Short Term Only

Some apartment buildings are built for residents, but are used for short term stays (hotel style accommodation) that causes problems for residents.  Some apartment buildings are only built for short term stays, and are trying to keep out long term tenants and owner occupiers.

"Quest on Story resident Cameron Green said that unless he and the owners of another eight apartments in the inner-city Kangaroo Point building could find the money to fight a legal battle, they would be out on the streets.

The residents bought their homes unaware that under the town plan they could only be used for short-term stays.

In many cases the apartments were advertised as suitable for first home buyers, the new owners received first home buyer's grants and in all cases solicitors carried out all the relevant searches."

Full story here.

Rent Money is Dead Money

I often hear young people say that rent money is dead money.  However, in many instances, it is better to rent than to buy.  This is particularly the case if you only want to live in the property for up to three years.  The transaction costs kill any possible benefits of buying.

Consider the purchase of an apartment for $450,000 in Brisbane.  The stamp duty (unless it is a first home) is just over $14,000.  The real estate agents' commission on resale (when you come to sell) is about $12,000, plus advertising costs.  This totals $26,000, or $500 a week if you own for a year, or $166 a week if you own for three years.

Plus you have to pay rates, body corporate, water and insurance, which for most apartments in Brisbane will be more than $5,000 a year (or about $100 a week).

So if you own for three years, you will be paying about $266 a week for stuff that the landlord would normally pay.

This does not take into account interest payments.  Interest is likely to be more than $24,000 a year (assuming no payment of principal), or $461 a week.

So to own the $450,000 apartment for 3 years will cost the equivalent of at least $727 a week in rent.  Of course, you can rent such an apartment for much less than this.  So if you have a $90,000 deposit, put it in the bank and receive $100 a week in interest, and rent for $500 a week, and you will be at least $327 a week better off renting than buying!

Gold Coast Apartments

"The supply of land, units and housing, as predicted was a problem in 2011. This was particularly evident in the unit sector. In spite of no new major projects commencing there is still an oversupply of new and near new unit stock washing around in the market. Unit values have continued to slide over the course of 2011 driven down by a combination of liquidators/receivers holding too much stock, a lack of confidence amongst buyers and a steady supply of mortgagee sales."

HTW Month in Review

By the way, The Oracle has a new fancy website.

RP Data October 2011 Index

Based on around 285,000 sales over the first 10 months of 2011, the RP Data- Rismark Home Value Index recorded a decline in the month of October prior to the decision to cut interest rates in November. In raw and seasonally-adjusted terms, capital city home values slid 0.2 per cent and 0.5 per cent, respectively over the month of October. Over the 10 months to end October 2011, Australian capital city dwelling values have declined by 2.8 per cent on a raw basis and by 4.0 per cent seasonally-adjusted.  RP Data's Tim Lawless noted that premium housing markets are continuing to record the largest falls in value.

Brisbane Apartments (raw, not seasonably adjusted):

• Median sales price for quarter = $360,000
• Monthly increase in sales price = 1.8%
• Quarterly increase in sales price = 1.1%
• But year on year is down 1.4%; year to date down 1.6%

Seasonably adjusted, year to date down 2.4%

See Full Release from RP Data

Hotels in Apartment Buildings

Many of the apartment buildings in Brisbane are "class 2" buildings -- which means they are for residential use.  To operate a hotel, the building must be a class 3 building.

A number of onsite managers operate hotels from class 2 buildings.  An example is Oaks.  Many owners are not happy with this situation.  See prior posts for example.

At M on Mary, an owner tried to stop the onsite manager operating a short term rental operation from the building, on the basis that the building was only a class 2 building.  A decision of the Tribunal said that it did not have the power to deal with this issue.  See decision.

Pets in Apartments

Another decision concerning the keeping of a small dog in an apartment -- Arbour on Grey.  Here, the dog owner was unsuccessful.  But the decision confirms that it is not appropriate to have a "dog free" building.

If conditions are imposed, they must be reasonable.  See the recent 212 Margaret decision. The following conditions in the bylaws were struck down as unreasonable:

• the pet does not weight (sic) more than ten (10) kilograms.
• only one animal is to be kept within the lot.
• the body corporate shall be entitled to withdraw its consent and require removal of the pet upon receiving two (2) substantiated complaints regarding the pet or the owner breaches any of the conditions of the approval.

I am always amazed that some body corporates want to ban pets.  It just deceases the pool of possible buyers, and thus deceases the value of their apartments.

Oversupply of 1 Bedroom Apartments in Brisbane?

A number of real estate agents have told me that there is an oversupply of 1 bedroom apartments without car parking in Brisbane.  That oversupply is likely to get worse as there are many new 1 bedroom apartments about to settle in off-the-plan buildings nearing completion.

Suncorp Selects Southpoint as New HQ?

There are rumours going around that Suncorp has select Southpoint at South Bank as its new headquarters.  Construction has not even started, so it will be a long way off.  (The other option Suncorp was looking at was 480 Queen St, the site of the proposed but abandoned Trilogy Tower.)  I suspect that this will add to the value of apartments in South Bank and some in South Brisbane.

Update:  Tuesday 29 November:  Rumour confirmed as correct.

Chinese Retreat

"Australia’s largest apartment developer, Harry Triguboff, has confirmed that Chinese buying of inner-Sydney apartments has halved in the last month. The China squeeze on its property market and fears about the level of our dollar are now having a direct effect on the Australian dwelling market. 

Triguboff believes that the sharp cutback in Chinese apartment demand will probably reduce apartment prices in Sydney by about 10%, but the prices will not collapse. He believes that a fall in apartment prices will flow on to the whole dwelling market in Sydney."
Full story here.
Harry Triguboff is the owner of Meriton, that is developing  two massive apartment towers in Brisbane, Soleil and Infinity, where most of the buyers are reported to be Chinese.  It is uncertain what impact China will have on the Brisbane apartment market.

View Tax

Apartment owners in Queensland are often taxed by local councils at higher rates than those of land owners or house owners.  People are starting to get upset by this.  In many cases the councils don't care, because the apartment owners don't live in the area and therefore can't vote.  See Sunday Mail story.

"Auctions A Bad Way to Sell"

Interesting report on Sunrise, that touches on real estate agents not reporting bad auction results.  See here.  Also discusses current uncertainty in property market.

Decreasing Market

According to Residex, the median sales price of Brisbane apartments dropped 3.48% in the year ending October 2011 and dropped 1.74% in the last quarter.

See Residex blog.

Foreclose and Bulldoze

See: The New Way To Foreclose

Hamilton One (also called Harbour One)

Here is a comment sent to me by a reader:

Recently, I arranged an inspection of apartments for sale in Hamilton One.  I am in the market so the request for an inspection was 100% genuine. 
The complex was only just finished. The thing that turned me straight off permanently in my particular situation, was that all the one bedroom apts do not have an oven to cook with and there is no provision for one, just a two-burner gas top. They have put in a movable bench-top convection microwave. It would be impossible to put a small gas BBQ on the balcony because the balcony’s are essentially closed in albeit for the concertina sliding windows which are up at about eye level upwards so the gas BBQ would essentially be inside, a VERY BIG no-no.  Of course, horses for courses and some people don’t cook, (I suppose??) so they may see that as a plus. Micro-waved and wok-cooked food does not appeal to me personally. 
While prices are advertised at $300,000 for one bedroom, that’s with a view of other high rise buildings, and no car park. I guess if you don’t have a car that’s fine, why pay for one if you don’t need or want it? I personally could not do without one. Therefore for me with a car, I think from memory (check for yourself) that one needed about a $415,000 start to have a car park however, that did include a reasonable view (in my opinion) since the one brm apts with car parks are on higher floors than those one brm apts without a car park. 
The concertina windows when open did seem to provide good ventilation and individually controlled ducted air con is throughout. The apt’s did have plenty of natural light which I thought was good, though another seven story complex is now under construction on the Nth side so that may impact on light, maybe not. 
Comms are Optus only. I personally did not like that “no-choice” option. According to the agent, hot water is individually metered from a central (gas??) boiler that distributes hot water around the complex and water is individually metered. I’m not sure how one went about getting electricity. I wonder what the unit rate for those utilities is? Foxtel is wired in, buy it yourself if you want it. 
The sales agent while quite pleasant seemed otherwise busy so other than a couple of apartment configurations, I was not shown around the complex to see the pool and any other facilities that may be there. I saw one pool though I think there may be two???

RP Data's Summary

Here are some interesting slides from an RP Data presentation.  Double click in the slides to make them larger.

Brisbane at the bottom?  Value Growth Starts to Improve on an Annual Basis

Brisbane transaction volumes have once again weakened:

Rental Rise in Brisbane

Number of properties advertised for sale has increased to record levels

Buying Off The Plan from Juniper

A number of people have asked me whether now is a good time to buy an apartment on the Gold Coast, particularly at Juniper's Soul building that is almost complete.

According to a number of property experts, the Gold Coast property market is still in decline, and further price falls are expected.

Let's look at Juniper's immediate prior luxury development, which is Oceans Mooloolaba.  Did buyers from Juniper do well or not?  It is sometimes hard to tell looking a public data, because Juniper gives under the table rebates to purchasers, so the exact initial purchase price from Juniper is not necessarily what is reported to the government.

Here is the evidence:

• Apt 704, sold by Juniper for $2,500,000 in 2005; resold in 2011 for $1,805,000.
• Apt 606, sold by Juniper for $1,580,000 in 2007; resold in 2011 for $1,650,000.
• Apt 503, sold by Juniper for $1,300,000 in 2007; resold in 2009 for $1,070,000.
• Apt 404, sold by Juniper for $1,380,000 in 2005; resold in 2007 for $1,200,000.
• Apt 404, sold by Juniper for $1,370,000 in 2003; resold in 2006 for $1,150,000; resold in 2010 for $1,115,000.
• Apt 401, sold by Juniper for $1,670,000 in 2003; resold in 2009 for $1,500,000.
• Apt 303, sold by Juniper for $1,320,000 in 2006; resold in 2007 for $1,025,000.
• Apt 301 sold by Juniper for $1,600,000 in 2003; resold in 2009 for $1,445,000.
• Apt 203, sold by Juniper for $1,750,000 in 2004; resold in 2010 for $1,800,000.

Taking into account stamp duty, everyone who has purchased from Juniper and then resold has lost money.  Some of the resales were before the market collapsed in 2008.  One suspects that it would be best to wait before buying in Soul or anywhere on the Gold Coast for that matter.

Northshore Hamilton

The $5 billion Northshore Hamilton urban redevelopment is underway, with thousands of apartments expected to be built in the next 10 years.  About 15,000 new residents are expected to move into this area, which is an old port and industrial precinct 6 km down river from Brisbane City.

• Two Devine apartment buildings are almost complete, with a third on the way.
• Brookfield Multiplex is building another Portside apartment building, Promenade (172 apartment), with two more planned.
• Citimark has development approval for Rivana, 15 levels with 208 apartments.
• Mirvac has a three building apartment complex planned, with a sales display office constructed onsite.
• Australand has launched 78 apartments as part of its $400 million project, Hamilton Reach.

Will there be an oversupply of small, non-riverfront apartments in this part of Hamilton, where there are few facilities and not much within walking distance?

Apartment Fire

Sad news.  There was a fatal fire in an apartment at Inn on the Park at Toowong this week. A lady died in her apartment.  Story and photos here.

Soleil's Pricing Not Holding Up?

Meriton's Soleil is partly completed, with settlements reportedly having occurred on the lower floors.  The top part of the building is still under construction.

Another blog reports that Meriton's list prices for Soleil are decreasing (I have not verified these numbers):

"1 July
Studio $350,000
1 Bedroom $380,000

25 July
Studio $340,000
1 Bedroom $375,000

11 August
Studio $330,000
1 Bedroom $365,000

1 November
STUDIO $306,000 - $325,000
1 BEDROOM $325,000 - $445,000
2 BEDROOM + CAR SPACE $565,000 - $818,000
2 BED + STUDY + CAR SPACE $653,000 - $689,000
3 BEDROOM + 2 CAR SPACES $750,000 - $877,000

4.5% Vendor Finance
$10,000 QLD Building Boost
$17,000 First Home Owner Bonus"


Listed on Domain today:

• 1 bed, no carpark - $403,000
• 2 bed, 2 bath, 1 carpark - $569,000 to $818,000
• resale by overseas buyer: Apt 5204, 2 bed, 2 bath, 1 car: $590,000 negotiable
• resale by overseas buyer: Apt 4803, 2 bed, 2 bath, 1 car: $630,000

As stated in a prior blog post, most buyers appear to be offshore buyers from China, and at the current sales rate, it will take 2 to 3 years for Meriton to sell all its stock in this building.

Two Queensland Buildings

From a recent article by Matusik: A Tale of Two Queensland Buildings

"Firstly, an investment dwelling’s worth should be determined by income – that means rent – just like it does for offices, shops and factories.  It shouldn’t be determined by a “comparable” resale.

Secondly, how and where the developer spends his or her money on a project shouldn’t affect the market’s (nor valuers’) perception of value.

• An investment’s value shouldn’t be determined by what a buyer once paid but by its income.
• The distribution of costs has no bearing on the end value of a product."

Full article here.

Rivé Apartments

Rivé Apartments near the Breakfast Creek Hotel are nearing completion.

One bedroom (77 sqm total) from $409,000.  Two bedrooms (106 sqm and larger) from $545,000.  See post below regarding Vecchio's prior development.

Improving Market?

It is useful to look at recent sales of apartments, and compare the price at which the apartment sold with the price that the vendor originally paid for the apartment.  In find this is more useful than looking at medium or average prices.  For example, if a building has a mix of 1 and 2 bedroom apartments, and for the last six months, only 1 bedroom apartments are sold, then the medium price will decrease.  This does not tell us whether the 1 bedroom apartments went up or down in value.

I recently had a look at sales in the Fresh Apartment building on boundary where Taringa mets Toowong, at 20 Campbell Street.   This building had its carpark flooded in the 2011 floods, but no apartments had water in.  The two magnificent pools were not flooded either.  It was developed by Vecchio, who is currently developing Rive Apartments (see post above.)

Apt 20:.  This apartment is 2 bedrooms, 2 bathrooms, 120 sqm (85 internal, 35 balcony).  In March 2007, it was advertised off-the-plan for $459,000.  The next year, it was still for sale off-the-plan for $504,000.  It was sold by the developer in May 2008 for $566,000 (probably this was above market price).  The first owner then resold it in November 2009 for $537,000.

Apt 23:  This is a 3 bedroom, 2 bathroom apartment, with a North East Aspect over the pool.  It is 148 sqm in total. It was sold off-the-plan for $669,000 in July 2007.  It resold in September 2011 for $569,000.

Apt 54:  This is a 3 bedroom, 2 bathroom penthouse apartment.  It is 117 sqm internal plus a large 84 sqm balcony..  It sold off-the-plan in April 2007 for $807,000.  It resold in August 2011 for $600,000.

So take care when buying off the plan or from a developer.

Devine's Hamilton Harbour

Hamilton Harbour is a three building apartment complex (plus one additional building of commercial space) currently being developed by Devine.  Two of the three buildings are almost complete.

According to Place Real Estate Agents, across the three buildings there are 658 apartments.  There are 125 apartments remaining for sale (mostly in the third building).  In the September 2011 quarter, 14 apartments sold (about one a week).  At this rate, it will take 26 months to sell the remaining apartments.

One beds are listed for rent from $300 a week, two beds from $510 a week, and three beds from $850 a week.

Here are some recent photographs, taken from the Portside area, of the two finished buildings.

Two Books

Before buying or investing in an apartment in Queensland, you should consider these books:

• Buying An Apartment Off The Plan in Queensland - A Guide For Successful Buying
• Investing in Brisbane Apartments - A Guide for Successful Investing

I see that BigW is now selling Kindle Book Readers.

111-222 Billbergia Apartment Tower Approved

The Brisbane City Council has approved the massive 111-222 apartment and hotel tower for Brisbane.  (See prior post here.)

There will be two towers as part of this development.  The large tower will be 90 storeys, located at 222 Margaret Street.  It will be a hotel from level 5 to level 21, and apartments from level 24 to level 88.  This building, if constructed, will be the tallest in Brisbane according to Brisbane Times.  If you want to buy an apartment, you can register on this website:  www.111plus222.com

The second smaller tower will be commercial office space, located at 111 Mary Street.

These two towers will have a major impact on the apartment building located at 212 Margaret St next door, and will also impact some views from Charlotte Towers.

New William Street Building

Echo Entertainment, who operate the Treasury Casino and nearby Treasury Hotel, are planning a new 5 star hotel at 159 William Street.  The published renders show Casino Towers in the background.  It appears that Oaks Casino Towers will have some of its river views blocked by this 400 room hotel.

Buyer Confidence Improves

The AFR had a story on Thursday about Brisbane apartments, "Buyer Confidence Improves" (p. 55).  Highlights from the article (copy available here):

• Thousands of new apartments in Brisbane's inner city have helped boost sales volumes 30% in September quarter compared with the June quarter, but the number sold is still substantially lower than the same period in 2010.
• 312 new apartments sold in September quarter, according to Place Advisory research report
• Influx of new projects scheduled for next year - 1000 new apartments are expected to come onto the market in the first half of 2012.
• 2059 new apartments currently for sale in Brisbane
• Average sales price was $580,529.
• "The Brisbane market is at the bottom of its cycle and we are now starting to see an increase in inquiry and sales activity" according to Mr Walker from Place.
• Most of the sales appear to be to overseas and interstate buyers.
• "The biggest positive is the local buyers are yet to enter the market. ... As consumer sentiment improves, they will start buying again."
• The influx of new units, particularly in urban renewal precincts such as Hamilton riverfront, Newstead River Park, and Show Ground Hill, could limit the market's recovery.
• Agents said too much choice and concerns about whether the market has hit bottom could constrain buyers.
• Urbis property economics consultants said Brisbane has a long-term undersupply problem.

Luxury Apartment?

Old time property developers, David Devine and Ken Woodley, now of Metro Property Developments, specialised in low end high rise apartments.  They are advertising one of their many new developments, Brooklyn on Brookes, as "Luxury Valley Apartments from $305,000".

I wonder what makes these apartments "luxury"?  Sure, they will be new, but a new apartment does not mean it is luxurious.  Let's look at the facts:

• built on a main road, Ann Street
• no city or river views from most levels
• 191 apartments, most with only one bathroom
• small apartments
• no separate kitchen
• bathrooms do not have separate bath and shower
• little cupboard and storage space in apartment
• no balcony

In my view, calling these "luxury apartments" is seriously misleading.  Buyers beware! 

River Place Auction Sale

From a Ray White email:

"Brisbane's CBD Prestige Market Is Running Hot!!

This morning over 100 people attended the auction for 326/82 Boundary Street, a River-front penthouse in River Place.

With 18 registered bidders there could only be one outcome, a successful sale reaching $1.497M!

This proves there are buyers out there wishing to secure quality properties within the Brisbane CBD."

Brisbane Rental Vacancy Rate Tightens

Rental vacancy rates across many areas of Queensland have tightened over recent months, according to the latest Real Estate Institute of Queensland (REIQ) data.

The REIQ’s September residential rental survey found the low number of investors in the property market contributed to the tightening of vacancy rates between June and September this year.

“The number of investors in Queensland continues to be below historical averages. What this means is that there is not the usual number of investment properties being added to the overall rental pool, which is putting a strain on supply,” REIQ managing director Dan Molloy said.

“The recent interest rate cut, as well as soft property prices, are likely to make investment property a more attractive proposition for investors so we will hopefully see more activity from this type of buyer in coming months. Many renters are also opting to stay put, perhaps due to the ongoing economic uncertainty, which is also have an impact on supply.”

The vacancy rate in Brisbane is 2.3 per cent. Brisbane City’s vacancy rate eased slightly, largely due to easing conditions in the 5km-plus zone, despite Inner Brisbane experiencing tighter vacancy rates since the end of June.

In terms of median rents from the Residential Tenancies Authority, these tighter conditions have only been reflected in weekly rents in the south-west and north-western suburbs, both up $20 and $25 over the September quarter for three bedroom houses. For the outer suburbs, new developments coupled with the return of renovated flood- affected properties coming back into the rental pool have contributed to the increase of supply.

Good or Bad Times?

Here are two conflicting articles, published on the same day in Property Observer.

1.  Next year could be the best year in a decade to buy property.

2.  Australia's housing bubble will eventual burst.

Who should you believe?  Who knows?

My view is that, at least for Brisbane, now is a good time to buy established, well located residential apartments, if you plan to buy and hold for the long term.  In my view, not a good time to buy off the plan, but some off the plan developments seem to be doing well.  For example, it is reported that in the first stage of the first building in the Showground Hill development, namely The Green, all the available apartments sold out in about 3 hours.  Not sure how many apartments were actually available -- they may have actually only sold ten apartments!  In any event, there must be some buyers signing contracts.

Disclosure of proposed or planned works

Here is a note from a reader, and it is a good reminder to do as many searches as possible and ask questions of as many people as possible before signing a contract for an apartment.

"Here is Winchcombe Place Apartments at 15 Vernon Terrace in Teneriffe (a.k.a. Newstead).  Underpinning of the building is taking place.  The front stairwells that exit to the street were recently underpinned as they had “parted” from the main building with cracks about 40mm in width appearing between the two. 

These photos show the huge cracks at the rear of the building which is currently being underpinned.  Several units in this complex were on the market prior to the work commencing.  I looked at one at an “open” a few months prior to the work commencing and was unaware this work was to occur.  Glad I didn’t buy one and then find this out.

The agent didn’t tell me anything about it when I inspected  the apartment in March 2011.  I’ve since learned a levy had been struck to pay for the underpinning.  I’m not saying the agent was dishonest, perhaps he did not know, only that I was not told. Perhaps I should have asked about proposed or planned works.  Had I made a successful offer, I would not have been very happy to discover this and the extra levy that records show had already been struck at the time of inspection in March. Buyer beware!"

Gold Coast and Soul

Herron Todd White says that the Gold Coast apartment market is still in decline.

It will be interesting to see how many of the Soul apartments actual settle.  Some photos of Jupiter's Soul -- the place looks bare and barren.

Luxury Brisbane Units

"As units go, there are a few very nice projects mostly on the river, with views and close to the city that have experienced good money, but sales have been rare. Scott Street, Kangaroo Point as well as the Tom Dooley projects are the places to find serious unit money but even these have seen a slower sale pace. The problem is that many buyers are empty nesters looking to purchase subject to the sale of their own riverfront homes which, of course, creates problems."

See HTW Report

No Views at Bella Vue - Contract Terminated

A recent Queensland Supreme Court decision worth noting:  Nifsan Developments v. Buskey.  Mr Buskey purchased a penthouse apartment off-the-plan from Nifsan in the Bella Vue complex at Emerald Lakes.  The contract price was over $1.5M.  Before signing the contract, the sales agent told them about the uninterrupted views that the apartment would have.  However, the developer was planning a building in front of the apartment that would block the views.  The court rescinded the contract, and Mr Buskey got his deposit back.

Interestingly, the developer had a policy of not telling its sales agents about relevant information.  The sales agent may be honest, but being kept in the dark by the developer.

Also, the evidence before the court was that the apartment was not worth $1.5M when the contract was signed, and was now worth about $800,000.

Extreme care must be taken when buying off the plan.  You may be paying way too much. What the sales agents tell you may not be true.

See full text of decision.