Saturday, March 12, 2016

Selling without an agent

A new service has just launched, to allow property owners to sell without an agent.  Some real estate agents are so hopeless, and don't return buyers calls, so there is some appeal here if you know what you are doing.  See www.noagent.com.au

Friday, March 11, 2016

Will Brisbane Prices Increase This Year?

CoreLogic recently reported:

"The trend in home value growth is showing signs of increasing in those markets that have previously underperformed. These include Brisbane, Adelaide, Hobart and Canberra. Affordability constraints as apparent in these cities and rental yields been compressed to the same extent as what they have in Melbourne or Sydney. Home values increased in Brisbane by 5.5% over the past year, which is the fastest annual rate of value growth in a year."

The above 5.5% included houses and apartments.  Below is the information just for apartments, which is not as good.  The question is whether Brisbane will have capital appreciation across the board, or whether it will be limited to certain suburbs, or to houses (not apartments), or to houses and older apartments in better locations.  There appears to be great oversupply of new smaller apartments, in locations such as Newstead and South Brisbane, so capital appreciation of this dwelling type seems doubtful.

Brisbane apartment prices (to 29 February 2016):
February 2016 - down 1%
Quarter - up 0.9%
Year to Date - up 1.5%
Year on Year - up 3%
Median price based on settled sales of Brisbane apartments over the quarter - $391,000 (which is less than reported for the quarter ending May 2015).

Wednesday, March 9, 2016

Property Prices Double Every 10 years?

I have been to seminars by property agents and promotors, where they say that property is a sure investment because property prices double every 7 to 10 years.  CoreLogic debunks that "rule".

"Melbourne is the only capital city housing market in which home values have doubled over the past decade.  In fact, many cities are a long way from having doubled with values in Brisbane, Adelaide, Perth, Hobart and Canberra having all increased by less than 50% over the past decade."

See CoreLogic Report

Monday, March 7, 2016

Off the plan risks

Two stories in the AFR today are worth reading, both on page 33.

The first is titled "Industry warns of settlements failure".  It has a chart that shows that the average number of completed apartments in Brisbane for the period 2007 to 2014 was less than 2,500 a year.  For 2016, it is predicted to be more than 5,000 in the year.  For 2017, it is closer to 10,000, or more than 3 times the past average.

"The settlement risk will occur in places where prices are slowing and the market's getting harder."

"Banks are not only cutting back their LVRs, they are also taking a more conservative approach to valuing completed apartments, and in the case of at least one retail bank, this meaning between 15 and 23 per cent below the purchase price."

So if you are buying off the plan, and have paid a 10% deposit, you may need to stump up 40% of the contract price, because the Banks may only lend in effect 50% of the purchase price.

The second article is titled "Lenders nervous about incentives to apartment buyers".  It states:

"A recent survey by WBP Property sowed nearly half of the off-the-plan sales in the eight months to last August were in negative equity, which means worth less than the purchase price."  And this does not take into account transaction costs, such as stamp duty.

Thursday, February 18, 2016

Apartment lawyer in trouble

Well known lawyer, Michael Teys, has been banned by ASIC from being a director.  Mr Teys often advises body corporate committees in relation to issues with onsite managers.  For example, he advised the committee of Admiralty Towers Two not to accept the assignment of the management rights from bank receivers to a professional manager due to the honesty and business skills of the proposed manager.  Very strange.  The pot calling the kettle black.


I suspect many committees have been unduly influenced by Mr Teys' almost religious like views of management rights. 

Monday, February 8, 2016

Brisbane Vacancy Rate Increases

According to the REIQ, the rental vacancy rate in the inner city of Brisbane is almost double that of the middle ring:

The REIQ Rental Report has revealed a higher vacancy rate in inner Brisbane as the supply of new apartments edges the 0-5km ring into weak territory for the December quarter.
The inner Brisbane vacancy rate reached 3.8%, up from 3.4% in the September quarter.
In contrast, the more affordable middle ring of 5-20kms tightened as the more affordable dwellings attracted residents, going from 2.4% to 2.1%.

Sunday, February 7, 2016

Brisbane Prediction

"Brisbane Avoid: High density apartments in the CBD, West End and Fortitude Valley. Recommend: Character houses in low density, established areas with good schools, transport and lots of renovation activity."

See Property Observer

Thursday, January 21, 2016

China limits cash moves offshore - danger for property settlements

A story in today's Australian Financial Review is titled "China limits cash moves offshore" and show the risks for developers in relation to off-the-plan sales contracts.  The Chinese buyer may not be able to get the cash out of China, and then may not be able to settle the contract on completion of the building.  And try suing the Chinese buyer.  Some buildings under construction in Brisbane have more than 80% offshore buyers, so I suspect that some developers may run into troubles next year.

China limits cash moves offshore
AFR, 21 Jan 2016, p1

Shanghai | Chinese banks are delaying and even blocking some foreign exchange transactions under a decision by the central government to limit capital leaving the country, a move that could hurt demand for foreign assets including Australian property.

At meetings on Monday and Tuesday afternoon senior bank executives were told by the government to toughen up their capital controls.

While they haven't introduced new rules, one executive told The Australian Financial Review banks were using existing measures to slow the amount of money going overseas. The crackdown has seen more stringent checks for both companies and individuals.

"We are now refusing all foreign currency transfers where the documents are not fully complete … previously the requirements were not so strict," said a bank executive in Shanghai who asked not to be named.

...

An Australian real estate agent based in Shanghai, Scott Kirchner, said the tougher capital controls could "cause problems for Australian developers as clients may not be able to get their money out of China".

"I'm advising people not to sign a contract unless they already have their money outside China," said Mr Kirchner, a director of BellerChina. "There is lots of uncertainty at the moment and that might affect sales."

In China, individuals are restricted to exchanging the equivalent of $US50,000 in foreign currency each year.

American lawyer Dan Harris said on his blog on January 14 that his firm's China office had received more "money problem" calls in one week than it had received for the whole of the past year.

"If there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars," said Mr Harris from Seattle-based firm Harris Moure.  He said it had affected real estate agents and companies waiting for Chinese investment money.

Previously, one option for those interested in buying overseas property was to use the currency quotas of friends and family.

Alternatively, underground channels in Macau or Hong Kong were available to get money out of the country. Both these methods are now under increased scrutiny as the government tries to stabilise the yuan.

"They haven't introduced any new capital controls but the implementation of existing measures has been strengthened," said another executive, who works at one of China's big state-owned banks.

David Olsson, a China Practice Consultant at law firm King & Wood Mallesons, said Chinese banks "have clearly got some direction to look more closely at outbound capital flows particularly around Shanghai and Shenzhen".

He said it was not expected to affect legitimate outbound investment and Australia would continue to be a big beneficiary of Chinese investment in agriculture, services-related sectors and tourism."

Wednesday, January 20, 2016

Failure to settle an off the plan contract was a costly decision

The Queensland Supreme Court recently decided a case involving an off the plan apartment contract in the Soul building at Surfers Paradise.

The case is Juniper Property Holdings No 15 P/L v Caltabiano (No 2) [2016] QSC 005 

Mr Caltabiano purchased the penthouse in Soul in July 2006 for $16.85 million, a lot of money for a 519 sqm apartment.  Mr Caltabiano failed to settle upon completion of the building in 2012.  So the developer forfeited the deposit, and sued Mr Caltabiano for damages.  The developer resold the penthouse in April 2015 for $7M.  So the claim for damages was $8.8M plus interest under the contract for failure to settle for over $3M.

Mr Caltabiano claimed that the sales agent was misleading -- it was claimed that at the request of Mr Caltabiano, the sales agent provided information in an oral discussion regarding supposedly comparable sales in Jade and Q1.  Mr Caltabiano never checked whether this information was correct.

The judge decided that the sales agent did not make the alleged misleading statements.  Even if they were made, they were not relied up by Mr Caltabiano.

  1. "The defendant submits that the fact that he did not obtain external advice as to the value of the Soul penthouse or the prudence of the purchase only serves to emphasise his reliance on the alleged representations. However, in my view, it is commercially illogical and inherently improbable that in deciding upon a $16.85 million purchase the defendant would not have obtained such advice because of reliance on the alleged representations made by the plaintiff’s sales consultant comprising comparisons with properties that the defendant did not know anything about. This is where the defendant’s story is incredible." 
See http://www.sclqld.org.au/caselaw/QSC/2016/005

This shows one of the many dangers of buying off the plan.  Values may go down substantially between contract and settlement, but you still have to settle.  And if you don't, then you are in big trouble.

Sunday, January 10, 2016

Response to Reader Comment regarding quality Brisbane apartments

A reader recently posted this comment, in relation to my post below:

"... you are certainly correct that there is a lot of stock under construction that will settle through the end of this year and next. However, with few exceptions most of this is small 1bd and 2bd "investor" stock targeted at the rental market. As you said, this is already leading to increases in vacancy rates and lower rents - at present, this is probably just a return to normal but it will probably over-correct and the rents/vacancy for small 1bd and 2bd stock will be worse than long term trend levels. That said, why do you see this impacting on quality owner occupier buildings such as admiralty, quay west?? The investor stock being constructed at present is vastly different to the owner occupier stock and I doubt there are many occupiers out there tossing up between admiralty and meriton's soleil. I feel the two markets will diverge and the the limited amount of quality owner occupier stock will lead to growth in this market. Do you not agree?"

This is my response.  The over-supply in Brisbane is having an impact on the rental market for the high quality, owner occupied buildings.  Note that many these buildings still have more than 40% of the apartments rented out, usually to long term tenants.  For example, in Admiralty Towers, large three bedroom apartments that rented for about $1,400 a week at the top of the rental market boom are now renting for less than $1,000 a week.  An excellent large one bedroom apartment with river views, fully furnished, has been vacant for months, at an asking rent of less than $600 a week.  This apartment would have rented quickly at about $640 a week two years ago.  For some reason, some tenants prefer smaller apartments in newer buildings.

The rental market in quality buildings is being impacted by a number of factors, and not just new apartments being completed.  These factors include:
  • the end of the mining boom, so less executive rentals
  • a rental boom, that probably caused rents to increase too much
  • short term rental apartments not achieving good returns, and so these are re-entering the long term rental market
  • lower population growth
  • no income growth
  • younger people having different views as to what is a trendy apartment
  • more choice in more inner city locations
Prices seem to be holding up at present, partly because interest rates are so low.  I recently locked in an investor loan fixed for 3 years at 4.09%.  Even at a reduced rent, this property is cash flow positive today.  So why sell?

I agree that owner-occupiers still have little choice for quality apartments in Brisbane.  If you are looking for a large two or three bedroom apartment in a quality building in a good location, there is still not much choice.  Very few of the new buildings would be suitable if you are looking for a long term residence.

Monday, January 4, 2016

Brisbane apartment market looking grim

According to the CoreLogic RP Data Home Value Index, dwelling values were absolutely flat across the combined capitals during December, with negative movements in Sydney, Adelaide and Canberra being offset by a rise in dwelling values across the remaining five capital cities. The Sydney housing market was the main drag on the December results, with dwelling values down 1.2%, while values were down 1.5% in Adelaide and 1.1% in Canberra, and down 0.5% for Brisbane apartments.

See full report here.

Brisbane apartment prices (to 31 December 2015):
December 2015 - down 0.5%
Quarter - no change
Year on Year - up 1.8%
Median price based on settled sales of Brisbane apartments over the quarter - $390,000

This is not a good result for the Brisbane apartment market for 2015.

The long term view for the Brisbane apartment market looks very uncertain.

There are a huge number of apartments being constructed.  There are also a number of new hotels opening, which impacts the short term rental markets (for example,  negatively impacting rents in apartment buildings such as Charlotte Towers, Aurora, Felix, Casino Towers and Festival Towers).  At present, from my informal survey, rents are decreasing in Brisbane and vacancy periods are significantly increasing.  This will only get worse.  I am not the only one say this.  See AFR article.

It is likely that valuations for new apartments sold off the plan in Brisbane will come in lower than the contract price, which may impact whether non-cash buyers will be able to settle.

My prediction for 2016 is that we may see values fall in 2nd tier buildings and remain flat in prestige buildings.  Rents will likely continue to decrease.  It looks grim.  What happened to the Gold Coast about 5 years ago (remember, Soul, Hilton and Oracle) may happen in Brisbane this year or next.

Saturday, September 19, 2015

Ray White Agent's View of Brisbane apartment market

From an email from a Brisbane Ray White agent:

"The concerns for property owners for the next 12-18 months is that with around 23,000 new apartments under construction around the CBD & fringe, is that it will have a volcano effect and force property prices and rent down due to the over supply. 

We are seeing this happen at the moment in Surfers Paradise with 9/10 owners are losing money on their property. Sydney and Melbourne have already seen this happen. We are recommending it's crucial to have a think what your property plans are for the next few years. 

If you are having any thoughts of selling, don't hesitate to get in touch before it's too late. This new stock coming to the Brisbane market is not far away. 

Good news is! The market is strong at the moment."

Thursday, September 17, 2015

Buying Activity and Capital Gains Not Strong

But not everyone is as optimistic about Queensland’s prospects.
Property analyst Louis Christopher of SQM Research said the state’s comparatively sluggish economy meant “buying activity hasn’t been strong”.
“If Brisbane is so good, why aren’t we seeing capital gains now?” he challenged.
“Yes, we are bullishly positive on the southeast Queensland market, and it’s a lot more affordable than Sydney — but there are reasons for that,” Mr Christopher said.
He said that the Queensland economy was still suffering from the austerity of the former Liberal Government, along with the mining downturn.  But there were hopes the new Labor Government would “open up its purse strings” and kickstart a recovery.
“There’s still a lot of stock about, and the economy is still quite patchy,” Mr Christopher said.
“Nevertheless, we are a little bit more positive on the market. We do agree it’s more affordable, on a rental basis and on an absolute price-to-wages basis.”
He said the Gold Coast was likely to see capital gains of between seven and 11 per cent over the next 12 months, but that Brisbane would be more restrained.
Source:  News.com.au

Friday, August 7, 2015

Brisbane Apartments and Units perform poorly

CoreLogic (RP Data) has released its recent monthly housing report.

"According to Mr Lawless, the strongest growth conditions outside of Sydney and Melbourne have been in Brisbane where dwelling values were 3.9 per cent higher over the year. Sydney and Melbourne values continue to boom, the next best performing city, Brisbane, has seen dwelling values rise by just 3.9 per cent over the past twelve months. Based on the median dwelling price, Sydney prices are now 72 per cent higher than Brisbane’s and Melbourne’s are 24 per cent higher,” he said."

However, apartments in Brisbane performed very poorly when compared with houses.  In fact, apartment values have declined in Brisbane.

Brisbane apartment prices (to 31 July 2015):
July 2015 - down 1.9%
Quarter - down 2.3%
Year to Date - down 0.8%
Year on Year - down 2.5%
Median price based on settled sales of Brisbane apartments over the quarter - $380,000


Sunday, August 2, 2015

Recent Brisbane City Apartment Sales

Some example recent sales in Brisbane city apartment buildings.  Some buildings are tightly held and have few sales.

Quay West - 132 Alice Street
  • Apt 88, 1 bed, 1 bath, 1 car, park views - $512,000 in June 2015
  • Apt 50, 2 bed, 2 bath, 1 car - $705,000 in February 2015
Admiralty Towers 1 - 35 Howard Street
  • Apt 119, 3 bed, 2 bath, 2 cars, river front - $1,240,000 in February 2015
Admiralty Towers 2 - 501 Queen Street
  • Apt 78, 3 bed, 2 bath, 2 cars, river front - $1,100,000 in March 2015
Charlotte Towers - 128 Charlotte Street
  • Apt 3701, 1 bed, 1 bath - $368,000 in July 2015
  • Apt 2504, 1 bed, 1 bath, 1 car - $436,000 in July 2015
  • Apt 1702, 2 bed, 2 bath, 1 car - $545,000 in Juune 2015
Casino Towers - 151 George Street
  • Apt 2101, 2 bed, 2 bath, 1 car - $872,000 in July 2015
  • Apt 1506, 1 bed, 1 bath, 1 car - $334,000 in July 2015
  • Apt 2104, 1 bed, 1 bath - $384,750 in June 2015
  • Apt 1307, 2 bed, 2 bath, 1 car - $480,000 in June 2015
Riverplace - 82 Boundary Street
  • Apt 288 - 2 bed, 2 bath, 1 car - $740,000 in July 2015
  • Apt 38 - 2 bed, 2 bath, 1 car - $677,500 in June 2015
Soleil - 501 Adelaide Street
  • Apt 5501, 2 bed, 2 bath, 1 car - $695,000 in July 2015

Lost Views for some apartments in Brisbane

You have to be careful these days when buying an apartment, because with all the development in Brisbane, your view may disappear or change.

Here is an example of an apartment in Sebel Suites (95 Charlotte St) on the 30th floor, where the aspect was impacted by a building nearby.  There are many other apartments in Brisbane that have recently been impacted or may soon be impacted by pending construction.


Saturday, August 1, 2015

Prediction that Brisbane Rents will not fall

"Brisbane's booming inner-city apartment construction market has led many to speculate a fall in rental prices could ensue in late 2015 as the market is flooded.  However, Dr Wilson said that in Melbourne, where there have been record levels of inner-city apartment developments, rents have continued to increase, which could bode well for Brisbane investors, though not so much for renters."

Monday, June 1, 2015

Capital city dwelling values rise 9% over past 12 months but capital losses in May

From RP Data:

Today's results revealed the pace of home value growth stalled in May with dwelling values down 0.9% over the month.  After an increase in dwelling values of 3.8 per cent over the first four months of the year, the May CoreLogic RP Data Home Value Index results out today recorded a drop of 0.9 per cent for the month across the combined capitals index; the first month-on-month fall since November last year.

Mr Lawless said, "Over the past three years, dwelling values have risen more than three times as fast as rents. Dwelling values are 24.2 per cent higher across the combined capitals over the past three years while weekly rents have risen by only 7.2 per cent. The net result is that gross rental yields have been compressed from 4.3 per cent back in 2012 to the current average gross yield of 3.7 per cent across the combined capital city index," he said.


Brisbane apartment prices (to 31 May 2015):
May 2015 - up 0.1%
Quarter - up 1.4%
Year to Date - up 1.7%
Year on Year - up 2%
Median price based on settled sales of Brisbane apartments over the quarter - $393,500


Sunday, May 31, 2015

Leave Your Money in the Bank

"The latest research shows that only 10% of sales in the Brisbane inner-city unit market are to owner-occupiers. Investors are buying 90% of the stock and the great majority of them are distant investors – people from interstate and overseas. Many will wish they had left their money in the bank.
Vacancies in Brisbane’s inner-city suburbs range from 4% or 6.5% - and that’s before all the new supply now under construction hits the rental market. BIS Shrapnel research shows that a record number of new apartments will be completed this year, but more will be finished next year and even more the year after. These numbers are a red flag for sensible buyers.
Brisbane, like Melbourne and the Gold Coast, is building far too many apartments because they’re not being created for local consumption – they’re being conceived for sale to unsuspecting foreign buyers."

Sunday, April 5, 2015

Supply Greater than Demand in Brisbane

4BC Real Estate Guru Keven Turner has downplayed any risk of undersupply in the Brisbane apartment market despite recent reports of an upcoming boom in demand.
Speaking to Mark Braybook on 4BC Mornings, Mr Turner said that the supply of new units far outweighs recent increases in demand.
"If you look at the number of approvals sort of going forward, we've only got something like 2000 or 1500 to 2000 units in the pipeline which is not even going to meet demand."
Mr Turner said Melbourne is at a far greater risk of oversupply with over 20 000 new units being planned or developed.
However Mr Turner has warned potential buyers in Brisbane to be prepared to hold onto properties well into the long term if they are seeking to make a profit.  
"Developers actually have a huge amount of control over new stock, new development stock, so they pretty much do actually control that market.  If you find that you're buying a unit you're probably gonna have to hold onto it for anything up to five to 10 years to get something value back out of it." 
Source 4BC Radio

Saturday, April 4, 2015

Property is a very long term investment

"Across resales of homes throughout the December 2014 quarter, those homes that were held for only a short period of time proved to be much more susceptible to loss. Although home values increased over the 2014 calendar year, 13.1% of owners who purchased and resold in the same year recorded a gross loss (resales in less than a year accounted for just 1.6% of all resales over the year). Homes resold after being held for between 3 and 5 years were the most likely to record a gross loss (17.1%) followed by those held between 5 and 7 years (15.3%). The data also reiterates the long-term nature of housing investment as well as relatively weaker growth in values over the past decade. Of those homes resold between 10 and 15 years from the previous purchase only 48.4% sold for double their original purchase price with the proportion rising to 95.0% for homes sold after 15 years of ownership."

Source: RP Data Pain Gain Report


 More than 10% of resellers in Brisbane suffered capital losses:


Friday, April 3, 2015

Sydney Strong, Brisbane About to Boom?

"Since mid-2013, the average gross rental yield across Australia’s combined capital cities has reduced from 4.3 per cent down to 3.6 per cent. Gross rental yields are now approaching record lows in both Melbourne and Sydney at 3.3 per cent and 3.6 per cent respectively.
Mr Lawless said the latest housing market data is likely to present a further challenge for the Reserve Bank when they deliberate interest rate settings next week. 
"Despite the headwinds of softer labour markets, very low rental yields, increased oversight on lending conditions and heightened economic uncertainty, historically low mortgage rates appear to be adding further stimulus to the housing market, albeit that stimulus is largely being felt in Sydney."
With Sydney now overpriced, Brisbane looks more promising.
Brisbane apartment prices (to 31 March 2015):
March 2015 - up 1.8%
Quarter - up 2.1%
Year to Date - up 2.1%
Year on Year - up 3%
Median price based on settled sales of Brisbane apartments over the quarter - $380,000


Thursday, April 2, 2015

Start Sounding the Alarm!

Australia will run into a glut of apartments in just two years led by Melbourne and Brisbane - but other cities are also building more than they need, says BIS Shrapnel.

The forecaster, which started warning about an apartment overhang in Melbourne a year ago, is now also ramping up warnings about Brisbane and Adelaide. 

Brisbane's voracious appetite for apartment construction has resulted in a stock surplus that dates back at least to 2006, but that glut is about to triple from 5000 from last financial year to 15,000 by next year, BIS Shrapnel says.
See AFR

Wednesday, April 1, 2015

No oversupply in Inner Brisbane for Apartments?

"Brisbane's inner-city apartment market is a long way from being oversupplied, according to leading real estate adviser Urbis.
Issuing its detailed inner-city report on Wednesday, the group reported that a record 1500 sales had been made in the December quarter from 111 apartment projects. The September quarter recorded 1400 and such numbers have not been seen since 2007.
Urbis economic and market research director Mal Aikman said future supply was "not an issue" and that investors from Sydney and Melbourne were seeing value in Brisbane.
"Looking forward what we find is that in the first and second quarters of 2015 there are about 5000 apartments available for sale," Mr Aikman said.  "At the current rate of demand, that would equate to a sales rate of about 4000 apartments. So demand is slightly behind, but not significantly, and we're a long way from saying there's an oversupply or a glut."
Urbis noted that the Brisbane central business district had a huge surge in sales almost entirely driven by AMP Capital and Billbergia's Skytower, which saw 415 sales worth $267 million."
In my opinion, Urbis is overly optimistic.  There may be buyers for off the plan apartments, but will there be enough renters?  I suspect that most buyers in Brisbane Skytower are from China.

The Brisbane Times provides this gloss:

He admitted prices for new apartments were highly unlikely to rise in the coming year due to the increased supply and stopped short of guaranteeing they would fall.  However, he indicated tumbling price tags to live in the inner-city were probable.  "Our view is prices aren't likely to rise but whether they will fall really depends on the developers," he said.

Monday, March 30, 2015

Sunday, March 22, 2015

Arbour on Grey - recent sales

It is hard to find out recent sales prices for a number of South Bank apartments in Brisbane.  This is because the land is leased on a 999 year lease.

Arbour on Grey is one of the better apartment buildings in Brisbane - developed by Mirvac about 12 years ago..  Some apartments on levels 3 and 4 have river views.  It is hard to compare apartments in this complex, because the floor plans and aspects are often very different.  There are two buildings - the north building and the south building, which are low arise, with about 6 entries in total.

Grey St is named after Earl Grey, who once had a tea storage facility on the street.

Some recent sales from Arbour on Grey (all two bed, two bath, 1 car park):
  • Apt 1110, 172 Grey St - level 1, north building - $660,000  (This apartment is a very large apartment looking over Grey St -- 96 sqm internal, with a 50 sqm balcony.  See www.1110arbour.com)
  • Apt 1307, 172 Grey St - level 3, north building - $735,000 (109 sqm overlook South Bank Parklands and Little Stanley Street, with river views)
  • Apt 2202, 186 Grey St - level 2, south building - $662,500 (100 sqm overlook South Bank Parklands and Little Stanley Street)
  • Apt 2218, 180 Grey St - level 2, south building - $655,000
  • Apt 2312, 182 Grey St - level 3, south building - $735,000
There is a three bedroom apartment with a good floor plan currently for sale for $1M plus.

Before buying elsewhere in South Brisbane, it is worth comparing what you get in Arbour on Grey.

Sunday, March 15, 2015

Brisbane the laggard, says Macquarie

"Brisbane is still very much the laggard for this cycle given the sluggish domestic economy, with periodic price falls still common particularly for the Brisbane unit market," Macquarie's latest report noted.
It was in part because Queensland continued to show population growth moderation as the recent mining boom subsided.
The lagging occurs even as prices emerge back into recovery and should exhibit strong price growth into 2015, it noted.
In my view, another big reason for zero growth in Brisbane is income growth has been negligible, and other costs (especially food and entertainment) have increased faster than salaries.  As a result, rents in Brisbane have basically been flat for two to three years.

Thursday, March 12, 2015

Brisbane Apartment Glut, then Crash

Queensland University of Technology property economist, Professor Chris Eves, has warned a glut in apartments in Brisbane's CBD, South Brisbane and West End would cause a price crash for apartments in 2016.
"I know of one construction company [Hutchinson] that currently has contracts out for 3000 units in those locations and basically when you are looking at those sorts of numbers, you are looking at a serious oversupply, he said.
Professor Eves said research showed there had been a 9% increase in the number of approvals for apartments in inner-city Brisbane in the past year.
"But we are not seeing the same sort of increase in the population," he said.
The crash will hurt major developers, off-the-plan buyers and some banks, but deliver a bonanza for renters and buyers.
"If we see those approval numbers continue, we are looking at the potential of another Gold Coast/Sunshine Coast glut in the unit market."  
He said the glut in Brisbane CBD, South Brisbane and West End apartments would peak in 2016, causing prices to drop sharply.

Sunday, March 8, 2015

Advice from Warren Buffett

Forget what you know about buying fair apartments at wonderful prices; instead, buy wonderful apartments at fair prices. 

Saturday, March 7, 2015

Developments in Brisbane

A good website to look for future developments in Brisbane is the Brisbane Development website.  It demonstrates that there are many large apartment buildings in the pipeline for Brisbane.  Some examples:
  • CavCorp's proposal for 366 apartments at Newstead Gasworks.
  • Walker Corporation has plans for 433 apartments on Ann Street in the Valley.
  • Aria plans for 84 apartments in Vulture Street in the South Brisbane
  • Plans for 353 apartments on Brunswick Street in the Valley
Before buying, it is worth looking to see if your views will be blocked by any proposed new development.  And keep in mind that there is likely to be an oversupply of new apartments in Brisbane in the next 2 years.  Maybe wait until these buildings all settle, and you may then get a better price.

The Brisbane Development website has a good interactive map showing developments.


Troubles within Body Corporates

When buying an apartment, it is important to understand whether the body corporate committee is professional and sensible, and whether the building owners are cohesive.

An example of a building with major troubles in this area is Admiralty Towers Two at 151 Queen St. This is a prestigious riverfront building, with large apartments and great facilities, is in a really super location.  However, onsite management company went bankrupt a few years ago, and the receivers are trying to sell the management rights (that is, the contract for the caretaker for the building and onsite rental office).   The current body corporate is opposed to management rights as a concept -- some sort of religious like zeal.  The management rights were sold, and at an AGM the owners narrowly approved the sale to the new caretaker, but the committee is trying to block the sale.  The committee is spending owners money to engage a lawyer from Sydney to fly to Brisbane on this issue -- a lawyer who has publicly stated he is against management rights.  Fights and more fights.  Lawyers everywhere.   Uncertainty over who will be the caretaker.  This has and will impact the value of apartments in this building.

Another building where a fight is brewing is Quay West, where the management rights contract will come to an end in a few years.  Some committee members in this building are also opposed to management rights.  The committee is doing illogical things, just to make the onsite manager's life as difficult as possible.  One example:  the onsite manager offered to buy a new smoke detection system for the building at the manager's own cost to bring the building up to standard, but the committee rallied owners to vote against this.  Does this make commercial sense?

And in Admiralty Towers One, one owner keeps bring legal action against the body corporate and has been regularly unsuccessful.  See this decision and this decision and this decision for example.  This one owner is causing all the other owners to waste money on lawyers, rather than improving the quality of the building.

Another example is The Phoenician at Broadbeach.  The committee at this building has been hostile to a succession of onsite managers for years.  One example -- the committee got into a trade mark litigation with the onsite manager, and lost, having to pay the legal costs of the onsite manager!  What a waste of owners' money.

One common threat running through all this is the Unit Owners Association of Queensland.  Buildings listed above that have had internal disputes often have committee members from UOAQ living in the building or on the body corporate.  It is not uncommon for committee members in such circumstances to push the views of the UOAQ with religious like zeal, often to the financial detriment of residents and lot owners.

(Click on letter below to make bigger)




Recent Sales - Admiralty Towers One and Two

Recent sales in Admiralty Towers One (35 Howard Street)
  • Apt 145, 2 bed, 2 bath, river views from side (not direct riverfront) 105 sqm - $600,000 in January 2015
  • Apt 101, 2 bed, 2 bath, no river views - 104 sqm - $577,000 in January 2015
  • Apt 146, level 24, 2 bed, 2 bath, no river views (same floor plan as Apt 101) - 104 sqm - $575,000 in September 2014
  • Apt 54, level 8, 1 bed, 1 bath, 1 car - no river views - 74 sqm - $426,300 in September 2014
  • Apt 44, level 6, 2 bed, 2 bath, 1 car - full river views - 132 sqm - $810,000 in June 2014
Recent sales in Admiralty Towers Two (501 Queen Street)
  • Apt 72, 3 bed, 2 bath, 2 car - full view views - 151 sqm - $1,050,000 in October 2014
  • Aprt 133, 3 bed, 2 bath, 2 car - full view views - 175 sqm - $1,250,000 in October 2014
  • Apt 95, 3 bed, 2 bath, 2 car - full view views - 151 sqm - $1,048,000 in August 2014

Austin Apartment Sale

Aria developed a property at 77 Grey Street, South Brisbane, overlooking the Queensland Museum, called Austin.

Apartment 1807 is currently listed for sale at just less than $700,000.  The apartment has a nice view of the roof of the museum (which is not so attractive) as well as the river and city skyline.  This part of Grey Street is busy, often with traffic jams.  The location is a very short walk to downtown Brisbane.

The apartment has two bedrooms, two bathrooms, and is 80 sqm internal, with a small 9 sqm balcony.    So this works out to be over $7,850 a sqm.  To me, that is very expensive.

If you are considering buying an apartment off-the-plan, it is worth looking at this apartment to see what an 80 sqm apartment is like.  For example, look at the photo below -- there is no place to put a TV, unless you put the TV or the couch in front of a window, and the coffee table has been pushed up against the couch to make the room seem bigger.  The kitchen is not really a room, but a row of floor tiles.  The bedrooms are tiny, at 3m by 3.1m; or 3.05m by 3.3m.  Typically, you would not want a bedroom less than 3m x 4m.

Keep in mind that two bedroom apartments with good views can be as large as 130 sqm, so remember to compare apples with apples when looking at apartments.  That is why price per square metre is a good comparison measure.





Friday, March 6, 2015

Rental Yields Decreasing as Prices Increase

From RP Data CoreLogic:

"CoreLogic RP Data February Home Value Index results released today showed that Australia’s combined capital cities have seen dwelling values rise by a further 0.3 per cent in February taking home values 8.3 per cent higher over the past twelve months.
According to CoreLogic RP Data head of research Tim Lawless, dwelling values continued their upwards trajectory over the month of February by recording a 0.3 per cent gain over the month. This now takes combined capital city dwelling values 2.5 per cent higher over the rolling quarter and 8.3 per cent higher over the twelve months to the end of February.
Over the past twelve months the CoreLogic RP Data Index shows dwelling values across the eight capital city aggregate index are up 8.3 per cent. Sydney is once again the clear standout with dwelling values 13.7 per cent higher while Melbourne values are 7.4 per cent higher. Australia’s third largest city, Brisbane, recorded the third highest rate of annual capital gain with dwelling values up 5.9 per cent. In contrast, dwelling values have increased by less than four per cent in every other capital city over the year.
Evidence of compressed rental yields is continuing across each of the capital city markets. A year ago the gross rental yield for a capital city dwelling was averaging 4.3 per cent; by the end of February the typical gross yield has been eroded down to just 3.7 per cent - due largely to the consistent high rate of dwelling value growth relative to rental growth."

Brisbane apartment prices (to 28 February 2015):
February 2015 - up 0.5%
Quarter - down 2.3%
Year to Date - up 0.3%
Year on Year - up 0.5%
Median price based on settled sales of Brisbane apartments over the quarter - $385,000

So, Brisbane apartment prices over the past year have barely increased, and increased much less than detached houses in Brisbane.  Brisbane is still under performing compared with Sydney and Melbourne.  And if you purchased at the peak of the market in about 2008, you would still be well underwater.


Wednesday, March 4, 2015

Quay West Brisbane Resales

Recent sales for Quay West in Brisbane, at 132 Alice Street
  • Apt 37, 1 bed, 1 bath, 1 car - 72 sqm - $456,000 in October 2014
  • Apt 134, 3 bed, 2 bath, 3 car - 172 sqm - $1,350,000 in September 2014 sold to a QC
  • Apt 68, 2 bed, 2 bath, 1 car - 126 sqm - $695,000 in September 2014
  • Apt 43, 1 bed, 1 bath, 1 car - 72 sqm - $440,000 in August 2014
  • Apt 47,  1 bed, 1 bath, 1 car - 72 sqm - $440,000 in July 2014
Rumour has it that Ken Woodley, who lives in this building, recently purchased a 1 bedroom apartment (402) in Quay West for himself or a family member, at $435,000.  Mr Woodley is an owner and managing director of developer Metro Property Group.  I wonder why Mr Woodley is not purchasing in a Metro building, but is buy an older apartment in a Mirvac building?  Does that tell you something about the market?