Thursday, April 28, 2011
China's Ghost Towns
Wednesday, April 27, 2011
Dangers of buying off-the-plan
Mr Conolly told Mr and Mrs Brecht that unit 7 would be suitable for them because it was going to have uninterrupted views that could never be built out and although there was a development to be built in front called “Splash”, the residents of the penthouses would be able to see over the roof of Splash because the balconies of the penthouses, in particular of unit 7, would be higher than the roof of Splash. Mr Conolly said there would be uninterrupted views from unit 7, Number One Park and those uninterrupted views would be views of the ocean. He said to them that if you were standing on the balcony “you may not see waves breaking onto the sand, but you will see waves breaking.” He said that those surf views were panoramic, which Mrs Brecht understood to mean 180 degree views. In common parlance, the word “surf” is synonymous with the words “breaking waves” or “white water”, so that a view of breaking waves has the same meaning as a view of surf or white water views.
The apartments in Number One Park were yet to be built so they were to be bought off the plan. It was not therefore possible for intending purchasers to stand on the balcony to see if the representation made as to the views was correct. In such circumstances the vendor, real estate agent and intending purchasers all realise that purchasers must rely in the usual course on representations made by the real estate agent retained by the vendor to market the property for sale. ...
In order for Barnscape to settle, the company borrowed $600,000 and used $600,000 of its own funds. Mrs Brecht said that if they had not used the $600,000 to purchase unit 7 at Number One Park, they would have otherwise invested the funds. They were unable to take up an opportunity to purchase a beach front block of land for $540,000 later in 2005 on Kangaroo Island (Lot 256 on De Coudie Drive) because the funds had been spent on Number One Park. The rest of their funds were invested elsewhere, and so were not available to purchase Lot 256. An RP Data Property Search showed that Lot 256 sold on 17 May 2005 for $540,000 and then on 27 March 2006 for $755,000.
If Barnscape had not purchased a unit in Number One Park, then there were properties which they could have bought on the Sunshine Coast between Coolum and Noosa with uninterrupted surf views. Of the alternative properties particularised, however, only unit 4, Splash appears to have become available during the relevant period and have the type of ocean view sought by the Brechts. Unit 4 Splash sold on 7 October 2003 for $1,950,000 and Unit 2 (rather than Unit 1), 16 Henderson Street sold on 18 October 2003 for $1,725,000. Those units were larger in size than either Unit 7 or Unit 8 Number One Park; Splash is closer to the ocean and has fewer units. Those factors made the units more expensive to purchase than unit 7 or unit 8, even if units 7 and 8 had shared the expansive views enjoyed by the units in Splash and 16 Henderson Street. Barnscape had access to an additional $1,000,000 at the time of settlement if more monies had been required to purchase a more expensive property. So those are opportunities that Barnscape missed as a result of the purchase of unit 7.
As the unit at Number One Park had been bought as an investment property, it was let as a holiday rental property. It was also used from time to time by Mr and Mrs Brecht personally. The rental was designed to provide some income while steps were put in place to work out what the cause of the problem with the view was and then to sell the property. The net rental received by Barnscape was as follows:
01/07/04 – 30/06/05 | Dolphin Bay Real Estate | $17,361.99 |
Laguna Noosa Holidays | $1,005.18 | |
01/07/05 – 30/06/06 | Dolphin Bay Real Estate | $20,112.58 |
Zinc Realty | $4,267.73 | |
01/07/06 – 30/06/07 | Dolphin Bay Real Estate | $15,978.80 |
Zinc Realty | $11,495.64 |
In addition, Barnscape had other expenses, including interest paid on the $600,000 loan. However, had they bought an alternative property at Sunshine Beach, they would have received rental income and most likely paid interest on borrowings. They would probably have received more income but paid more interest so it is very difficult to say they made a net loss on rental income and interest payments.
Unfortunately units 9 and 10 were for sale when the Barnscape contract settled and the Brechts took the view that the Barnscape unit would not attract a good price if it was put on the market at the same time as two other penthouse units. On 12 May 2006, Barnscape appointed Zinc Real Estate to sell unit 7 for $1,375,000. Once it was offered for sale it took 12 months to sell. Barnscape signed a contract to sell unit 7 on 29 May 2007 for $1,035,000.
See Avis v. Mark Bain Constructions and
Developer ordered to pay compensation after off-the-plan unit's views are blocked
Morning Money's view
On the no-housing-bubble side will be AMP economist Dr. Shane Oliver, Mr. Harley Dale from the Housing Industry Association, and Mr. Christopher Joye from property index firm Rismark.
We’ve been told the date to pencil in is 7 June. When more details are available you’ll read about it here.
We’re looking forward to the debate for a number of reasons. But most of all we’re looking forward to the property bulls providing some original arguments.
It’s boring combatting the same old tired excuses. We’ve bashed down each argument as they’ve made it. Now their only option is to recycle the same old trash and hope they can get away with it.
I mean, after spending the past two years denying a house price crash was possible under any circumstances, we’d like to hear them explain the situation in Queensland. After all, they never made any distinction between Queensland and the rest of Australia...
If anything, Queensland was compared to Western Australia as a safe place to buy due to the resources boom.
But according to the Courier Mail article sent to us by Money Morning reader Bill:
“Housing slump falls to 2000 levels as access to finance cuts construction”
And don’t even think about blaming the slump on the floods. As many spruikers now admit, the Queensland property market has been dead for two years... not that they admitted it until recently."
Monday, April 25, 2011
This Time is Different
Friday, April 22, 2011
Good Size Two Bedroom Apartments in Brisbane
- Flow West End, 144 sqm
- Admiralty Towers, 129 sqm
- Quay West Brisbane, 128 sqm
- Waters Edge West End, a number of designs over 120 sqm
- Saville South Bank, 120 sqm
- Metro 21, 119 sqm
- Admiralty Two, 116 sqm
- Ciana Indooroopilly, 113 sqm to 132 sqm
High Rises
- "What we have sitting out there is a potential tsunami of apartments. They're all high-rises and a lot of them are aimed at the investor market."
- "They're missing the point altogether, building high-rises and thinking this will solve the housing dilemma. These places have poor facilities, with a lack of shops and where people don't get a chance to mix in a community."
- "High-rise apartments are largely marketed to investors because developers are under pressure to sell a certain percentage off the plan before they can build. You're buying brand new, so obviously paying a premium for the 'wow' appeal."
- "The majority of this construction will also be relatively small one and two-bedroom apartments aimed at investors, and 50 to 70% populated by students. The initial vacancy rate is likely to be high, taking significant time to absorb the necessary demand."
- The Age recently reported 88% of the 4,155 apartment sales in the first half of 2010 were in investment focused buildings.
- "My concern is that with a high-rise there are so many of them and they're all the same. There's no point of difference."
- "Because so many come on the market at once, they get let very quickly to anybody that comes along. Before you know it they look like slums."
- "Investors should try and buy two-bedroom properties [rather than one-bedrooms] if they can afford it."
- "In a high-rise, you're buying a carbon copy of 100 or 200 other units. Your until will be completely dictated by what the last unit sold for."
- "Poor property struggles in the market for years."
Does the RBA think there is a bubble in the housing market in Australia?
NY Short Term Rentals Law
Thursday, April 21, 2011
One or Two Bedrooms?
- It should have two bathrooms. If it only has one bathroom, it is not so good to share. Often, a two bed one bath apartment is really a one bed plus study apartment.
- The second bedroom should be near the bathroom. It is not good if you have to walk through the living room to get to the bathroom.
- The bedrooms should be separated and have privacy.
- Both bedrooms should have external windows. A window onto a hallway does not count.
- Ideally, both bedrooms should be a reasonable size. Anything less than 3.2m x 3.1m for a bedroom (not including the wardrobe) is too small in my view. It is best if the smallest room is no less than 3.4m x 3.2 m. The main bedroom should have a wall that is at least 4m.
- There should be room for a desk in both bedrooms.
Off-the-plan apartment risks
"Our (real estate) market is the Chinese market, just like coal and iron ore," Mr Triguboff said.
"We need lower interest rates so that our dollar drops and it stimulates growth."
Mr Triguboff, whose Meriton Apartments builds more than 1000 units a year, said Chinese owners and investors had accounted for about 75 per cent of Meriton sales for the last two to three years.
But in the past month, numbers had fallen steeply. ..."
Apartment Prices Level with Houses
"THE planets are falling into alignment for property investors at present. We not only have a buyers' market in many key locations, but the scenario for rents and yields looks positive.
Two reports from credible research sources record a revival in rental growth in most of our major cities and predict solid rises throughout the year. "Renters should prepare for significant growth in rental prices throughout 2011, driven by accelerating economic activity, housing shortages and a depressed first-home buyer market," said APM's senior economist Andrew Wilson. Units in particular have seen a major shift in demand, with low vacancy rates for inner-city residences in most capital cities intensifying competition.
It has long been a basic tenet that houses show better capital growth than apartments, but changing lifestyle choices and affordability issues mean more households are opting to live in attached dwellings.
Last year, units showed slightly better capital growth than houses in terms of average growth across the nation, according to RP Data figures. ...
The 4 per cent average growth for dwelling rents recorded by Matusik Property Insights in the past year is very moderate - about half the historic annual rise in rents - and inconsistent with notions of a chronic dwelling shortage (as claimed by the developer lobby).
Matusik says vacancy rates drive rental growth and a general increase in vacancy rates in 2009 and much of last year caused rental growth to stall. Rental growth is now starting to return, he says, with a recent drop in vacancies.
"A falling vacancy rate is likely to put further pressure on weekly rents," Matusik says. "Rises of between 5 and 8 per cent during calendar 2011 are not out of the question.
"This in turn should lead to an increase in property values."
The Queensland Rental Market
Extract from REIQ press release:
'Queensland’s residential rental market has absorbed the impacts from this year’s natural disasters however demand is starting to tighten in some areas due to lower buyer activity, according to the Real Estate Institute of Queensland (REIQ). The REIQ’s March residential rental survey has found vacancy rates have continued to tighten over the past six months as more and more buyers stay on the sidelines.
“The floods did have a temporary impact on the rental market, but the REIQ rental survey has found this was mainly confined to flood-affected areas,” REIQ chairman Pamela Bennett said.
“However, the rental market is starting to be affected by the subdued property market given the low number of first home buyers and investors’ means there is more demand and less supply in the rental market. This also occurred in 2008 when high interest rates deterred buyers so it is not difficult to ascertain that the current economic conditions and the rapid nature of rate rises last year are having the same effect this year.”
The REIQ March rental survey, as well as statistics released by the Residential Tenancies Authority (RTA), have shown that the Brisbane rental market, while tighter, is not as dire as many anticipated.
The rental survey found vacancy rates for the Brisbane City local government area tightened in March, coming in at 1.8 per cent, down from 2.6 per cent in September last year.
RTA statistics for the start of this year largely illustrate drops in bonds lodged in suburbs directly affected by the floods, while January in general was a quieter month across the Brisbane area as many renters chose to stay put following the floods.
While median weekly rents were up significantly in some flood-affected Brisbane suburbs during January, Brisbane as a whole recorded steady rents and a drop in the total number of bonds lodged for the month.
“With reduced rental accommodation in their immediate area, many tenants and homeowners displaced by the floods had to look to other suburbs for accommodation in January and February,” Ms Bennett said. “However, REIQ agents in unaffected suburbs reported that this did not result in any significant increase in rental demand in their local areas.”
RTA statistics show that demand for three and four-bedroom houses increased following the floods, while the two-bedroom unit rental market remained relatively stable. In general, REIQ agents are now reporting that the rental market has begun to return to normal conditions.'
See also The Australian
Migration to Queensland
This has affected the demand for property in states such as Queensland and Western Australia, where the economy and property industry have been geared around interstate-migration-supported growth. Take away interstate migration and these states are impacted, Western Australia less so than Queensland because of the mining boom.
But how long will this trend last? The answer is both simple and complex.
The slowdown in interstate migration to Queensland will last for as long as people have diminished confidence in their ability to achieve the shift. There needs to be time and positive consumer and workplace sentiment between the GFC and the recovery.
I'd suggest that, all else being equal, that timeframe would be three to four years, which means that recovery might not arrive until mid next year. But "demographic recovery" for Queensland could also be tempered by the floods and Cyclone Yasi as well as by further changes in policy settings coming out of Canberra.
And then there is the issue of negative media sentiment, which will continue for as long as the ABS reports show demographic decline."
Full story here. It is worth reading.
Devine and Leightons
"At Devine, they weren't interested in the fundamentals of the business. They just thought you do it and it happens," Mr Devine said. "I have a lot of respect for Wal King but I can't say the same for the other Leighton representatives on the Devine board while I was there."
A Leighton spokesman said Mr Devine's comments were no longer relevant to Leighton and its investment in Devine.
"Mr Devine would be better placed to look at his own performance and that of Devine when he was there rather than a company that he no longer has anything to do with," he said."
Wednesday, April 20, 2011
Home Loan Volumes Down
Q1 defects
THE developer of the Gold Coast's Q1 supertower is being sued over construction defects that allegedly have left the building requiring millions of dollars worth of repairs.
Only six years after its completion, the world's tallest residential building allegedly is riddled with corrosion.
Sunshine Coast Troubles
Despite bids on 30 of the 36 units none was sold, although post auction talks continued later yesterday. Reed Property chief executive Ken Reed said the market was soft. “It’s a buyer’s market. Conditions on the Sunshine Coast are not too different from elsewhere in south-east Queensland,” he said.
An opening bid of $65,000 for an 88 square metre one-bedroom unit was the lowest offer made. One of the 512sq m penthouses attracted a maximum bid of $600,000 after it was listed for $1.58 million. Kings Beach residents Deborah and Jeff Taylor said the event was “a fizzier”. “The marker is so depressed at the moment. Things are selling for prices you wouldn’t believe. There are so many units on the market around here at the moment,” Mrs Taylor said.
The $65 million tower has access to a Greg Norman-designed championship golf course, pools, tennis courts and a gym."
Monday, April 18, 2011
Changes to Lot Entitlements for Some Apartments
After being approved by Queensland Parliament on the 6 April 2011, the Body Corporate and Community Management and Other Legislation Amendment Bill 2010 received Royal Assent on 14 April 2011, meaning that the new legislation is now in force. The new legislation will introduce a number of matters including:
- New principles to be used when determining Contribution and Interest Schedule Lot Entitlements
- A process where owners, who have been affected by a Lot Entitlement change, can submit a motion to the Body Corporate Committee before the 14th April 2014 to revert back to the Lot Entitlement Schedule before the change was made
- Additional requirements for Disclosure Statements and rights of termination
- Introduction of a new "Two Lot Scheme" module to make management of these smaller schemes much less onerous for their owners
Sunday, April 17, 2011
Madison Heights Bowen Hills
Saturday, April 16, 2011
Milton Park
Brisbane City Council’s plan to turn the old Milton Tennis Centre site into parkland is set to benefit surrounding properties, with The Milton the only major new development now on the horizon, says a leading property researcher.
Michael Matusik, director of Matusik Property Insights, said council’s plans to resume the 3.5 hectare site for suburban parkland would reduce the future supply of new apartments in the suburb by about 670, increasing the ‘scarcity value’ of stock in Milton.
Mr Matusik said, along with the reduction in supply, homes and apartments in Milton would benefit from a three to five per cent price premium generally afforded to properties within a one kilometre radius of major parkland.
“The single most common feature of any metropolitan area’s position as a desirable residential address is trees, and while buyers want to be in close proximity to the city, public transport and amenities, they still want access to green open space.
Mr Matusik said the significant reduction in future supply as a result of the development of the parkland at the old Milton Tennis Centre site would put increased demand on new and existing property in the suburb.
The 30-level The Milton, which is anticipated to begin construction this year, will feature 298 one and two bedroom apartments, most with views of the CBD or Brisbane River, along with a ground floor retail promenade and commercial office space."
My comment: The proposed park is some time off. It is located on the other side of the railway and the other side of Milton Road to that of FKP's development. So I don't think it will have much impact to people's decision to decide to rent or buy on a development near the Milton Railway Station, that has views of the brewery.
Rental Yields
"Demand for rental homes in resource-rich regions of Queensland is continuing to drive up residential rental yields in some mining areas, according to the Real Estate Institute of Queensland (REIQ).
The REIQ residential rental yield report found that over the December quarter 2010, the postcodes of Dysart, Blackwater and Moranbah in Central Queensland recorded gross yields between 14.5 and 8.9 per cent because there remains more demand than supply for rental homes in many of these mining areas.
Across the state, however, the market conditions of the past 12 months has resulted in more sustainable gross rental yields given property prices have generally softened and rents have remained stable.
Australian Bureau of Statistics (ABS) figures show that investor numbers in Queensland increased in February compared to January however numbers remain at historic lows."
For apartments and townhouses:
Recent Auctions
- 2602/108 Albert St (Festival Towers) - 2 bedrooms - one of the better apartments in the building - withdrawn from auction and now listed at "over $500,000"
- 110/540 Queen Street (Willahra Tower) - studio - failed to sell - highest bid was a vendor's bid of $175,000
Thursday, April 14, 2011
Market Cracks
Apartment prices in the luxury beachside Australian town of Noosa Heads have tumbled by a fifth since 2008 as cracks emerge in a housing market that’s so far escaped the rout seen in the U.S., U.K. and Ireland.
The median apartment price in the tourism and retiree town 150 kilometers (93 miles) north of Brisbane has slumped 21 percent in three years to A$570,000 ($594,000), according to the Real Estate Institute of Queensland. Sales have more than halved across Queensland state’s Sunshine coast, home to “Crocodile Hunter” Steve Irwin’s Australia Zoo, and the Gold Coast, known for its surfing beaches and casinos.
“We have a very overvalued housing market and even a small adverse shock can be magnified by a large adverse impact on property values,” said Gerard Minack, Sydney-based global developed markets strategist at Morgan Stanley (MS), who asserts Australian home prices are as much as 40 percent overvalued. “We’re seeing that now in parts of Queensland.”
The Rental Market in Brisbane
This is an extract from a real estate agent's newsletter who sells inner city apartments:
"Where does that leave the rental market??
Going up, up, up – as many people are forced to wait much longer than they had hoped or expected for rebuilding to commence and renovations to be completed. Almost 8,000 homes were inundated by the January floods, and another 10,000 homes were partially affected. This means that the homes of almost 40,000 people would have been somehow affected!
“The increasing demand (for rental properties) us likely to create upward pressure on rental rates as those displaced persons look for temporary accommodation over the next 6-12 months”, according to recent RPData report on the effects of the floods on the housing market. “The issue is that rental houses will be in short supply and many may have to opt for a unit instead.”
Tuesday, April 12, 2011
Tennyson Prices
Sunday, April 10, 2011
From the USA
Trilogy Definitely Not Going Ahead - One less hotel for Brisbane
The Trilogy building, which was to be a mix of apartments, offices and a Mirvac hotel, is officially dead.
Despite reportedly good off-the-plan sales, it is now reported that the current owners of the land are selling to a Melbourne developer who will build an office tower on the site. This may impact some of the views from Aurora?
See Brisbane Times
Recent Sales
- Quay West, apartment 1506, 2 bedroom, sold last week, reportedly very close to listing price of $775,000
- Quay West, apartment 1505, 1 bedroom, sold last week, listing price $465,000
- Arbour on Grey, apartment 2302, 2 bedrooms, sold at auction yesterday for $611,000 according to APM
- Parklands Pinnacle, apartment 6017, 3 bedrooms, failed to sell at auction, sold after for $1.3M
Buyers Market
- The Courier Mail makes money from property advertisements and thus tries to have positive stories about the property market and its advertisers (i.e., real estate agents). This Saturday's Courier Mail had no stories about residential real estate at all.
- Real estate agents are returning my calls when I say that I am looking to buy. I even have agents offering to be a buyers agent for me.
- In relation to sales in apartment buildings that I follow, for sales this month, the prices are flat or going backwards (10% to 20% declines in sales prices for comparable apartment property sales, compared with sales prices from six months ago). There are some exceptions to this.