The Perils of Leveraging Property Investment
Tuesday, September 11, 2012
Home Truths of the Leverage Game
An interesting article by Chris Joye in the Weekend AFR, worth reading:
The Perils of Leveraging Property Investment
The Perils of Leveraging Property Investment
Newman State Budget
- An increase in stamp duty: Increase in the transfer duty threshold from $980,000 to $1 million; rate to increase to a whopping 5.75 per cent.
- FHOCG: For first home owner buyers who buy a new or off-the-plan apartment or house in limited circumstances. Terry Ryder thinks it is a bad idea. Will it just add $15,000 to the price of new properties? It is just another payback to developers who supported Newman, including the apartment developer who is Newman's father-in-law. Why is the government trying to encourage young people to buy overpriced new apartments?
Monday, September 10, 2012
Agents to Vendors: Get Real
An article in the Weekend AFR: Agents tell vendors to get real.
"Because prices haven't improved, only about 20% of sales are actually achieving what the vendor wants. ... a lot of homeowners are still discounting to sell." Click on image below to get full size story.
"Because prices haven't improved, only about 20% of sales are actually achieving what the vendor wants. ... a lot of homeowners are still discounting to sell." Click on image below to get full size story.
Sunday, September 9, 2012
REIQ June Quarter Apartment Report
From an REIQ Press Release:
"The Real Estate Institute of Queensland (REIQ) June quarter median unit and townhouse price report has found healthy price increases across many parts of the State. The solid median price growth was despite decreased numbers of unit and townhouse sales – similar to the house market over the June quarter.
Over the June quarter, there was increasing numbers of first home buyers and investors in the market, compared to owner-occupier activity which was reduced, so this is partly behind this good price growth.
“As was the case with the house market, there was reduced unit and townhouse sales activity over the June quarter as many buyers waited for the return of the stamp duty concession on 1 July,” REIQ CEO Anton Kardash said “However, as first home buyers and investors were unaffected by the stamp duty change, these buyers were more prominent over the June quarter. Given the affordability of units and townhouses, as well as their often more central locations, first-time buyers and investors often compete for this type of property which may be partly responsible for the increases in median prices we experienced over the period.”
The preliminary number of unit and townhouse sales across Queensland decreased 15 per cent in the June quarter compared to the March quarter.
Brisbane recorded a median unit and townhouse price increase of 3.8 per cent to $402,500 over the June quarter. Over the period there was also an increase in the number of high-end unit sales in Brisbane city and city-fringe suburbs which augurs well for confidence levels amongst buyers."
The chart below is from REIQ. It says March, but it should be June Quarter I suspect. Click on chart to make larger.
"The Real Estate Institute of Queensland (REIQ) June quarter median unit and townhouse price report has found healthy price increases across many parts of the State. The solid median price growth was despite decreased numbers of unit and townhouse sales – similar to the house market over the June quarter.
Over the June quarter, there was increasing numbers of first home buyers and investors in the market, compared to owner-occupier activity which was reduced, so this is partly behind this good price growth.
“As was the case with the house market, there was reduced unit and townhouse sales activity over the June quarter as many buyers waited for the return of the stamp duty concession on 1 July,” REIQ CEO Anton Kardash said “However, as first home buyers and investors were unaffected by the stamp duty change, these buyers were more prominent over the June quarter. Given the affordability of units and townhouses, as well as their often more central locations, first-time buyers and investors often compete for this type of property which may be partly responsible for the increases in median prices we experienced over the period.”
The preliminary number of unit and townhouse sales across Queensland decreased 15 per cent in the June quarter compared to the March quarter.
Brisbane recorded a median unit and townhouse price increase of 3.8 per cent to $402,500 over the June quarter. Over the period there was also an increase in the number of high-end unit sales in Brisbane city and city-fringe suburbs which augurs well for confidence levels amongst buyers."
The chart below is from REIQ. It says March, but it should be June Quarter I suspect. Click on chart to make larger.
Thursday, September 6, 2012
Quay West Sales
There have been three recent sales of one bedroom apartments in Quay West, at 132 Alice Street, Brisbane. These are large one bedroom apartments, about 74 sqm including balcony, which is the size of many two bedroom apartments. These apartments have views of the Botanical Gardens.
The recent sales have been for $450,000 (two apartments) and $460,000. It is not clear if the apartments are being sold furnished or not. These are prices at 2009 levels. There was a dip back to the $420,000 mark in 2011, but now pricing has recovered.
By comparison, a number of 1 bedroom apartments in Admiralty Quays have recently sold for $580,000, and one at $595,000 in August 2011. (In September 2009, a one bedroom sold for $612,500, so not yet back at that peak.) Admiralty Quays is a high quality building with direct riverfront. These one bedrooms are about 76 sqm.
The recent sales have been for $450,000 (two apartments) and $460,000. It is not clear if the apartments are being sold furnished or not. These are prices at 2009 levels. There was a dip back to the $420,000 mark in 2011, but now pricing has recovered.
By comparison, a number of 1 bedroom apartments in Admiralty Quays have recently sold for $580,000, and one at $595,000 in August 2011. (In September 2009, a one bedroom sold for $612,500, so not yet back at that peak.) Admiralty Quays is a high quality building with direct riverfront. These one bedrooms are about 76 sqm.
Wednesday, September 5, 2012
Unrealistic List Prices and Lowball Offers
A nice article: "Lowball offers for property not uncommon in current soft market and hard for vendors to swallow". I am often surprised by the list price for an apartment. For example, I have seen some apartments recently where the list price is $100,000 more than the sales price of a similar apartment a few floors away that recently.
Extract:
"Many vendors (irrespective of the value of the home) can be fixated on achieving a particular price for one reason or another. Owners of premium properties are no different and can sometimes be stuck on an unrealistic price. Quite often when sales agents call to inform me of silent listings, the first thing I ask is how the price has been determined. Very often they openly admit that it has been hard to set the price and ultimately it has been dictated by the vendors. In these instances, it can take time to condition the vendors to accept a significantly lower price than they originally hoped for."
Monday, September 3, 2012
Capital growth flat in August after rising in June & July: RP Data
The above headline does not really apply to the Brisbane apartment market. Read on....
After recovering by one per cent in June and 0.6 per cent in July following the RBA’s back-to-back rate cuts, dwelling values across Australia’s combined capital cities were unchanged in August. At the end of August, dwelling values across Australia’s combined capital cities were down just -0.6 per cent in the first eight months of the year compared to a -2.2 per cent year-to-date loss in May. The year-on-year numbers have also shown a substantial improvement. Dwelling values were down -2.4 per cent at the end of August compared to -5.3 per cent in May.
“Improved affordability since June has helped dwelling values rise across every capital city over the three months ending August 2012, apart from Adelaide. The big question is, ‘can this growth be sustained?’ On the one hand, winter is seasonally slow, so these results have been encouraging. On the other hand, we know that there is likely to be an increase in new supply over Spring, which may introduce some headwinds for a recovering market. How the market plays out over the Spring season will be an important litmus test for its resilience,” Mr Lawless from RP Data said.
A spokesman from Rismark added, “Late last year we forecast that housing conditions in 2012 would deliver a material improvement over the -3.8 per cent loss suffered in 2011. Despite the fact that the RBA did not cut rates again until May, and we had the banks hike rates by about 25 basis points in the intervening period, the national market has clearly stabilised.”
The Brisbane apartment market showed some improvement over the past 3 months, but still not enough to recover from price deflation in late 2011 and early 2012.
Brisbane Apartments: Capital Growth to 31 August 2012
Month: Up 2.1%
Quarter: Up 2.1%
Year to Date: Down 1.9%
Year on Year: Down 2.3%
Median Price Based on Settled Sales over Quarter: $350,000.
Brisbane apartments are doing better year on year and in the last quarter than Brisbane houses.
Source: RP Data
After recovering by one per cent in June and 0.6 per cent in July following the RBA’s back-to-back rate cuts, dwelling values across Australia’s combined capital cities were unchanged in August. At the end of August, dwelling values across Australia’s combined capital cities were down just -0.6 per cent in the first eight months of the year compared to a -2.2 per cent year-to-date loss in May. The year-on-year numbers have also shown a substantial improvement. Dwelling values were down -2.4 per cent at the end of August compared to -5.3 per cent in May.
“Improved affordability since June has helped dwelling values rise across every capital city over the three months ending August 2012, apart from Adelaide. The big question is, ‘can this growth be sustained?’ On the one hand, winter is seasonally slow, so these results have been encouraging. On the other hand, we know that there is likely to be an increase in new supply over Spring, which may introduce some headwinds for a recovering market. How the market plays out over the Spring season will be an important litmus test for its resilience,” Mr Lawless from RP Data said.
A spokesman from Rismark added, “Late last year we forecast that housing conditions in 2012 would deliver a material improvement over the -3.8 per cent loss suffered in 2011. Despite the fact that the RBA did not cut rates again until May, and we had the banks hike rates by about 25 basis points in the intervening period, the national market has clearly stabilised.”
The Brisbane apartment market showed some improvement over the past 3 months, but still not enough to recover from price deflation in late 2011 and early 2012.
Brisbane Apartments: Capital Growth to 31 August 2012
Month: Up 2.1%
Quarter: Up 2.1%
Year to Date: Down 1.9%
Year on Year: Down 2.3%
Median Price Based on Settled Sales over Quarter: $350,000.
Brisbane apartments are doing better year on year and in the last quarter than Brisbane houses.
Source: RP Data
Gold Coast less than $300,000
From the HTW Month in Review for September 2012:
"In Surfers paradise there are plenty of options for purchasers with $300,000 to spend, including older style units starting in the low $100,000’s and 1- bedroom, 1- bathroom units in modern highrises ($250,000 to $320,000). An example is Unit 709 in Wings residential which is a 7th floor 1- bedroom plus study with 2- bathrooms in a circa 2004 building that sold on 28 June 2012 for $250,000.
Just south of our tourism mecca, a semi-modern unit in a three storey walk-up in 2-bedroom, 1-bathroom configuration in Mermaid Beach/Broadbeach falls under the $300,000 category. An example is Unit 43 in Diamond beach South in Mermaid Beach which sold on 2 March 2012 for $300,000 - a 1994 2-bedroom, 2-bathroom lowrise unit with a floor area of 105 square metres."
"In Surfers paradise there are plenty of options for purchasers with $300,000 to spend, including older style units starting in the low $100,000’s and 1- bedroom, 1- bathroom units in modern highrises ($250,000 to $320,000). An example is Unit 709 in Wings residential which is a 7th floor 1- bedroom plus study with 2- bathrooms in a circa 2004 building that sold on 28 June 2012 for $250,000.
Just south of our tourism mecca, a semi-modern unit in a three storey walk-up in 2-bedroom, 1-bathroom configuration in Mermaid Beach/Broadbeach falls under the $300,000 category. An example is Unit 43 in Diamond beach South in Mermaid Beach which sold on 2 March 2012 for $300,000 - a 1994 2-bedroom, 2-bathroom lowrise unit with a floor area of 105 square metres."
Sunday, September 2, 2012
Skyline Apartment Recent Sales
Some recent sales at Skyline Apartments, also known as Mint Short Term Apartments, at 30 Macrossan Street, Brisbane:
- Apt 393, 3 bedroom, sold in April 2012 for $800,000 (originally sold off the plan in 2004 for $840,000)
- Apt 154, 3 bedrooms, sold in April 2012 for $745,000 (originally sold off the plan in 2007 for $815,000)
- Apt 203, 2 bedrooms, sold in February 2012 for $530,000 (originally sold off the plan in 2008 for $615,000)
- Apt 123, 2 bedrooms, sold in February 2012 for $600,000 (prior sale was in 2007 for $630,000)
- Apt 251 sold in August 2012, price not yet reported
Does not look like values have held up very well in Skyline Apartments.
Saturday, September 1, 2012
Meriton's Soleil - original buyers under water
I have re-looked at Meriton's Soleil apartments, now that they have finished. If you like high apartments with great views, then the upper floors are for you. The two bedroom apartments on the higher floors are nice apartments.
Positive aspects:
Positive aspects:
- good floor plans
- reasonable size (87 sqm internal)
- includes blinds
- floor to ceiling tiles in bathroom
- bath and separate shower
- linen cupboard
- floor to ceiling windows with fantastic views
- good ceiling height
Negative aspects:
- building also used as short term stay "hotel"
- lobby includes hotel check-in desk
- only 3 elevators to upper floors
- no balcony
- indoor pool, shared with hotel guests
- no central air con -- head-end on apartment wall
Pricing at present for a two bedroom on higher floors is in the $615,000 to $650,000 range, with stamp duty rebated, plus other offers available.
Looking at settled sales, it appears that off-the-plan purchasers paid more for similar apartments than those currently for sale. But it is hard to tell, because the developer has rent guarantees, discounts, rebates and cheap vendor financing. Looking at the 01 floor plan on the higher levels (which is a good 2 bedroom floor plan):
Apt 5001 - sold in 2012 to interstate investor for $635,000
Apt 5101 - sold in 2012 to owner occupier for $650,000
Apt 5301 - listed for sale at $627,000
Apt 5401 - sold in 2012 to Brisbane resident for $599,000
Apt 5501 - sold in 2009 to Queensland investor for $790,000
Apt 5601 - sold in 2009 to Brisbane resident for $759,000
Apt 5701 - sold in 2012 to owner occupier for $670,000
Apt 5801 - sold in 2011 for $837,500
Apt 5901 - listed for sale at $631,000
Apt 6001 - listed for sale at $636,000
Apt 6101 - sold in 2009 to foreign investor for $829,000
Apt 6201 - sold in 2009 to foreign investor for $834,000
Apt 6301 - sold in 2009 to foreign investor for $843,000
Apt 6401 - list for sale for $651,000
Shows that there is a big risk buying off the plan, with some investors now $200,000 behind.
Inner City Apartments For Sale
Some apartments for sale in Brisbane City.
River Place, 82 Boundary Street (riverfront)
Apt 253, 1 bed plus study, 1 car park, level 28, 83 sqm, $495,000
With stamp duty - $510,750
$6,153 sqm
Rates $1,300 a year; body corporate $6,300 a year
Assume rent of $570 a week ($520 a week after agent's fees)
Net return per year - $19,440 per year before interest (3.8% return).
Apt 275, 1 bed plus study, 1 car park, 83 sqm, $505,000
With stamp duty - $521,100
$6,278 per sqm
Rates $2,200 a year; body corporate $5,950 a year
Assume rent of $570 a week ($520 a week after agent's fees)
Net return per year - $18,890 per year before interest (3.6% return).
Apt 185, 1 bed plus study, 1 car park, 81 sqm, $489,000
With stamp duty - $504,540
$6,229 per sqm
Rates $2,200 a year; body corporate $5,950 a year
Assume rent of $530 a week ($485 a week after agent's fees)
Net return per year - $17,070 per year before interest (3.4% return).
Apt 123, 2 bed 2 bath, 1 car park, 110 sqm, $689,000
With stamp duty - $713,030
$6,482 per sqm
Rates $2,447 a year; body corporate $6,600 a year
Assume rent of $660 a week ($610 a week after agent's fees)
Net return per year - $22,673 per year before interest (3.2% return).
Meriton's Soleil - new apartments (not riverfront)
Apt 5301, 2 bed 2 bath, 1 car park, 87 sqm, level 53, list price $627,000, but may discount to $615,000
Stamp duty refunded by developer
$7,068 per sqm
Rates $2,400 a year; body corporate $5,200 a year
Assume rent of $700 a week ($665 a week after agent's fees)
Net return per year - $26,980 per year before interest (4.3% return).
Assume that you can lock in an interest rate of 5.55% for 3 years (e.g., with BOQ), then you will be making a loss on all these investments after interest payments.
The above also assumes that these apartments will sell at the list price, which is an incorrect assumption, so the returns will be slightly better than stated above.
River Place, 82 Boundary Street (riverfront)
Apt 253, 1 bed plus study, 1 car park, level 28, 83 sqm, $495,000
With stamp duty - $510,750
$6,153 sqm
Rates $1,300 a year; body corporate $6,300 a year
Assume rent of $570 a week ($520 a week after agent's fees)
Net return per year - $19,440 per year before interest (3.8% return).
Apt 275, 1 bed plus study, 1 car park, 83 sqm, $505,000
With stamp duty - $521,100
$6,278 per sqm
Rates $2,200 a year; body corporate $5,950 a year
Assume rent of $570 a week ($520 a week after agent's fees)
Net return per year - $18,890 per year before interest (3.6% return).
Apt 185, 1 bed plus study, 1 car park, 81 sqm, $489,000
With stamp duty - $504,540
$6,229 per sqm
Rates $2,200 a year; body corporate $5,950 a year
Assume rent of $530 a week ($485 a week after agent's fees)
Net return per year - $17,070 per year before interest (3.4% return).
Apt 123, 2 bed 2 bath, 1 car park, 110 sqm, $689,000
With stamp duty - $713,030
$6,482 per sqm
Rates $2,447 a year; body corporate $6,600 a year
Assume rent of $660 a week ($610 a week after agent's fees)
Net return per year - $22,673 per year before interest (3.2% return).
Meriton's Soleil - new apartments (not riverfront)
Apt 5301, 2 bed 2 bath, 1 car park, 87 sqm, level 53, list price $627,000, but may discount to $615,000
Stamp duty refunded by developer
$7,068 per sqm
Rates $2,400 a year; body corporate $5,200 a year
Assume rent of $700 a week ($665 a week after agent's fees)
Net return per year - $26,980 per year before interest (4.3% return).
Assume that you can lock in an interest rate of 5.55% for 3 years (e.g., with BOQ), then you will be making a loss on all these investments after interest payments.
The above also assumes that these apartments will sell at the list price, which is an incorrect assumption, so the returns will be slightly better than stated above.
Friday, August 31, 2012
Devine Makes a Killing at Hamilton Harbour
"Devine reported the sales success at Hamilton Harbour as one of the highlights of its financial year as it reported an underlying profit after tax of $11.1 million but a statutory after tax loss of $12.9 million.
Devine says 90% of total apartments in the two Hamilton Harbour towers have now been settled. Construction of both towers is now complete with a third tower now under construction. There are 13 apartments available for purchase in tower one and 31 available in tower two.
Devine says the inner-Brisbane market, the focus of more than 40 apartment projects by a variety of developers, is now stable after a “prolonged period of weakness” with successive quarters of good volume sales.
The Hamilton Harbour precinct located between Racecourse Road and the Brisbane River in Hamilton is a joint venture between Devine and Leighton Properties with one-bedroom apartments starting at $425,000. Devine says price is continuing to drive the majority of sales with 70% of unconditional sales under $550,000.
Devine says 90% of total apartments in the two Hamilton Harbour towers have now been settled. Construction of both towers is now complete with a third tower now under construction. There are 13 apartments available for purchase in tower one and 31 available in tower two.
Devine says the inner-Brisbane market, the focus of more than 40 apartment projects by a variety of developers, is now stable after a “prolonged period of weakness” with successive quarters of good volume sales.
The Hamilton Harbour precinct located between Racecourse Road and the Brisbane River in Hamilton is a joint venture between Devine and Leighton Properties with one-bedroom apartments starting at $425,000. Devine says price is continuing to drive the majority of sales with 70% of unconditional sales under $550,000.
Devine expects Tower three settlements to commence prior to December 2012 and contribute to current year earnings with almost 70% of this tower contracted."
Extract from Property Observer article
Aria in South Brisbane
Aria has been in the news recently. Extracts from two stories below. I think that South Brisbane is a good location, but a number of Aria's apartment buildings are located in non-prime and C-tier locations within South Brisbane.
"THERE are pockets of prosperity to be found in southeast Queensland's property sector despite the recent lacklustre performance of the market. Nestled between two flanks of the winding Brisbane River, medium-rise residential and commercial properties are popping up among the easy-living environs of Southbank, the city's convention centre hub, the Gallery of Modern Art and Griffith University. South Brisbane, just across the Victoria Bridge from Brisbane's central business district, is benefiting from local and state government changes to push it out of its light industrial past and into a trendy and bustling future.
Aria Property Group has made the area a focal point of its activities, with sales of their medium-rise residential towers in the inner-city area almost completely sold out before the foundations are sunk. Aria Property head of development Chris Mitchell says apartment sales at the company's 65-apartment project, Station 16, have just settled, while construction was under way on two of the company's other residential developments.
"THERE are pockets of prosperity to be found in southeast Queensland's property sector despite the recent lacklustre performance of the market. Nestled between two flanks of the winding Brisbane River, medium-rise residential and commercial properties are popping up among the easy-living environs of Southbank, the city's convention centre hub, the Gallery of Modern Art and Griffith University. South Brisbane, just across the Victoria Bridge from Brisbane's central business district, is benefiting from local and state government changes to push it out of its light industrial past and into a trendy and bustling future.
Aria Property Group has made the area a focal point of its activities, with sales of their medium-rise residential towers in the inner-city area almost completely sold out before the foundations are sunk. Aria Property head of development Chris Mitchell says apartment sales at the company's 65-apartment project, Station 16, have just settled, while construction was under way on two of the company's other residential developments.
"South Brisbane is the focus of the business at the moment because of its location and rental premium over alternative inner-city locations," Mitchell says. "We did quite an extensive amount of research to make sure what we were trying to deliver would fit the market in terms of quality and price points. Certainly, the location was a big selling factor."
Aria Property Group has developed its inner-city niche in South Brisbane since arriving on the Queensland property scene almost a decade ago. The company has a $250 million investment portfolio that includes 63 commercial, retail and industrial sites and tenancies across southeast Queensland. Its future apartment pipeline could be up to 2500 apartments.
Formed in 2003 by developer Tim Forrester - the son of FKP co-founder and long-serving chief executive Rod Forrester - Aria has concentrated on delivering high-end investment product in the region."
Full story in The Australian
See also Brisbane Times:
"The CMC asked Brisbane City Council in June to investigate its role in letting Aria buy the eight square metres of footpath for the Edmonstone Street development.
A Brisbane City Council spokesman said yesterday the council's investigations were completed last month and no evidence of official misconduct by council officers or staff with the former state Department of Resource Management had been found.
Aria's managing director Tim Forrester said the developer had no "short term" plans to go ahead with the Edmonstone Street tower. "We're focused on these more boutique developments," he said. Mr Forrester would not be drawn on the developer's further plans for South Brisbane, but said there was a "chronic" under supply of housing in the suburb "There's such a demand for apartments and as a result we're seeing rents remain incredibly strong," he said. "There's an increasing number of office workers in South Brisbane and that's really pushing up demand on the southern side of the river."
Mr Forrester added young professionals were also showing a preference for boutique apartment buildings on the southern side of the river, over soaring towers in the CBD. He said he was hopeful the council would welcome the proposal for Grey Street, as it came in under the area's 20-storey height limit. Just two two-bedroom apartments remain for sale in the Artisan development, which is due to be completed in June next year. The remaining apartments are priced at $594,000 and $629,000. The complex features 66 apartments over 10 levels with 37 one-bedroom and 29 two-bedroom residences."
Full story in The Australian
See also Brisbane Times:
"The CMC asked Brisbane City Council in June to investigate its role in letting Aria buy the eight square metres of footpath for the Edmonstone Street development.
A Brisbane City Council spokesman said yesterday the council's investigations were completed last month and no evidence of official misconduct by council officers or staff with the former state Department of Resource Management had been found.
Aria's managing director Tim Forrester said the developer had no "short term" plans to go ahead with the Edmonstone Street tower. "We're focused on these more boutique developments," he said. Mr Forrester would not be drawn on the developer's further plans for South Brisbane, but said there was a "chronic" under supply of housing in the suburb "There's such a demand for apartments and as a result we're seeing rents remain incredibly strong," he said. "There's an increasing number of office workers in South Brisbane and that's really pushing up demand on the southern side of the river."
Mr Forrester added young professionals were also showing a preference for boutique apartment buildings on the southern side of the river, over soaring towers in the CBD. He said he was hopeful the council would welcome the proposal for Grey Street, as it came in under the area's 20-storey height limit. Just two two-bedroom apartments remain for sale in the Artisan development, which is due to be completed in June next year. The remaining apartments are priced at $594,000 and $629,000. The complex features 66 apartments over 10 levels with 37 one-bedroom and 29 two-bedroom residences."
Buy or Rent a Brisbane Apartment?
See RP Data's recent and popular "Buy or Rent" report. Details on RP Data blog. The report says that it is better to buy rather than rent an inner city Brisbane apartment. But this also means that landlords are doing well.
"Regional areas of Queensland have a much greater number of suburbs that are currently cheaper to buy than rent compared to Brisbane. Across the state the stronger performance of the regional markets is reflective of the fact that a majority of Queenslander’s live outside of Brisbane and in particular it highlights the strength of the mining and resources regions across the state.
At a Statistical Division level, the most populous region, Brisbane, shows the greatest number of suburbs that are cheaper to buy than rent across most scenarios. This is reflective of the weak capital growth conditions that have been evident across Brisbane and the fact that rents have continued to increase, whilst home values have not."
"Regional areas of Queensland have a much greater number of suburbs that are currently cheaper to buy than rent compared to Brisbane. Across the state the stronger performance of the regional markets is reflective of the fact that a majority of Queenslander’s live outside of Brisbane and in particular it highlights the strength of the mining and resources regions across the state.
At a Statistical Division level, the most populous region, Brisbane, shows the greatest number of suburbs that are cheaper to buy than rent across most scenarios. This is reflective of the weak capital growth conditions that have been evident across Brisbane and the fact that rents have continued to increase, whilst home values have not."
Wednesday, August 29, 2012
Project Marketing Techniques
Interesting article about how project marketing companies use online techniques and database collection strategies to gain sales in off-the-plan developments: How a development can secure sales
Tuesday, August 28, 2012
West End High Rise
The State Government has allowed 12 storey apartment buildings to be built in West End, against local community interests, and as a reward for loyal property developers.
"The Newman government has cleared the way for 12-storey buildings in the part of West End opposite Toowong by ticking off on changes to the local plan. Deputy Premier Jeff Seeney yesterday confirmed he had approved the reinstatement of parts of a Brisbane City Council plan that had been blocked by the former Bligh government." See Brisbane Times
"The Newman government has cleared the way for 12-storey buildings in the part of West End opposite Toowong by ticking off on changes to the local plan. Deputy Premier Jeff Seeney yesterday confirmed he had approved the reinstatement of parts of a Brisbane City Council plan that had been blocked by the former Bligh government." See Brisbane Times
Housing Market Slumpy?
There are many negative stories at present about the housing market. For example, "Gloom Returns to Housing Market" (but is Queensland the only bright spot?) and "no housing shortage".
Many pundits say employment growth drives property growth, and unemployment causes property prices to fall. If that is the case, then Brisbane is heading for a property slump, due to massive Queensland government lay-offs.
Talking to taxi drivers and shopkeepers in Brisbane, in a very unscientific survey, it seems that business is very bad, and when good, is patchy.
It will be interesting to see what happens in September.
Many pundits say employment growth drives property growth, and unemployment causes property prices to fall. If that is the case, then Brisbane is heading for a property slump, due to massive Queensland government lay-offs.
Talking to taxi drivers and shopkeepers in Brisbane, in a very unscientific survey, it seems that business is very bad, and when good, is patchy.
It will be interesting to see what happens in September.
Sunday, August 26, 2012
FKP's SL8 Monster
FKP developed a project in West End, called SL8, a few years ago. It is interesting to look at how it has performed. FKP advertised this as an architect designed building in a good location. In my opinion, the design was poor, and the location (even though in West End) is not great.
Here are the recent resales of apartments in SL8 (all two bedroom apartments), 8 Musgrave :
- Apt 146, sold off-the-plan for $545,000 in 2007; resold for $475,500 in May 2012
- Apt 123, sold off-the-plan for $585,000 in 2008; resold for $449,000 in November 2011
- Apt 174, sold off-the-plan for $725,000 in 2007; resold for $600,000 in November 2011
- Apt 144, sold off-the-plan for $765,000 in 2008; resold for $610,000 in October 2011
- Apt 214, sold by the developer for $520,000 in July 2010; resold for $440,000 in September 2011
Who said you can't loose buying property? Every purchaser who has resold in SL8 has lost money. And don't forget, the above does not take into account stamp duties and real estate agent fees. Most buyers lost more than $100,000 when reselling. If the buyers borrowed 80% of the purchase price, the buyers would have lost 100% or more of their equity.
Why such massive capital losses? The property market has clearly gone into negative territory. But a key factor here in my opinion is that the developer priced the apartments above the market value even in 2007, promoted the development heavily (including website keyword optimisation), and delivered a mediocre product. (Have a look at the comments regarding this FKP advertorial.) Take extreme care when buying off the plan!
Metro 21 Sales
A boutique apartment building in Brisbane City is Metro 21, located at 21 Mary Street. I generally like this building, because it is smaller than most inner city buildings. It is about 34 floors high, with a maximum of 4 apartments per floor. There is a pool and gym, and as well, a sky lounge BBQ area on level 26. Some of the 2 bedroom apartments have 2 ensuites, plus a 3rd guest bathroom, making it a good apartment to share. The two bedrooms are 84 sqm internal, plus a large balcony.
Recent sales:
Apt 3401, 2 bedrooms, 3 bathrooms, sold in May for $550,000
Apt 1701, 2 bedrooms, 3 baths, sold in March for $492,500
Apt 1003, 1 bedroom, no car, sold in February for $310,000.
Apt 1804, 2 bedrooms, sold in October 2011 for $525,000.
Buy Real Estate or Buy Apple Stock?
Money Watch: Invest in Apple or buy rental property?
http://usat.ly/PNBhKB
http://usat.ly/PNBhKB
Thursday, August 23, 2012
Rental Crash Coming?
I wonder if a rental crash is coming? From my review of listing portals, there is a build up of property for rent in Brisbane. Some landlords are reducing rents. I am not sure if this is seasonal, or part of a trend. There are less students renting in Brisbane at present, and less consultants doing government work.
If anyone has any evidence on this topic, please let me know.
The economy is not strong in Brisbane. Some government departments are doing forced redundancy programs, where 30% of employees and almost 100% of contractors are being let go. Small business is hurting, with costs increasing and revenue decreasing. My guess is that the actual inflation rate and unemployment rate is higher than being reported.
A reader sent me this via email:
"Enjoy reading your blog, just wondering if you have noticed the huge rise in listed apartments for rent in Brisbane. The price also seems to have fallen, seen 2b2b1c furnished in Bowen Hills/Kelvin Grove for $520. Casino Towers 2b2b1c for $480
Emporium has gone from 2 apartments available 2 weeks ago, to over a dozen. Not sure you keep stats on these things, but would be interesting if you could post them if you do."
If anyone has any evidence on this topic, please let me know.
The economy is not strong in Brisbane. Some government departments are doing forced redundancy programs, where 30% of employees and almost 100% of contractors are being let go. Small business is hurting, with costs increasing and revenue decreasing. My guess is that the actual inflation rate and unemployment rate is higher than being reported.
Wednesday, August 22, 2012
RP Data Quartley Report - Brisbane
Over the past 12 months, home values in Brisbane have fallen by
-2.8 percent for houses and units declined by a greater -5.0
percent, underperforming the ten year average annual growth
rates of 7.4 percent and 6.6 percent respectively.
Although the combined capital cities began to record some growth in values post GFC, property market was not able to recover to the same extent as other cities and has recorded limited growth in home values over the past five years.
Over the past decade, Brisbane’s housing market has recorded distinct cycles with annual capital gains recording a historic high in November 2003 and then consolidating over 2004 to 2006.
While Brisbane’s housing market showed some of the highest capital gains of any capital city prior to the GFC, overall Brisbane values have been underperforming post-2007.
Since the beginning of 2009, Brisbane’s property market has been underperforming compared to the combined capital cities.Brisbane has experienced a much stronger housing market performance over the last five and ten years than it has over the past year.
Vendors are currently discounting their initial asking prices at an average rate of -9.1 percent for houses and -8.9 percent for units. In June 2011, vendor discount rates were recorded at -9.7 percent for houses and -9.1 percent for units.
In June 2012, Brisbane houses and units were typically listed on the market for an average of 69 days and 81 days respectively. At the same time the previous year, both houses and units took an average of 73 days to sell, highlighting a slight improvement in conditions for house vendors.
Vendors who sold their dwellings over the past year had owned their houses for 9.2 years on average and units for 7.4 years.
Although the combined capital cities began to record some growth in values post GFC, property market was not able to recover to the same extent as other cities and has recorded limited growth in home values over the past five years.
Over the past decade, Brisbane’s housing market has recorded distinct cycles with annual capital gains recording a historic high in November 2003 and then consolidating over 2004 to 2006.
While Brisbane’s housing market showed some of the highest capital gains of any capital city prior to the GFC, overall Brisbane values have been underperforming post-2007.
Since the beginning of 2009, Brisbane’s property market has been underperforming compared to the combined capital cities.Brisbane has experienced a much stronger housing market performance over the last five and ten years than it has over the past year.
Vendors are currently discounting their initial asking prices at an average rate of -9.1 percent for houses and -8.9 percent for units. In June 2011, vendor discount rates were recorded at -9.7 percent for houses and -9.1 percent for units.
In June 2012, Brisbane houses and units were typically listed on the market for an average of 69 days and 81 days respectively. At the same time the previous year, both houses and units took an average of 73 days to sell, highlighting a slight improvement in conditions for house vendors.
Vendors who sold their dwellings over the past year had owned their houses for 9.2 years on average and units for 7.4 years.
Monday, August 20, 2012
Why Investors Favour Apartments
"Nationally, 58% of flats, units and apartments are owned by investors. That is quite an amazing statistic, especially when you compare that detached houses only 21% are investor-owned."
See Tim Lawless article.
See Tim Lawless article.
Sunday, August 19, 2012
Belise
A nice video fly-through for the planned Belise apartment complex at St Paul's Terrace in the Valley has been made available. See here. Also, more information here. Belise is 21 levels, and has a 228 apartments, a mixture of 1, 2 and 3 bedroom apartments. Two bedroom, two bathroom advertised from $550,000.
Few Optimistic Words From Real Estate Lobby Group
From an REIQ media statement, issued last night:
"Queensland home buyers retreated from the property market in the June quarter as they waited for the return of stamp duty concessions but house prices held their ground, according to the latest Real Estate Institute of Queensland (REIQ) data.The REIQ June quarter median house price report, released today, shows house prices remaining steady in the face of lower sales activity across the State. REIQ CEO Anton Kardash said there was a noticeable slow-down in activity from May to June."
REIQ is the lobby group for Queensland real estate agents, and they are reporting a slow-down and lower sales activity. That is, nothing is selling. (The median house price data released by REIQ, which is for houses (not apartments) is not that useful, if there are few sales. The price data reports only on what is selling today, and not whether values for any particular property have risen or fallen.)
"Queensland home buyers retreated from the property market in the June quarter as they waited for the return of stamp duty concessions but house prices held their ground, according to the latest Real Estate Institute of Queensland (REIQ) data.The REIQ June quarter median house price report, released today, shows house prices remaining steady in the face of lower sales activity across the State. REIQ CEO Anton Kardash said there was a noticeable slow-down in activity from May to June."
REIQ is the lobby group for Queensland real estate agents, and they are reporting a slow-down and lower sales activity. That is, nothing is selling. (The median house price data released by REIQ, which is for houses (not apartments) is not that useful, if there are few sales. The price data reports only on what is selling today, and not whether values for any particular property have risen or fallen.)
Saturday, August 18, 2012
Off-the-plan risks
An interesting article Off-the-plan properties are a risky acquisition. This article has some good information, but it is focused on the southern States. For a Queensland perspective, have a look at the Kindle Book (also available on Google Books) Buying An Apartment Off the Plan in Queensland.
Wednesday, August 15, 2012
Rive Breakfast Creek
I recently visited the display apartments at Rive, Breakfast Creek. (It is being advertised as Breakfast Creek, but it is really in Albion.) I must say that I was a little disappointed. The finishes inside are almost the same as the same developer did for Fresh Apartments in Toowong a number of years ago -- no improvement in finishes, and so Rive Apartments look so last decade.
The views I saw from the apartments were of flat metal roofs of neighbouring industrial areas, and busy roads. The common space felt to me like a second tier suburban office park. The surrounding neighbourhood is not fantastic by any means, unless you want to go to the Breakfast Creek Hotel or Albion Racetrack, which both neighbour this complex.
Prices have dropped (at least from the list price, which I suspect was always an opening gambit) -- a two bedroom has dropped from $610,000 to $570,000; and a three bedroom has dropped from $710,000 to $670,000. An 88 sqm internal two bedroom is listed for sale at $640,000.
The views I saw from the apartments were of flat metal roofs of neighbouring industrial areas, and busy roads. The common space felt to me like a second tier suburban office park. The surrounding neighbourhood is not fantastic by any means, unless you want to go to the Breakfast Creek Hotel or Albion Racetrack, which both neighbour this complex.
Prices have dropped (at least from the list price, which I suspect was always an opening gambit) -- a two bedroom has dropped from $610,000 to $570,000; and a three bedroom has dropped from $710,000 to $670,000. An 88 sqm internal two bedroom is listed for sale at $640,000.
Tuesday, August 14, 2012
Too Many Rentals Available?
"Investors returning to the property market - and, at times, frustrated vendors unable to sell - have pushed the number of properties advertised for rent to 7057, up from 5732 in July 2011, the latest figures from RP Data reveal. New rental listings are also up, with 3403 new listings compared with 2619 new listings for the same time last year."
See Courier Mail
Holiday Letting Agent Investigation
An interesting article in the AFR on 9 August (page 45) about StayMint (or Mint?) real estate letting agent, and how (it is alleged) they were renting out apartments on a short term basis, but not paying the owners for the rentals. It seems that the government is investigating. This is not a rare problem -- I have heard similar stories in the past about apartment buildings in Brisbane that are rented out on a short term basis, and holiday apartments on the Gold and Sunshine Coasts where the real estate agent or onsite agent pockets the money and tells the owner that the apartment is vacant. This same business manages Skyline in Brisbane.
See "Stay Mint Faces Complaint"
"The Queensland Office of Fair Trading is investigating holiday letting company StayMint, a wholly-owned subsidiary of listed property group Ariadne, following complaints from owners of a Gold Coast apartment block about financial irregularities. Fair Trading officers raided the StayMint office at a Broadbeach apartment complex, Carmel by the Sea, last Thursday and seized financial documents.... The owners said they had discovered people had stayed in their apartment but the stay was not recorded in the monthly statement to the owner, and the rent not paid."
See "Stay Mint Faces Complaint"
"The Queensland Office of Fair Trading is investigating holiday letting company StayMint, a wholly-owned subsidiary of listed property group Ariadne, following complaints from owners of a Gold Coast apartment block about financial irregularities. Fair Trading officers raided the StayMint office at a Broadbeach apartment complex, Carmel by the Sea, last Thursday and seized financial documents.... The owners said they had discovered people had stayed in their apartment but the stay was not recorded in the monthly statement to the owner, and the rent not paid."
Housing Risk
An interesting article by Chris Joye: Housing Risk: It's greater than you think.
"Using some complex statistical methods pioneered by US academics, we estimate that the annual volatility of an individual home with no debt is about 18 per cent. That is similar to the observed risk of the Aussie sharemarket.
But this assumes you have no debt. What happens when you leverage up? The most variable dotted line in the second chart displays the monthly returns yielded by an individual home with 80 per cent gearing. This has a spectacular impact on risk and return. The annual equity volatility of a single property jumps from 18 per cent to north of 38 per cent. On the other hand, returns are also higher.
The key to mitigating risk is diversification. This ideally means a portfolio comprising multiple assets situated in unrelated regions. Hard to achieve, I know. Without diversity, your best way to reduce risk is by using less debt."
See also: 10% lose money when they sell home -- circa 15% after costs
"Using some complex statistical methods pioneered by US academics, we estimate that the annual volatility of an individual home with no debt is about 18 per cent. That is similar to the observed risk of the Aussie sharemarket.
But this assumes you have no debt. What happens when you leverage up? The most variable dotted line in the second chart displays the monthly returns yielded by an individual home with 80 per cent gearing. This has a spectacular impact on risk and return. The annual equity volatility of a single property jumps from 18 per cent to north of 38 per cent. On the other hand, returns are also higher.
The key to mitigating risk is diversification. This ideally means a portfolio comprising multiple assets situated in unrelated regions. Hard to achieve, I know. Without diversity, your best way to reduce risk is by using less debt."
See also: 10% lose money when they sell home -- circa 15% after costs
Ray White's view
This from a Ray White agent's newsletter, about the Brisbane inner-city apartment market:
"Large amounts of buyers enquiring on our properties. I have not seen this level of enquiry since the peaks of 2007. We are expecting price movement in the second half of 2012, on the back of large amounts of property selling."
I guess times must be good. I have emailed a number of agents about apartments listed for sale in Brisbane, and many have not returned my emails. I have inspected a few, and asked to put in an offer, but no reply. I guess there are too many buyers out there, over-running the agents! Or maybe, too many agents have quit the business during the past lean years?
"Large amounts of buyers enquiring on our properties. I have not seen this level of enquiry since the peaks of 2007. We are expecting price movement in the second half of 2012, on the back of large amounts of property selling."
I guess times must be good. I have emailed a number of agents about apartments listed for sale in Brisbane, and many have not returned my emails. I have inspected a few, and asked to put in an offer, but no reply. I guess there are too many buyers out there, over-running the agents! Or maybe, too many agents have quit the business during the past lean years?
Sunday, August 12, 2012
The Plaza South Brisbane
David Devine’s Metro Property Development group has increased its commitment to the inner-Brisbane apartment market, with approval granted for an $80 million project in South Brisbane. The 12-level development, called The Plaza, has been designed by architects Deicke Richards and is due to be built at the corner of Russell and Manning streets on a 2,270-square-metre site and will feature 168 apartments.
Off-the-plan marketing of the project will begin later this month. It will offer a mix of one- and two-bedroom apartments, ranging in price from $330,000 to $575,000. The project will take the value of Metro’s approved apartment developments in Brisbane to more than $400 million.
Metro currently has 1,337 apartments under construction or approved for development in inner Brisbane and a further 950 apartments in the pipeline.
See Property Observer and Prior Post
Comment emailed to me by a reader, after this post was published:
"I came across your blog while searching for a project called The Plaza by developer Metro as you would probably know about. I was basically doing more research on the project as I may be interested in investing in it. Upon researching I found out that Aria would build one called the Vines directly in front of The Plaza which probably would have The Plaza looking to another building rather then the great city views it promises. Bascially from reading through your blog, you have given your opinion on Vines being too expensive...i agree btw."
Off-the-plan marketing of the project will begin later this month. It will offer a mix of one- and two-bedroom apartments, ranging in price from $330,000 to $575,000. The project will take the value of Metro’s approved apartment developments in Brisbane to more than $400 million.
Metro currently has 1,337 apartments under construction or approved for development in inner Brisbane and a further 950 apartments in the pipeline.
See Property Observer and Prior Post
Comment emailed to me by a reader, after this post was published:
"I came across your blog while searching for a project called The Plaza by developer Metro as you would probably know about. I was basically doing more research on the project as I may be interested in investing in it. Upon researching I found out that Aria would build one called the Vines directly in front of The Plaza which probably would have The Plaza looking to another building rather then the great city views it promises. Bascially from reading through your blog, you have given your opinion on Vines being too expensive...i agree btw."
Saturday, August 11, 2012
First Home Buyers Return
From an REIQ press release:
The low interest rate environment and more affordably-priced properties are continuing to attract
Queensland first home buyers into the property market, according to the Real Estate Institute of
Queensland (REIQ).
The latest Australian Bureau of Statistics data found that more than 1,650 properties were financed for Queensland first home buyers in June - an increase of 30 per cent on June last year.
And over the June quarter, according to the Office of State Revenue, more than 5,400 First Home Owner Grants were paid in Queensland compared to 4,000 over the same period in 2011.
The latest Australian Bureau of Statistics data found that more than 1,650 properties were financed for Queensland first home buyers in June - an increase of 30 per cent on June last year.
And over the June quarter, according to the Office of State Revenue, more than 5,400 First Home Owner Grants were paid in Queensland compared to 4,000 over the same period in 2011.
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