residential, retail and commercial project that can only be called immensely ambitious.

He is willing to bet that Brisbane people will be willing to pay about $500,000 for an entry-level one-bedroom apartment measuring less than than 50sq m. Big enough to swing a cat - just. He's willing to bet that they will want to live right next to the truck-laden Logan Rd, over a train line and right next to a busway in a suburb that looks like it has had too much sun and has never been known for urban chic. He's also betting that the housing affordability dilemma will mean people will question if they can afford a home and a car.

But just to show how strongly he feels about Buranda, the man who developed the oh-so-swish Emporium development in Fortitude Valley says he is less confident about his separate plans for 56 luxury apartments at South Bank projected to cost between $2 million and $10 million each. "I would not like to make that call right now," he said...."
See Courier Mail

Skyline Price Decreases

Skyline is selling new 3 bedroom apartments for $650,000. This is less than some of the two bedroom prices in Skyline. These apartments were recently marketed for $720,000 plus. They are nice city apartments, but will be crowded out by Meriton's Soleil and Macrossan towers.

Howard Smith Wharf redevelopment

The Council has issued a plan for urban renewal in the wharf area under the Story Bridge. It looks like an excellent plan, and my guess is that it will increase the value of the apartments in the Admiralty precinct. It is called the Howard Smith Wharves redevelopment.

Details here and here.

Waters Edge on the Edge

A friend forwarded an email to me, recently received from Pradella, that included the following:

"Pradella have adjusted the pricing of some of the apartments in ‘Reach’ at Waters Edge. We have now sold 50 apartments, but we need to keep moving toward our pre sales targets, hence the pricing adjustments. The 1 beds have not been adjusted, but some of the 2 bed plus 1 bath, and 2 bed plus 2 bath have, and there are some very good buys to be had."

My guess is that no construction will commence until there are about 100 pre-sales.

Recovery?

See story in SMH.

Water's Edge at West End Update

A friend forwarded an email to me, recently received from Pradella, that included the following:

"Pradella have adjusted the pricing of some of the apartments in ‘Reach’ at Waters Edge. We have now sold 50 apartments, but we need to keep moving toward our pre sales targets, hence the pricing adjustments. The 1 beds have not been adjusted, but some of the 2 bed plus 1 bath, and 2 bed plus 2 bath have, and there are some very good buys to be had."

My guess is that no construction will commence until there are about 100 pre-sales.

Trilogy or Soleil?

With Empire Square and Vision both gone, it seems that the only two large inner city high rise on the horizon are Trilogy Tower and Meriton's Soleil. Both are similar heights, in a similar location, and are apartments without balconies. Both will have hotel / serviced apartments. Both will complete about the same time. I hear that some people who were initially interested in Trilogy are now interested in Soleil. They are different products. Soleil is cheaper on a price per sqm basis, and probably a different level of quality.

Trilogy (Mirvac managed hotel apartments) (residential apartments not yet on sale so not part of this comparision)

• 16 apartments per floor, over 12 levels. 192 apartments in total
• 3 elevators
• 1 and 2 bedroom configurations
• sold furnished, if one signs up with Mirvac
• 6% rental guarantee
• on sale for more than 3 months
• about 60 to 70 reported as sold
• one bedroom size - 53 to 59 sqm, most without car parking
• two bedroom size - 70 to 89 sqm, with 1 car park

Example pricing for 1 bedroom:
Level 35, East view - $530,000
Level 41, East view - $555,000
Level 41, River view - $570,000
2 bedrooms:
Level 35, river view - $890,000
Level 37, corner apartment, NE river view - $945,000
Level 37, corner apartment, SE river view - $940,000

Soleil - residential apartments

• 5 to 7 apartments per floor. 188 apartments on sale, with others being held by developer
  
• 3 elevators
• 1, 2 and 3 bedroom configurations
• sold unfurnished
• rental guarantee
• on sale for about 10 days
  
• less than 10 sold
  
• one bedroom size - 46 to 62 sqm, without car parking
• two bedroom size - 71 to 83 sqm, with 1 car park

2 bedroom apartments
Level 31, city view over Adelaide Street: $509,000
Level 40, views over All Hallows: $615,000
Level 42, views towards The Valley: $610,000
Level 42: views of River Place, and maybe Storey Bridge: $672,000
Level 47: views over Skyline towards the river: $755,000

No More Vision

"PLANS for Brisbane's tallest tower appear to be crumbling with builders told [Friday] the contract for works on the Vision tower had been suspended. Builder Grocon told workers at the Mary St site yesterday that the main works contract had been suspended by the developer, Austcorp. Last week an Austcorp spokes-man said the $950 million, 287m Vision was a live project and it would be Built. Austcorp head Trevor Chappell was overseas yesterday and un-able to be contacted to confirm the suspension" Source: Courier Mail.

"A company spokesman insisted Vision would be built when market conditions improved, but industry sources have told brisbanetimes.com.au completion is unlikely. One senior development figure said the project's future had been uncertain for some time and claimed there had long been doubt surrounding Austcorp's ability to secure credit.

While the developer continued to tout apartment sales figures up until last month, it is understood several multimillion dollar conditional contracts had collapsed."

in liquidation: M on Mary

"RECEIVERS & MANAGERS APPOINTED IN LIQUIDATION. BRAND NEW APARTMENTS. INVEST TODAY FROM JUST $295,000 IN THE HEART OF BRISBANE, AUSTRALIAS MOST EXCITING AND LIVEABLE CITY. PLUS A RENTAL GUARANTEE OF 6.5% GROSS (avg) MANGEMENTS FEES INCLUDED."

It appears that a Gold Coast company has been appointed to off load what remains for sale in M on Mary serviced (non residential) apartments. This building has 1 bedroom apartments, with some 3 bedroom apartments on higher floors. About 400 apartments in total, with over 100 reported as unsold. A very poor pool area. Most don't have car parks. Small apartments. Avoid!

Which Buildings Have More Owner Residents?

The Brisbane City Council has released a list (in relation to rate increases) that includes the number of owner occupied apartments in Brisbane apartment buildings. The full list is here. My view is that the higher number of owner occupiers in a building, the better the investment in that building.

Community Title Scheme Name	Number of Units	Number of Owner-occupied Units	Percentage Owner Occupied
ADMIRALTY QUAYS	173	59	34%
ADMIRALTY TOWERS	151	49	32%
ADMIRALTY TOWERS II	193	71	37%
ALLEGRO APARTMENTS	117	16	14%
CASINO TOWERS	214	34	16%
CENTREPOINT	51	20	39%
CHARLOTTE TOWERS	415	29	7%
CORONATION RESIDENCES	48	22	46%
CUTTERS LANDING - CUNNINGHAM	33	14	42%
CUTTERS LANDING - FLINDERS	84	53	63%
FELIX	254	48	19%
FESTIVAL TOWERS	401	51	13%
KOKO APARTMENTS	110	36	33%
LEXICON APARTMENTS	89	16	18%
OXYGEN	191	34	18%
PARK AVENUE AT SOUTH BANK	56	32	57%
PARKLAND BOULEVARD	400	168	42%
PRECINCT TOOWONG	46	19	41%
QUAY WEST BRISBANE	136	28	21%
QUEEN STREET 570	127	9	7%
REGATTA APARTMENTS	59	17	29%
RIPARIAN PLAZA APARTMENTS	48	23	48%
RIVER PLACE APARTMENTS	314	76	24%
SKYLINE APARTMENTS	185	37	20%
THE AURORA TOWER	472	128	27%
THE GARDENS	107	23	21%
TRILOGY RESIDENCES	121	8	7%
WILLAHRA TOWER	106	16	15%

Prices Still Increasing

From RP Data's Property Pulse:
"Brisbane
Across the 12 months to August 2008, Brisbane’s median house value has increased by $21,915 although, the level of vendor discounting has also increased by 3.64%. Given this, vendors who sold in August 2008 would be $6,328 better off than if they sold at the same time last year. Brisbane’s median unit value rose by $11,966 across the year to August 2008, meanwhile an increase in the level of vendor discounting of 3.09% has meant that a Brisbane vendor selling at the median unit value would have been $2,410 better off selling this year as opposed to selling at the median value last year"

Vision Suspended

"PLANS for Brisbane's tallest tower appear to be crumbling with builders told yesterday the contract for works on the Vision tower had been suspended. Builder Grocon told workers at the Mary St site yesterday that the main works contract had been suspended by the developer, Austcorp. Last week an Austcorp spokes-man said the $950 million, 287m Vision was a live project and it would be Built. Austcorp head Trevor Chappell was overseas yesterday and un-able to be contacted to confirm the suspension" Source: Courier Mail.