Investment Article fyi

Investment Article for Friends of LJ Gilland Real Estate Pty Ltd

SEPTEMBER 21, 2012 | SPECIAL GUESTS | 1 COMMENT ← GO BACK

By JEgan

The question most sellers of residential property in Brisbane are asking today is ‘who will buy my property?’ According to RP Data research, Brisbane residential property values peaked in the December 2007 quarter and had fallen by around 15% to the December 2011 quarter.

This has also coincided with a decline in sales volumes of houses and units in Brisbane in this period. Current estimates suggest sales volumes are 40 percent below their five-year average levels. Local buyers have been very hesitant to buy or sell.

Sales of inner city apartments have probably been the least affected sector of residential sales between 2007 and 2011. Research from Colliers and Place Projects reveals that there were 1,065 new project apartment sales in 2007 and 1,278 in 2011. The average sale price in 2007 was $688,000 with 54% of new units being 2 bed, 22% were 1 bed, 18% were 3 bed and 6% were penthouses or the like.

The average sale price in 2011 was $560,000 with 45% of new units being under $550,000 (mostly 1 beds), 46% between $550,000 and $750,000 (mostly 2 beds) and only 9% for larger units. The sale of more affordable 1 bed units jumped from 22% to probably near 40%. This accounted for the drop in the average sale price.

The inner city apartment market is most resilient because it attracts broad market appeal from both owner-occupiers and investors, young or older buyers or those in between with a wide range of apartment choices in good locations.

Inner city locations attract a wide spectrum of buyers because of CONVENIENCE. People live, work and play in close proximity. They spend time relaxing and enjoying themselves rather than commuting. They have a wide choice of things to do within a short walk of their ‘home’. They hardly need to use their car unless they want to go to the beach. It’s all about convenience, convenience and convenience.

So who are the buyers? Well today most of the buyers of 1 bedroom and smaller 2 bedroom apartments are 40-plus investors looking to build wealth for older age. They buy and young professional singles and couples rent from them (this could be considered the natural order). The apartments don’t need to be spacious but they need to be convenient to what matters to young professionals. They’ll pay up to $700 per week rent (with some sharing) and they may never get to suburbia in later life.

When these young professionals get older most leave the inner city to have a family of two or more children. Although some who remain childless or have one or two children stay in the inner city because it’s convenient. They love the convenience. They just buy a bigger apartment. They move from being a one bed renter to a two or three bed owner. Their choice is driven by what the bank will lend them. Most want the bank to give them enough to get a mid to larger sized 2 bedder for around $500,000 to $750,000.

If things go really well for them as they cruise past 50, they’ll find a nice comfortable 3 bedder on the River. As they get older and wealthier they just buy better digs but they will never give up the conveniences. Just look at New Farm, Newstead, Kangaroo Point, South Brisbane and Brisbane’s inner west.

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Best regards,
Linda and Carlos Debello
http://www.ljgrealestate.com.au
http://twitter.com/GillandDebello
http://au.linkedin.com/in/lindajanedebello
http://gillandrealestate.wordpress.com/
http://www.facebook.com/pages/LJ-Gilland-Real-Estate-Pty-Ltd/169194919788253

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