Juniper's Soul

It is hard to tell, but it appears that only about a third of the apartments purchased off the plan in the first stage of the Soul tower at Surfers Paradise have settled.  Juniper, the developer, must not be happy about this.

Brisbane real estate transaction volumes below average

Brisbane home values continue to fall

Summary of Recent RP Data report

Housing values record their first monthly increase since December 2010 in November 2011

• Capital city dwelling values up 0.1% over the month of November, the first monthly increase since December 2010.  Dwelling values are down -3.5% over the twelve months to November 2011.
• Home values in Melbourne and Brisbane fell by the most significant amount over the quarter, both down by -1.7%, followed by Adelaide and Perth which both fell by -0.3%.

National sales volumes are tracking about 17% below the five year average.

·         In recent months the estimated number of dwelling transactions has remained quite stable. Based on our estimates of October transaction numbers, every capital city except Sydney (+8%) is recording lower than average home sale numbers.

·         The worst hit markets are Melbourne (-32% below average) and Darwin (-30% below average).

• Rents are starting to improve in certain areas and across certain product types while yields continue to improve.
• Capital city house rents have increased by 4.9% over the 12 months to November 2011, compared to average annual growth over the past five years of 5.8%.
• Capital city unit rents have increased by 5.4% over the 12 months to November 2011, compared to average annual growth over the past five years of 6.6%.
• Gross rental yields for houses have improved from 3.9% last November to 4.3% currently and for units they have increased to 5.0% from 4.7% last year.

Homes are taking longer to sell and vendors are providing large discounts on their price expectations however, conditions have shown improvement over recent months.

·         The average number of days it takes to sell a house has decreased over recent two months.  It currently takes 53 days on average to sell a capital city house compared with 46 days at the same time last year.

·         Vendors are now providing an average discount of -6.9% from their initial listings price, at the same time last year the average vendor discount across the capital cities was recorded at -5.9%.

Blue Sky Ahead?

John Edwards at Residex believes that there is blue sky ahead for the Australian residential property market.  A quote from a blog entry from today:

"Adverse comments and the position currently surrounding European economic problems have certainly had an impact on Australia’s economy; however it is important to recognise the position Australia holds, and that if things do go horribly wrong, Australia has the capacity to simulate its economy by increasing borrowings and decreasing interest rates.

Our housing markets ended 2011 in a better position to where they started and I am confident that the year ahead will be better for residential property owners compared to last year.  Most owners should see their assets hold value or increase and this year could in fact be a good time for investor activity provided the world economy doesn’t move into severe recession as a consequence of the problems in Europe. ...

The data suggests that we are exiting a period of negative adjustment however, in my view, we should not expect any rapid uplift in housing values because current economic conditions are not capable of supporting strong consumer activity. Retail activity during the Christmas period certainly suggests that consumers are cautious."

Busting Bubble?

According to contrarian economist Professor Steve Keen, it was accelerating debt that drove house prices up and it is decelerating debt that is causing the fall.

Keen has argued the significance of private debt in the economy - something which mainstream economists largely ignore. In a recent post on his blog, debtdeflation.com, Keen reveals the debt to disposable income ratio for Australian households has been rising until recently. Now Australians are saving and paying off debt rather than spending and this has a negative impact on house prices.

The end result, Keen argues, is that house prices will fall 40 per cent over the next 10 or so years, or 5 per cent to 10 per cent for 2012.

See Courier Mail and Property Observer

But see a contrary story here and story by Matusik.  Chris Joye from Rismark takes the opposite view.

Chinese Investors

"And buyers from China once again topped the list, according to new research by Colliers International.  The figures on buying patterns during the 2010-2011 financial year have shown 733 residential sales to foreign buyers.  In all, 506 of those sales were investments with 277 for owner-occupiers."

See Courier Mail

Gold Coast Still Oversupplied

"The high-rise market on the Gold Coast is nothing like any other Australian market.

"It's a unique market and it's driven by speculation and not necessarily the fundamentals. But we just don't need any more high-rise developments for the moment.''

Mr Morris said his latest research indicated there were 625 new high-rise apartments for sale on the Coast. That represented a 2 1/2-year supply based on the average sales rate over the past two years.

"But the figure is a bit camouflaged by a rather big project in Southport - Philip Usher Constructions' $200 million H20 on Broadwater development, which is completed, but has not yet been put to the market.

"So there's another 350 apartments just sitting there which, when they get released for sale will add another year to supply, increasing it to 3 1/2 years.''

In the wake of the GFC, the Gold Coast high-rise apartment market has been hit by spiralling valuations and two high-profile victims of receivership, Southport Central and the twin-tower The Oracle Broadbeach.

It has led to heavy discounting of stock, with prices of some luxury apartments slashed by as much as 30 per cent.

But Mr Morris believed prices could fall even further throughout 2012.

"Most of the stock on the Gold Coast is held by receivers and the prices are not being driven by the market.

They're being driven by what the receivers have to do to get rid of the debt,'' he said. ``So it's quite possible the average price of new apartments could sink below the average price of resale stock.''

Research by the Oliver Hume Real Estate Group shows the Coast's total supply of available apartments - low, medium and high-rise - has reached 1626, down from its peak of more than 2000 over the past couple of years.  And the figure is expected to continue to fall with predictions of the strongest summer sales since the GFC. 

See Full Story

Recent Brisbane City Apartment Sales

Here are the recent reported apartment sales in the larger Brisbane downtown buildings.  Most of these sales closed in the period from late October to early December 2011.

Charlotte Towers

• Apt 2110, 1 bed, 1 bath, 1 car - $382,000

Aurora

• Apt 393, 2 bed, 2 bath, 1 car - $665,000
• Apt 236, 2 bed, 2 bath, 1 car - $515,000
• Apt 512, 2 bed, 1 bath, 1 car - $582,000

Festival Towers

• Apt 3401, 2 bed, 2 bath, 1 car - $475,000
• Apt 1707, 2 bed, 2 bath, 1 car - $440,000
• Apt 2110, 1 bed, 1 bath, ? car - $350,000

Felix

• Apt 356, 2 bed, 2 bath, 1 car - $505,000
• Apt 276, 2 bed, 1 bath, 1 car - $492,000

River Place (82 Boundary Street)

• Apt 302, 2 bed, 2 bath, 1 car - $690,000
• Apt 326, 3 bed, 2 bath, 2 car - $1,497,000
• Apt 231, 2 bed, 1 bath, 1 car - $423,000
• Apt 110, 1 bed, 1 bath, 1 car - $410,000

Skyline

• Apt 55, 1 bed - $320,000
• Apt 131, 3 bed, 2 bath, 1 car - $700,000

Admiralty Quays

• Apt 9, 3 bed, 2 bath, 1 car - $900,000
• Apt 67, 1 bed, 1 bath, 1 car - $580,000
• Apt 135, 2 bed, 2 bath, 1 car - $780,000

Admiralty Towers Two

• Apt 57, 2 bed, 2 bath, 1 car (103 sqm) - $660,000

No reported recent sales (last October to early December) in Casino Towers, Quay West or Admiralty Towers One.

Brisbane Market Flat, and therefore good buying?

With the market remaining soft most of last year, Mr Lawless said Brisbane was again becoming more affordable compared to other capital cities.

There had not been such disparity between Brisbane and Sydney prices since 2007 and Melbourne since 2004.

"It just demonstrates that there is quite a strong value proposition opening up within the Brisbane marketplace,'' he said.  "Which should make the Brisbane market look much more attractive to investors and also interstate migrants.''
See Courier Mail

South Brisbane and Indooroopilly

A recent report by Urbis lists South Brisbane as being "trendy" and Indooroopilly as a "prime unit location".  Bowen Hills also gets a mention as an area undergoing redevelopment.
See Article

Why are Landlords Hostile to Pets?

Many landlords are hostile to pets.  My experience is that students are worse than pets.

"Brisbane vet Michael O'Donoghue has seen too many people have to give up, or put down, their pets because they could not find a rental property that welcomed animals.

"It's very heart-breaking, people euthanising their beloved pet because they can't find accommodation," he said."

See SMH

The Dunmore in the Valley

There is a new apartment development currently being marketed in Fortitude Valley.  It is called The Dunmore.  Management rights have been sold to Mantra, and the property will be managed under the Peppers brand as a small hotel.  For investors, the rental returns will be on a pooled basis based on lot entitlements, similar to many Mirvac properties.

According to the selling agent, The Dunmore will comprise of 78 apartments including:

-           42 One bedroom apartments, a number without car parking

-           18 One bedroom + study nook apartments

-           18 Two bedroom apartments (inc. flexibility of dual key access)

Product	Price Range
1 Bedroom	$376,000 - $462,000
1 Bedroom + study	$399,000 - $482,000
2 Bedroom	$572,000 - $632,000

Predictions for 2012

I am not going to make any major predictions for the Brisbane apartment market for 2012.  It is too uncertain what will happen next.

It is probably not a good time to sell.  If you can hold off selling, then that is probably wise.  (I guess that the market will, at worst, be flat.)  However, if you may be forced into selling sometime in 2012, such as due to loss of a job, divorce, financial difficulties, or a forced move, then it is probably best to sell as soon as possible so that you are not a distressed seller.

If you are buying, there is plenty of choice.  But only buy if you plan to hold for the long term.  I think it is better buying an established apartment than buying off-the-plan, at least in Brisbane.  (The Gold Coast is a different story.)

Rents are unlikely to fall.  Body corporate levies are unlike to decrease.  Who knows what interest rates will do.

I may buy in the next 6 months, but only if the price is extremely competitive or the property is extremely unique.  I doubt that I will buy off-the-plan this year.

Two books to assist you:

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

Finding A Great Apartment to Rent in Brisbane

Introduction


Finding a good apartment or home unit to rent in Brisbane is not easy, particularly in January and February when the demand for apartment rentals is high and many tenants are looking.


In the best buildings, the existing tenants do not often leave, and when they do move out, the apartment is often snapped up quickly. For the better buildings, a large percentage of the apartments are occupied by the owner, and so are not rented out.   Also, onsite managers often control the rental rolls, and don't often advertise on the usual property websites (as they don't need to do so).  Some have their own website.  Also, onsite managers may have a relationship with executive relocation services, and the better apartments may be provided to corporate tenants.  For the mid-quality buildings, many apartments are furnished and rented on a short term basis, sometimes even overnight.  Thus, there may be few apartments available for rent. 

At one time, a good specialist website for apartments was http://www.seqrents.com.au However, it seems that some buildings are not using this site anymore, or are not bothering to update their listing on this site. So, although useful, it is less useful.


A newer website that has a number of rental listings is CityApartmentSales, and is used by a number of the onsite managers to list apartments for rent.  The largest number of listings are located on RealEstate.com.au, but a number of onsite managers do not use this website.  Also, try Central Apartments for rentals in Pradella buildings.

You have to find out how each manager advertises his/her vacancy.

Generally, you want to avoid any buildings managed by Oaks, as they focus on short term hotel style rentals.

This website has a list of most city apartment buildings, with useful information and links about them. Also, try this customised search engine.

Downtown Brisbane:

If you want to live downtown, then I recommend the Admiralty Precinct. This comprises three first-tier buildings (Admiralty One, Admiralty Two and Admiralty Quays), plus River Place (good location, not as good quality) and Skyline (second tier).  Recently partially opened just behind these buildings is Meriton's Soleil (budget quality).

Admiralty One is good value, and has some of the largest two bedroom apartments in Brisbane, but is a smaller building.  It is direct river front - http://www.admiraltyone.com.au/

Admiralty Two also has good sized apartments, and the building has great facilities. http://www.admiraltytwo.com.au/

Admiralty Quays is newer, and has a great pool, but the apartments are smaller than the two Admiralty buildings listed above, and it is more expensive. http://www.admiraltyquays.com/

Nearby on the river in the city is River Place, that is not as good quality, but is likely to have availability as this is a large complex. Careful of Storey Bridge noise. Great views.  Great pool.

Soleil has only just opened.  It is currently the tallest building in Brisbane.  A large building with over 400 apartments, but less than half have been sold.  In late December, the Soleil website said that there were currently no apartments available for lease.
On Alice Street in the city, if you can get an apartment in Quay West, that is fantastic, as it has park and river views.  About half the apartments in this building are hotel managed, so it is easy to get short term accommodation in Quay West, but difficult to find an apartment for a long term lease.  All apartments are privately owned. You want to get above level 7.

For an inner city downtown building, Metro 21 is one of the better quality buildings. It has only 4 apartments per floor -- and tries to be more upmarket so is better than most buildings that aim at students -- it seems to have better availability, and some of the two bedroom apartments have three bathrooms. The baloneys are large:
http://www.realestate.com.au/realestate/agent/metro+21+brisbane/mlibri
and http://www.metro21apartments.com.au/

M on Mary has recently been taken over by new management, so it will be interesting to see what happens in this building.  It was not high on my list previously, but that may change with the new management.

Parklands at Roma Street also has some good apartments.

SouthBank


I recommend Arbour on Grey at SouthBank: http://arbour.com.au/cms/welcome.html

Also, Saville (Mantra) at SouthBank is one of the nicest buildings if you get a river facing apartment.  The apartments are level 8 and above.  Below level 8 is a hotel.  The best thing to do here is call to find out availability.  Telephone 07 3305 2559

West End


There is likely to be some availability in some of the riverside West End apartments.  These include Waters Edge, Flow, Koko and Left Bank.


Some of the better apartments not on the river road include SL8 and Tempo.


In my view, all of the above West End apartments are too isolated.

Apartments in Suburbs

The suburbs that I recommend, due to location, transport and large number of better quality apartments, are Toowong, St Lucia, Taringa, Indooroopilly and possibly Milton and Hamilton.  I don't recommend Chermside.

In Indooroopilly, there has been very little recent construction.  Two of the newer, quality buildings Riva and Ciana.

Riva has apartments with great river views. It is a quiet building, with a pool, and is close to the train station and Indooroopilly Shopping Centre.  It has good onsite managers, but apartments rarely become available here.

Ciana is a larger new complex, in a central location, with many large apartments. There is a pool and gym, plus a bowls club! 

The newest complex in the Toowong / Taringa area is Fresh.  This complex has two pools, a gym and great gardens, and a large number of apartments are owned by super funds and thus are rentals.  Try here.

Next door to Fresh is Encore, which is a relatively nice complex, with good pricing (but not as nice as Fresh, and some of the apartments are small).  This complex flooded in January 2010.  

St Lucia is harder to find quality -- there are few onsite managers. So you have to try local real estate agents.

If you want an apartment complex that feels more suburban, then Parklands at Sherwood is a great choice. Many apartments have park/rural views, and there is a great pool and bbq area.

Nearby is Tennyson Reach, where you can get a large new apartment on the river. This is a new complex, but (apart from river views) not a great location.  It was badly flooded.  You can rent a high quality apartment at a reasonable price here, if you don't mind the location.

Off-the-plan commissions

I have recently come across off-the-plan developments in Brisbane where the agent is being paid a flat 7% or 8% commission.  These agents are mostly selling to foreign buyers.  On a $600,000 apartment, that means $48,000 goes to the agent.  In other words, you are paying at least 8% too much!

Apartments in Teneriffe, Brisbane

Rents and apartment prices to face some stiff competition in Teneriffe?

The sky-high rentals and apartment sale prices being charged for apartments in Teneriffe may soon face some stiff competition when the several hundred brand new apartments being built by FKP at its new Gasworks complex combined with those already for sale at Mirvac’s Waterfront complex, both at neighbouring Newstead, come on stream.  There are some 600 units and apartments planned for construction in that area.

This may have been the trigger for the formation for the recently formed Teneriffe Apartment Managers Network. 

A recently released brochure, Renting in Teneriffe, is available around the area and promotes sales and renting of apartments through the on-site apartment managers listed and includes 19 apartment complexes that are let by on-site managers in Teneriffe.  Many of the apartments at Teneriffe are converted Woolstores while others such as Dalgety-Mercantile and Winchcombe-Carson complexes were built around 1994-96. 

Perhaps the Teneriffe apartment complex managers have already concluded that they can expect some fierce competition in terms of property prices and rents towards the end of 2012 when the FKP apartments come on stream, which start at $450,000 just a hundred metres down the road from Teneriffe. 

Woolworths is set to open a supermarket in the FKP complex, and boutique shops are planned along with office space and the 5 hectare Parklands area. It’s going to be interesting to see if rents and property prices hold up in Teneriffe when these complexes come on stream in late 2012 and early 2013.

Spotting a Bubble

An excellent article by Bill Moss, who was very senior at Macquarie Bank, has been published recently.

"I have always believed that no one should ever invest in anything unless the fundamentals are right. If the people who pay the rent or borrow the money to purchase a property cannot afford to keep up repayments, then a property investment fails. After a global financial crisis, the concept of keeping vacant real estate as an inventory item, as the sheiks of Dubai did or as the Chinese and Russians tried to do, is doomed to end in tears."
Read the full article at Property Observer.

Soul

A new Soul website, that shows actual interior photos of apartments, has been launched.  It appears that less than 100 apartments have actually settled to date.  A number of off-the-plan contracts have crashed.  The building is being managed by Mirvac, soon to be Accor, under contract.  Mirvac did not purchase the management rights.

Asian Developers

"Foreign developers have grabbed a 30 per cent share of Australia's apartment market, a trend not repeated since the Japanese office and hotel development boom in the late 1980s.

Overseas investors are behind 13,000 apartments in 37 projects in Australia. Based on the average number of apartments completed in 2011, that represents a market share of as much as 32 per cent, research by the property group CBRE finds.

About 40 per cent of projects are under construction; the rest are at the planning or marketing stage."

See Fairfax

So it appears that Asian developers are building small apartments in Australia for Asia buyers that are rented to Asian students.  When the tide goes out, will Australians want to buy or live in these boxes?

Not So Devine

"Home developer Devine warns deteriorating property market conditions will cut its full year pre-tax profit by 31 per cent.

Market conditions had continued to deteriorate across most Australian property markets, which had delayed Devine's ability to bring new projects to the market, the company said on Wednesday."

See Business Spectator

Housing Shortfall in Queensland?

"Australia's housing shortfall is expected to blow out to more than 640,000 in 20 years, prompting industry calls for tax cuts and other measures to stop prices going through the roof.

The gap between demand and supply increased by 28,200 to 186,800 housing units this year, a National Housing Supply Council (NHSC) report reveals.

The annual report on the state of supply shows NSW and Queensland had the largest shortfalls of 73,700 and 61,900, respectively."

See Business Spectator

Off-the-plan craziness at The Oracle

Here is an interesting but sad story about a teacher's aid, who signed an off-the-plan contract in 2006 to purchase an apartment in The Oracle at Broadbeach for $940,000, plus stamp duty.  Unsurprisingly, she was unable to settle and then unsuccessfully sued the developer (Niecon) to get out of the contract.

"She explained that she did not have the funds to settle and that the matter had cost her $7,500 in bank guarantee fees. She explained that she had a mortgage of around $100,000 on her $300,000 townhouse, was in her mid-50s and earned about $550 per week as a teacher’s aide. She asked to be let out of the contract and explained the difficulties that she had in meeting the required deposit of $94,000. She explained that she had brought up her children without maintenance from her former husband and saw the investment in The Oracle as a way of finally getting ahead by using the equity in her home as the deposit."

In early 2010, before completion of the development, she listed the property for sale at a price of $1.28 million. "This price was selected because it would enable her to cover the purchase price, stamp duty and agent’s commission. However, the price of $1.28 million was unrealistic in the light of the global financial crisis and its impact on property prices, even though Ms Ryan had the hope that such an iconic building would not be affected as other parts of the market had been."

What a crazy thing for this person to do.  Why would anyone in their right mind who was earning $550 a week sign a contract to purchase a Gold Coast apartment for about a million dollars?!

See Decision, at paragraph [326] and following.

The Oracle - Developer Wins Lawsuits

The developer of The Oracle at Broadbeach was sued by a number of people who purchased apartments off-the-plan and then, after the market dropped, did not want to settle.  The developer won the lawsuits, and the buyers have to pay significant damages to Niecon.

Interestingly, the judge's decision (which is long and complex) discussed issues about when a residential apartment building is and can be operated as a hotel or short stay letting operation.

"The contract provided that any authorisation of a person as a letting agent would be in the terms of the Caretaking and Letting Agreement annexed to the Disclosure Statement. That agreement provided for the entity appointed by the body corporate to operate a letting business, and to use certain common property for specified purposes. The letting business was not limited to long-term tenancies. Nothing in the Caretaking and Letting Agreement provided that the letting agent could not conduct its letting business so as to attract short-term tenants and holiday-makers. The letting business involved associated services commonly rendered in connection with letting lots in similar developments and “any other lawful activity.” This authorised the provision of services to guests occupying apartments, including guests staying for a short time who might require room service, a mini-bar and other “hotel-like services”."

"The fact that [the onsite manager] provides guests with certain “hotel-style services” does not mean that the tower has ceased to be a “residential tower” in the sense earlier described. The fact that some of the occupants are there for a short term does not mean that the tower is not a residential tower. The contractual promise of a lot in a residential tower relates to a tower used for residential purposes. The relevant provision distinguished the residential component from the retail component of the development. In its contractual context, a residential tower does not mean simply a tower for owners who are residents or long-term tenants."

Risks of Buying Off the Plan

Property commentator Michael Matusik published some articles recently about the risks of buying of the plan.  See:
Risks 1 to 3
Follow Up Comments

For a more detailed analysis, see the recently published Kindle Book: Buying An Apartment Off The Plan in Queensland - A Guide For Successful Buying.  
This book can be downloaded to a Kindle, iPhone, iPad or computer.  The cost is less than $10, so good value if you are planning on spending money on an apartment in Queensland.

Cash or Property?

This story has been submitted by a reader:

"Read with interest your story “Property or Shares”. I know many people who are equally dismayed at the negative return and decimation of their super fund accounts. I know some people who were intending to retire in 2012 but now say they will have to work for years, but now are soon to be made redundant.  Where does a person of retirement age with a successful white collar job history get a job.  Impossible they say. Meanwhile, their super funds continue to get chewed up. I feel very sorry for them.  They were well off, nice, generous people, now they are bitter and angry and getting poorer and are looking at selling their house in a declining market and downsizing to a granny type flat and will have little money to live out their retirement years.    

To add to your  “Property or Shares” post,  I’ll give you a similar actual for “Cash or Property”.  I owned (no mortgage) a PPR property in a very good Brisbane West suburb bought in 2004 for $285,000 inc stamps.  I sold it in Jan 2010 just at the final ring of bell of the top end of the market for $1,100,000. For certain reasons, I also paid CGT of about $60,000 out of the proceeds leaving me with $1,040,000. At the time of sale, it was impossible to get a similar house in that street under $1,000.000, though those days were quickly coming to an end as the GFC MK-1 took hold and I took the risk to unload and rent.  I felt at the time those houses were way over valued. People would pay anything to live in that street.  I used to attend auctions as a spectator sport in that street and watch them go mad. They’d pay anything.  I told myself they were mad and decided to sell, the bell is about to ring.  Not by accident, I was right.

I’ve had that cash on deposit with the banks and have been getting between 7.75% and 6.05% distributed across several online savings accounts approximately averaging in rough figures $66,000 p.a. To date, approx $120,000 in interest, compounding,  with absolutely no risk, bank guaranteed, calculated daily, paid 1^st of the following month every month with cash funds available in just seconds.

Meanwhile, that house and all houses in that street have depreciated in value and are now selling for $680,000 to $775,000. Just recently, a house of almost identical age, design, appearance , condition, size and land size directly across the road from my old house sold for $750,000. I’m awfully glad I sold out. I’m now renting at an absolute riverside location, a 2brm unit for $24,000 per year.  I reckon I’m  $350,000 ahead in CASH than if I’d held on in the property market and still owned that property today."   

Mirvac Sells Hotel Division to Accor

Mirvac announced today that it is selling its hotel division to Accor.  In Brisbane, Mirvac owns the management rights for Quay West in Alice Street and Sebel Suites in Charlotte Street.  Mirvac also owns the management rights for Sebel Maroochydore and Sebel Noosa, Cairns Harbour Lights, the Sea Temples in Far North Queensland.  Mirvac is managing the Soul complex on the Gold Coast under the Sea Temple brand.

This sale received international attention, probably because Accor is a French company.

Many investors have purchased strata titled apartments in Mirvac managed buildings.  For the most part, the income is pooled, and investors receive income based on lot entitlements.  It will be interesting to see if Accor will be able to manage such complex arrangements, where each hotel has, in effect, many different owners.

A message to Mirvac staff from management said the following:

"The strategic review has today culminated in the Board of Mirvac Group approving an important transaction involving the sale of Mirvac Hotels & Resorts to Accor Asia Pacific (“Accor”) and the sale of Mirvac’s 49% interest in the Mirvac Wholesale Hotel Fund  (owner of six of our largest hotels) to Accor and Singapore based investor Ascendas.

This transaction is a transforming event for our company. It will create new opportunities for staff, our owners and our customers. There are also some critical elements to the transaction that I will explain below that should encourage staff to embrace the opportunity to be part of one the world’s largest hotel companies. I can imagine you have many questions and I will attempt to touch on what I think are some of the major items.

What does this mean for Mirvac Hotels associates?

Under the terms of the sale contract Accor is obliged to offer employment to all staff on their prevailing terms and conditions.

How will our business transition to Accor?

The transition of our business into Accor will be a gradual and considered process to ensure minimal disruption. This means key elements of our business such as CRS, web site, sales & marketing programs, national training, STARS Program will initially continue as per usual.

What is the timing for the completion of the transaction?

Completion is subject to a number of consents and regulatory approvals which means the sale will not be completed until the second quarter of 2012. Until completion, it will be business as usual. Post completion it is anticipated there will be interchange of staff between Accor and Mirvac Hotels & Resorts that hopefully will give everyone the opportunity to enhance their career path."

Apartment Rentals In Inner Brisbane

Top 10 most expensive inner-Brisbane suburbs for unit rentals: RP Data

Chinese Buyers

A website for Chinese buyers of real estate outside China is in the process of being launched.  It is called Juwai.  There are already a bunch of Australian listings.

"The site has more than 1 million property listings from over 80,000 agents and developers in the US, Australia, Canada, the United Kingdom and Japan.   Schwartz says there a “huge need” for such a site."  See Property Observer.

Property or Shares

I looked at my super account with BT tonight.  Invested all in Australian and international shares.  Over the past 11 months, I have added $24,000 to my super account.  However, despite this, the balance of my account is exactly the same as it was on 15 January 2011.  The losses on my super account are way worse than any losses on my property investments.

Maybe I should have followed the investment advice of the billionaire lawyer.

Distressed Sales

A recently Landmark White report states that about 31% of properties advertised for sale and coming onto the market recently are listings that are distressed sales.  Many of these would be Gold Coast apartments.  The report covers industrial and commercial properties as well as residential.

See full report here and this comment.

Photo above of one of the pools at The Oracle.

The Oracle Gold Coast

Oracle receivers have released a special new price list for local agents for Oracle apartments in Broadbeach.

Agents report that the new prices fit squarely into the current hi-rise market values of central Broadbeach at around $4200-4900sqm.

During the past week, it is reported that 12 Oracle properties changed hands on the new prices with around another dozen or so under offer.

Photos show an Ocean view from a one bedroom apartment in The Oracle.

Update from 15 December:  "During the past 24 hours, 6 out of the 59 receivers stock has sold and 18 are on hold."  [I suspect that the receiver has more than 59 apartments that are unsold, so this must be a trickled release.]

Rent Money is Dead Money - part 3

Another interesting comment from a reader regarding the prior post Rent Money is Dead Money:

I am a number of months into my apartment owning experience, and your colum on buy versus rent this weekend was very interesting. 

 

It has surprised me how relatively expensive apartment living is in comparison to houses.   Unencumbered by the facts, you would think that apartment living would be cheaper due to massive economies of scale:

 

·         Two pools supported by 400 units not one pool by one house

·         Four large garbage collections from four points rather than traversing a neighbourhood with 400 different pickups – council gets the benefit of this one – and nobody would use tip vouchers.

·         Maintenance of larger grounds, but offset by 400 units supporting, versus grounds per house

·         Economies of scale on hot water heating by using much larger units

·         Economies of scale on water requirements

·         Economies of scale on heating and cooling due to insulation from two sides, roof and floor not being open to environment.

 

Obviously the above benefits are eroded by the cost and maintenance of elevators, the onsite manager, profit margin for developer, security, etc.

 

For my apartment, annual fees for rates etc are not $5k per your note but $9k, comprising $6k body corporate and insurance, $2k rates, and $1k water.

 

The $6k for the body corporate was not particularly out of line for similar units when I was looking around.

 

The $2k for rates is just as a result of robbery by Brisbane City Council.  My home rates are only $1.4k.  Rates for my apartment should be only $1k but a 2.1 parity factor was put on by the Council when they went through that rate adjustment exercise.

 

Obviously at home in a house, I have no body corporate, but realistically I should consider the $45 I pay a fortnight for lawns mowed as equivalent, and I look after my own pool.

 

So I am paying $1.2k/yr for lawns mowed, if I got the pool looked after I am guessing that would be $40 per month or so.  Say that’s $2k per year.  Home insurance is probably $600 per annum, can't tell as it is bundled with contents.  There are other costs with the pool, all the chemicals, the pumps/chlorinators etc and some provision for outdoor maintenace , say another $1k per year.  So in fact that is $3.6k per year, maybe a bit higher than I thought it would be.  And there are probably other episodic costs that I haven’t been quite fair to my unit on.  I just had to spend $3k to get my home pool fence up to spec.  Maybe the comparison is not as bad as I first thought.  If I am honest there would be other expenses on my house that would be covered by Body Corp for equivalent unit.

 

But still, even with all this, it seems evident that the apartment is still more expensive than house and all those economies of scale are eroded.

 

Obviously the other cost savings that you really need to be taking with an apartment are as follows:

 

·         Dropping Gym memberships and using shared facilities at the common areas.

·         Dumping at least one car – that would give a pile of savings, that are only going to get higher.

 

I don’t see the power bill for my unit, but this is an area where I suspect apartments are losing out to houses.  I've had for over a year solar hot water and solar panels for elec gen on the roof.  These have paybacks of around 5 years or so based on current elec price and are only going to get shorter payback as power bills increase.  How are apartments getting onto the bandwagon of sustainability.  I am sure it is impossible to get a pile of owners to cough up more money to install solar hot water or solar panels.