Category Archives: Brisbane Inner City

Is it now possible to imagine Australia having a national affordable housing strategy, backed by funding, by the end of 2016.

At the National Housing Conference last week, there was considerable optimism about the newly appointed federal minister for cities, Jamie Briggs, whose infrastructure mandate includes housing. New energy is coming from the states with the largest affordable housing deficits – a social housing initiative from the New South Wales government and a “refreshed” metropolitan planning strategy in Melbourne with a stronger emphasis on affordable housing.

It is now possible to imagine Australia having a national affordable housing strategy, backed by funding, by the end of 2016.

Australia certainly needs such a strategy. The population is projected to reach 38 million in the next 35 years. Sydney and Melbourne are each expected to grow by at least three million people. The proportion of older people will be higher, with a lower proportion in the paid workforce.

This means we need at least six million new housing units in the next three decades. There is increasing impetus to locate these dwellings close to public transport, employment clusters and health and social services.

Cost pressures are intensifying

Rising housing demand and prices affect everyone, but low-income renters have fared worst in recent years. Capital city rents rose by twice the level of inflation from 2005 to 2010. By 2011, the shortage of suitable rental properties exceeded 500,000.

As a result, even most households that receive Commonwealth Rent Assistance (projected to cost A$6.6 billion in 2015-16) pay well over the recommended maximum rent. Some 55% of the A$7.7 billion annual cost to the government of capital gains exemptions and negative gearing goes to the top 10% of income earners. Only 4% goes to the bottom 20% of households by income.

Existing programs are not accomplishing policy aims. The Abbott government discontinued two small national programs, the Social Housing Initiative co-funding construction of non-profit housing and the National Rental Affordability Scheme subsidising below-market rental housing. No national strategy or infrastructure funding program has replaced those small but important initiatives.

Key steps towards affordability

What would be the basic elements of a national affordable housing strategy? Economist David Rosen led a review of the US$7 trillion spent in the US on federal finance, tax, lending, spending and regulatory programs and policies. According to Rosen, the place to start is a standard definition of “affordable housing”.

Malcolm Turnbull’s appointment of a cities minister, Jamie Briggs, has raised hopes of action on developing a national affordable housing strategy. AAP/Lukas Coch

The next step would be to calculate current and projected need for affordable housing by subtracting housing need from the available stock. There are local efforts to calculate this in cities like Melbourne, but it would need to be done in a consistent way across the country.

The cost of owning or renting a home includes rent or mortgage payments, property taxes and unit maintenance. A household can also incur onerous transport costs, if living far from employment and good public transport. Internationally, affordability is usually defined as housing that costs no more than 30-35% of household income, adjusted for household size.

For households earning less than 30% of their area’s median income, private market housing will almost certainly be out of reach without some form of subsidy.

In metropolitan Melbourne, for instance, the average weekly income is A$1333. A little over 11% of households in the city (159,000 households) earn less than A$400 a week, which is 30% of the median income. These households could only afford to pay a maximum of A$133 a week on the rent or mortgage. Less than 1% of rentals in Melbourne are available at those prices.

Social housing constitutes less than 3% of total housing stock. Most of it is occupied by these low-income households. So, at the most basic level, affordable housing would seek to fill that shortfall of more than 150,000 units in one major city alone, as well as building for future affordable housing needs.

How do we fund affordable housing?

After calculating need, the next requirement for a national affordable housing strategy would be to identify all potential revenue sources to fund it. These could be direct funding from national, state and local governments, but also indirect funding through tax rebates, low- or no-cost land, or mechanisms like reduced parking requirements or expedited planning approvals (which cuts land-holding costs and uncertainties).

A plethora of mechanisms used in other countries could be adopted here. For instance, in the US the Low Income Housing Tax Credit has, since 1986, allowed private investors to obtain tax credits in return for a ten-year investment in constructing or rehabilitating low-income rental housing. The stable and bipartisan program injects about US$6 billion a year in capital into affordable housing.

If a small proportion of the negative gearing tax credit were re-allocated towards investment in social housing, a similarly scaled program could be instituted in Australia. Similarly, if the Commonwealth guaranteed a 6% return on social housing investment, how much of the A$2 trillionheld in superannuation funds could be unlocked?

For the past two years, the Transforming Housing project has brought together state and local government, private developers, community housing providers and commercial and philanthropic investors to identify barriers to scaling up affordable housing in metropolitan Melbourne and how to overcome them.

Much of the emphasis has been on mechanisms at a state and local level, ranging from value capture financing to innovative design and construction. However, there is growing consensus that a Commonwealth affordable housing strategy is essential to enable integrated action by other levels of government and the private and charitable sectors.

With a clear sense of the numbers around affordable housing need and a stable financing and renewal model, the Turnbull government could reap multiple co-benefits. A national strategy could make cities more liveable, stimulate the property and construction sector, and reduce healthcare costs. The private and charitable sectors are waiting to swing into action.


This article was co-authored by: Dr David Rosen, principal of DRA Associates and an advisor on development, finance and policy; Rob Pradolin, general manager of business development for Frasers Property Australia; Catherine Brown, CEO of the Lord Mayor’s Charitable Foundation; and Dr Heather Holst, deputy CEO and director of services and housing for Launch Housing.

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Five of the major regions throughout Queensland are experiencing steady improvements in median house values.

The Sunshine State is establishing its growth potential according to data released by the Real Estate Institute of Queensland (REIQ).

“This report supports the REIQ’s long-held view that those areas of Queensland that have been doing well are continuing to do well,” according to Antonia Mercorella, CEO of the REIQ.

Brisbane is the fastest-selling area in the state with average days on market at 57 – a drop of eight days compared to a year ago.

Brisbane median house values have also risen 1.6 per cent over the March quarter, which along with Toowoomba reflects the state’s the highest quarterly increase.

The capital city’s proportion of profit-making sales increased three per cent in the year to reflect 96 per cent.

Toowoomba holds the state’s record, however, with 98 per cent of all houses sold recording a profit for the vendor.

Mercorella says Queensland is in the grip of steady, sustainable growth, although some regionals are in a recovery phase.

“Those areas that are struggling to recover from the resources downturn are still trying to stabilize,” she says.

“But what we don’t have is the start of another boom and bust cycle, which as we all know by now, doesn’t really benefit anyone in the long-term.”

Five of the major regions throughout Queensland are experiencing steady improvements in median house values.

Brisbane, the Gold and Sunshine coasts, Toowoomba and Cairns, all showed rising annual median house values of approximately 1.5 to 1.9 per cent on average each quarter over the past year.

Gladstone’s median house values rose by 0.8 per cent, which is the city’s first positive move in five quarters.

The rate of decline in Mackay’s median values appears to be slowing with a drop of one per cent to its annual median value in the March quarter.

In addition, Townsville’s median house values rose 0.7 per cent, and its proportion of profit-making sales has remained stable at 74 per cent since August last year.

SEE ALSO RENTAL MARKET EXCERPT FW: http://wp.me/p2zAfd-2l8

Our goal is simple: to provide the greatest possible net operating income, while continually enhancing the value of the asset. We believe in using proven and new strategies and continually looking for new ways to provide cost savings for the property and the owner Our vision To provide a flexible and all-encompassing management service for our customers' properties and assets. Our values Exceptional customer service.  Transparency, punctuality and reliability.

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Too many property investors are missing out on important cash flow by neglecting depreciation

Many property investors are missing out on beneficial depreciation tax claims. The annoying thing is how often this happens, when it really doesn’t need to happen at all!

Tax depreciation is often an overlooked method of obtaining tax deductions on investment properties. It is a big help in enabling investors to minimise their tax liability and improve their cash flow. Sadly though, we often see situations where depreciation either isn’t maximised to its fullest potential, or worse yet, overlooked entirely.

The Australian Taxation Office (ATO) recognises that the value of capital assets reduces over time as they approach the end of their effective life. These assets can be written off as a tax deduction ie. ‘depreciation’.

What depreciation should I be considering?
If you own an investment property (new or old, large or small), two areas of depreciation are available:

1. plant and equipment
2. capital works on the building

Different items within a rental property have different rates of depreciation based on the effective life of the item. These items are identified by certified quantity surveyors, who inspect the property assets and then calculate its depreciation through their expertise and knowledge of which items are depreciable and how savings can be achieved.

To claim maximum tax benefits on an investment property the ATO encourages property investors to obtain a fully compliant tax depreciation report prepared by a certified quantity surveyor. You or your accountant will use this report when preparing your income tax return.

Further, some property investors may not realise that they don’t have to wait all year to benefit from the depreciation deductions available to them. Instead, they can improve their cash flow throughout the year simply by nominating to use a Pay As You Go (PAYG) withholding variation.

A PAYG withholding variation allows individuals to vary the amount of tax withheld by their employer in each pay to anticipate their tax liabilities. This means that they can take advantage of the deductions available to them regularly, rather than waiting until the end of a financial year for their tax refund. You should speak to your accountant about this.

When to obtain a property depreciation report

Ideally, a depreciation report should be obtained soon after the purchase of an investment property. This enables a quantity surveyor to separate the items included in the purchase price, from the expenses that will be incurred by the new owner in the future. This detailed analysis ensures the maximum investment property depreciation allowances can be claimed.

A depreciation report is critical documentary evidence required by the ATO to support any tax deductions for components of an investment property that are decreasing in value. All investment properties are eligible to have their assets depreciated where, generally speaking, construction costs are incurred after 18 July 1985 and structural improvements are incurred after 27 February 1992. This applies even if the previous owner paid for the construction. In the event that the original construction cost data is no longer available, the ATO stipulates that a quantity surveyor must assess this figure.

Where to start – immediate tax depreciation write-offs and the low value pool

Obtaining independent, professional property advice ensures investment property owners stay up to date with the intricacies of tax legislation and can make well-informed decisions that enhance cash flow. For instance, waiting until just before the close of the financial year to buy an asset for an investment property may entitle you to claim the full cost on your tax return for that year. For example, plant and equipment assets valued at $300 or less are generally able to be written off at 100 per cent in the financial year of acquisition.

Moreover, under the Low Value Pool Regulations, certain items can be depreciated more quickly. Items that enter the pool are depreciated at a set rate or 18.75 per cent in the first year but in subsequent years, the percentage rate of depreciation jumps up to 37.5 per cent on the diminishing total.

What can effective property depreciation save you?

In typical situations – say a commercial property investment of around $1,000,000 – using a quantity surveyor and well-prepared depreciation report can result in clear benefits. Potential tax deductions under a well-planned depreciation schedule could total in excess of $27,000 in the first year of claim and over $100,000 for a 10-year period following the purchase of the property. For an individual taxpayer on the top marginal tax rate of 49.5 per cent (2014/2015 individual tax rate), the tax saving would be $13,365 on a $27,000 tax claim.

Of course, depreciation is only one component of owning an investment property and the associated tax deductions. Other deductions could include:

• fees to property management agencies (SEE WHAT WE CHARGE VRS WHAT OTHERS CHARGE http://wp.me/p1qS3N-7YJ
• repairs and maintenance to the property and its fixtures (IMPORTANT INFORMATION TO NOTE:-

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• interest payments on mortgages over the property
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The total deductions can be considerable and go a very long way to improving your tax bill at the end of the financial year and throughout your years of investment in the property.

Clearly, there’s a real advantage in obtaining a depreciation report on your investment property. Our recommendation is to make sure you have a good depreciation strategy, but consult your accountant and other advisers before you finalise this!

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Mirvac To Develop $850m Eagle Farm Residential Project

Leading property group Mirvac has been selected as Brisbane Racing Club’s preferred partner for the development of its $850 million Eagle Farm Residential Precinct.

Mirvac were chosen from a shortlist of three contenders to partner with the Club on this quality project.

The Eagle Farm Residential Precinct will be built alongside the Eagle Farm Racecourse and as one of Brisbane’s most exciting lifestyle developments to date, the tender drew attention from local, interstate and offshore developers. The 10-year project forms part of the Eagle Farm Master Plan and will see the delivery of over 1,000 trackside apartments alongside an exciting food, beverage and retail destination.

HORSE RACING

Located in Ascot, just 6 kilometres from the Brisbane CBD, the 54,000 square metre site offers a premium, large-scale development opportunity in a thriving part of the city’s north east. A range of retail, commercial, hospitality and entertainment facilities are planned for the adjacent land.

Mirvac’s Group Executive Residential John Carfi said the business was thrilled to have been selected as the Brisbane Racing Club’s development partner at such an iconic Brisbane location.

150515 eaglefarmres_620x380

“This location provides Mirvac with an excellent opportunity to deliver quality residential apartments in the heart of Brisbane’s popular racing precinct,” he said.

“Mirvac will draw on its expertise and strong track record of delivering major residential and mixed-use developments and we look forward to working closely with the Brisbane Racing Club on the next phase of this exciting project.”

BRC’s Chairman Neville Bell said Mirvac had been chosen after a vigorous selection process based on its experience in large-scale, mixed-use development projects.

“The redevelopment of the Eagle Farm Racing Precinct is an exciting step for us as part of our 10 year Master Plan,” he said.

“Mirvac’s extensive experience in similar projects aligns with our objectives for the future of the club.

“We are delighted to have a major developer of Mirvac’s calibre onboard as we work through this significant redevelopment.”

The announcement for Mirvac follows successful sales results at its Waterfront, Newstead development which has delivered more than $150 million in sales.

THE MASTER PLAN

Eagle-Farm

Situated six kilometres to the Brisbane CBD, the 5.431 hectare site is approved for residential apartment towers up to 15 storeys.

The site, known as Precinct 5B of the Eagle Farm Master Plan area, provides a rare opportunity to partner with the Brisbane Racing Club to develop its large residential development site.

Brisbane Racing Club’s General Manager – Property & Asset Management, Mr Jeff Kahler said the Club was seeking a joint venture partner for what will be one of Brisbane’s most exciting developments.

“Brisbane Racing Club has obtained planning approval for the master planned development of Eagle Farm and Doomben Racecourses and is seeking a joint venture partner for this iconic Brisbane residential opportunity which will appeal to large developers who want to be involved in a premium, large scale development,” said Mr Kahler.

Knight Frank’s Director of Commercial Sales, Mr Morrison said that the master planned development of the non-core land of Eagle Farm and Doomben Racecourses is a rare opportunity for a local or offshore developer.

“This approval is one the largest and most exciting lifestyle projects in Brisbane’s history and one we’re extremely confident will be well received by the developer community,” continued Mr Morrison.

“The Eagle Farm Residential Precinct is located alongside the Eagle Farm Racecourse and is designated as a high density residential area. This site is capable of sustaining in excess of 1,000 apartments and is situated immediately next to a proposed mixed-use development which may include a range of uses comprising retail, commercial, hospitality and entertainment facilities.

“The site is located in a popular lifestyle precinct, well serviced by public transport with rail, bus and Citycat all close by and easily accessible from all parts of Brisbane and beyond via Inner City Bypass,” added Mr Morrison.

Knight Frank’s Managing Director of Commercial Sales, Mr Paul Henley said that Brisbane residential site sales have gone through considerable growth the past 12 months.

“The Brisbane Apartment market has entered a new property cycle. Sales rates have now remained above long term averages for a full 12 month period. Sale prices have stabilised and stock transacting is a good mix of investment and owner occupier product which signals a suitable diversity of purchasers in the marketplace, as the development of Eagle Farm Residential Precinct is likely to offer.

“In addition to traditional markets Melbourne and Sydney, we have sensed a considerable shift in favour of Brisbane also in our recent visits to Malaysia and Singapore as a preferred Australian location for investment This positive sentiment in favour of Brisbane is in our opinion going to grow in the short to medium term,” added Mr Henley.

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Brisbane Rental Market Article of Interest

For Rent Rented

Once you give an investor a rental return amount quite early on in the development and purchase phase, they are expecting that return upon completion and settlement and this poses an issue.

There is estimated to be approximately 30,000 new apartments and units being built in Brisbane for completion in 2015 and a large percentage of these new builds are marketed to Chinese and international buyers.

In my opinion, the issue I think we are going to face from a property management point of view, is that as a percentage of these new developments are being bought by foreign investors, there could potentially be a “rental guarantee” which is being offered and I see that this as having a negative impact on the rental market. Once you give an investor a rental return amount quite early on in the development and purchase phase, they are expecting that return upon completion and settlement and this poses an issue.

With interest rates being at a record low, I have seen an increase in tenants not renewing their tenancies and in some cases, breaking their lease to purchase a home and to take advantage of the low interest rates. This has therefore, had an impact on the vacancy rates in Brisbane’s Inner City. Although there are still a large number of renters on the market, their expectations of features within their rental property has also increased. They are coming to open homes with a mental checklist and are hesitant to apply for a property if the property does not meet their needs- why would they when there is a lot of properties for them to choose from?

Having these thousands of properties become available in 2015 and with the low interest rates, the expectations of rental returns need to be realistic in order to ensure minimum vacancy periods. I am finding that rental prices are being reduced now more than ever to accommodate the market and to minimise vacancy periods in order to ensure the landlords have an income stream from their investment.

Investors also need to keep in mind that inner city living will not appeal to everyone therefore may only attract tenants such as professional couples, students or the single executive and with an expected increase of the stock levels in 2015 how many of these “attractive” tenants are out there?

Sydney, Melbourne and the other states are not experiencing the flat rental market issue which we are facing here in Brisbane. In these other states, you hear about a line of prospective tenants at open homes eager to rent properties- something I haven’t seen in Brisbane since December 2014. Maybe it’s because it is a lot harder to purchase your first home or similar in Sydney and Melbourne than it is in Brisbane

Source R Patel is a Director at Urban Property Agents in Brisbane.

Best Regards  Linda & Carlos Debello  “Your Local Property Sales & Management Specialist”  LJ Gilland Real Estate Pty Ltd  PO BOX 19  ZILLMERE 4034   0413 560 808 (Mob 2)  0409 995 578 (Linda)  http://www.ljgrealestate.com.au/index.php?lan=ch    Chinese website https://www.facebook.com/ljgrealestate

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Linda & Carlos Debello
“Your Local Property Sales & Management Specialist”
LJ Gilland Real Estate Pty Ltd
PO BOX 19
ZILLMERE 4034
0413 560 808 (Mob 2)
0409 995 578 (Linda)
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Direct Trade Sino Aust

According to The Australia China Business Council, direct trade from Australia to China contributes 5.5 per cent to Australian GDP, amounting to $79,150 million, nearly 200,000 Australian jobs (or one in 58 Australian jobs) is sustained by direct export activities to China. ‪#‎ACBC‬

http://www.ljgrealestate.com.au/index.php?lan=ch

Best Regards  Linda & Carlos Debello  “Your Local Property Sales & Management Specialist”  LJ Gilland Real Estate Pty Ltd  PO BOX 19  ZILLMERE 4034   0413 560 808 (Mob 2)  0409 995 578 (Linda)  http://www.ljgrealestate.com.au/index.php?lan=ch    Chinese website https://www.facebook.com/ljgrealestate

Best Regards
Linda & Carlos Debello
“Your Local Property Sales & Management Specialist”
LJ Gilland Real Estate Pty Ltd
PO BOX 19
ZILLMERE 4034
0413 560 808 (Mob 2)
0409 995 578 (Linda)
http://www.ljgrealestate.com.au/index.php?lan=ch Chinese website
https://www.facebook.com/ljgrealestate

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Filed under Brisbane Inner City, empowerment, family, LJ Gilland Real Estate Pty Ltd, ljgrealestate, SINO CHINA AUSTRALIAN ECONOMIC TRADE INFRASTRUCTURE REALESTATE FOREIGN INVESTMENT, Spring Hill Bowen Hills Fortitude Valley South Brisbane East Brisbane

The Brisbane’s inner city rental market has been termed “weak” by the Real Estate Institute of Queensland (REIQ). Here’s what they are talking about.

“Brisbane’s “weak” inner city vacancy rates climbing

The Brisbane’s inner city rental market has been termed “weak” by the Real Estate Institute of Queensland (REIQ). Here’s what they are talking about.

The REIQ recorded a 3.8% vacancy rate in Brisbane’s inner ring (0 to 5 kilometres from the city centre) in December 2014.

Any vacancy rate figure above 3.5% is categorised as “weak”, while a market is considered “tight” if it has a vacancy rate below 2.5%, and healthy with a vacancy rate between 2.5% and 3.5%.

“The other “weak” Queensland markets in December were in Bundaberg, Gladstone, Rockhampton,  Mackay and Townsville, with Mackay topping vacancy rates at 10.3%.

The Brisbane inner market is the only greater Brisbane region with a “weak” market. The REIQ notes that vacancy rates are trending upwards.

In a release, REIQ chief executive Antonia Mercorella said: “Residential vacancy rates are prone to seasonal fluctuations over the Christmas/New Year period and 2014 was no different.”

“Many REIQ agents reported softer tenant demand in December, with many leases expiring as students finish up their studies and others also take up employment opportunities in new locations.”

However, Brisbane’s inner market is experiencing weaker conditions than in previous years: In December 2012, the REIQ recorded a vacancy rate of 2%. In the same month of 2011, Brisbane had an inner city vacancy rate of 1.9%.

According to the REIQ, the median price of a unit in Brisbane was $420,000 in the September Quarter. In the latest HSBCDownunder Digest report, HSBC forecasts 6% to 7% price growth for Brisbane homes in 2015, with 4% to 7% forecast for 2016.

Click to open in new window:

This West End property will be available to rent in March at $540 per week. The two bedroom “near new” apartment was advertised to rent in September at $550 per week, with the asking rent lowered last month.

At its current advertised rent, investors who paid $510,000 in May 2013 will be receiving a yield of 5.6%.

Buyers paid $465,000 for this National Rental Affordability Scheme (NRAS) unit in July 2014. It was listed to rent late last month for $397 per week – slightly less than the $400 per week the previous owners were expecting this time last year.

According to Domain Group, vacancy rates for units in the greater Brisbane area were higher for units than houses in January, which is normal across all the capital city markets (see graph below).

Source: Domain Group

The unit at Kangaroo Point, has two bedrooms and two bathrooms. Its current advertised rental rate reflects a 4.4% yield.

SQM Research data shows that asking rents for units in the Brisbane inner region have remained relatively stable over the past five years.

Click to open in new window:

However, there have been recent warnings, including this from Terry Ryder, about the threat of oversupply in the Brisbane inner market:-

A media release this week was positively gushing in its eulogy of the Brisbane inner city apartment market. Sales are surging, it said, and the level of new construction in the pipeline was a cause for celebration. The market, apparently, “continues to shine”.

From where I’m sitting, sales are not surging and the new construction – 14 new projects with 1,400 apartments were launched in the June quarter alone – will make worse an existing oversupply.

The thing is, the people building, promoting and selling apartments are concerned only about finding buyers. They’re not interested in the broader consequences of the projects that are earning them money.

If the apartments in the current project sell, they pocket the profits and commissions, and move on to the next one.

Others have to deal with the carnage created by their projects. And there will be repercussions from the overbuilding of apartments in Brisbane.

The situation in the Brisbane inner city market is not (yet) as serious as that in Melbourne, where the existing oversupply is serious and the future oversupply will border on catastrophic.

But Brisbane is heading down the same slippery slope to surplus as Melbourne.

In Brisbane, as in Melbourne, Sydney, the Gold Coast and other major unit markets, the inspiration for the high level of new building is the Chinese investment market. Everyone is targeting Chinese investors.

Developers and their marketing stooges don’t care about the vacancy rate figures. That’s someone else’s problem. If they can flog their apartments to Asian buyers, nothing else needs to be considered.

The people who will feel the most pain in the future will be the investor buyers. High vacancies will push down rents and the returns they will earn from their investment. That in turn will undermine values.

Others will suffer. Owners of existing properties in or near the inner city will also find it hard to tenant their properties and will have to cut rents. Their values will fall also. Home owners in those areas will be equally affected by falling values.

Overbuilding is a constant and recurrent problem in inner city apartment markets. It’s the reason capital growth rates have been so poor in Brisbane.

The average annual rise in the median unit price in the Brisbane CBD has been around 3% per year over the past five years and also the past 10 years. In real terms, capital growth has been negligible at best.

Suburbs just outside the CBD, including Kangaroo Point, Fortitude Valley and South Brisbane, have similar track records.

This week’s media release claims sales are now “surging” in the Brisbane inner city apartment market. Not according to the sales data I’m seeing. Sales levels did rise last year, with every quarter producing an increase in sales volumes. But the market peaked in the December 2013 quarter and sales activity has declined in 2014.

That probably explains why there has been little price growth in evidence recently. According to Australian Property Monitors data, there was no change to median prices in the CBD and Woolloongabba in the most recent quarter, a rise of about 1% in Fortitude Valley and South Brisbane, and a 4% decrease in Kangaroo Point.

The real issue is that the Brisbane inner city areas already have too many apartments. The CBD and the near city suburbs all have vacancy rates in the 3.5% to 4.5% range. Those vacancy levels would not cause undue concern, except that massive levels of new supply are in the pipeline.

The writer of this week’s media release was clearly excited about the new projects coming up. It scoffed as the “predictable murmurings” about oversupply. But the concerns are real and well-placed. Dozens of new highrise apartment buildings are under construction or in planning, bringing thousands of new units to an oversupplied market.

There’s been a lot of media about the potential for prices to fall because of a “bubble”. There is no bubble in Australian property prices but there is a real threat of value decline in many major markets caused by developer overbuilding.

We’ve seen many times in the recent past how much damage oversupply can do and how much angst it can cause to property owners, including both investors and home owners, when values fall.

The Gold Coast has just emerged from years of falling property values – many people own properties worth less than they paid four or five years ago. The median unit price in Surfers Paradise is still lower than it was in 2009.

Owners of property in Gladstone have suffered double-digit value losses, not because of a decline in demand but because of absurd levels of overbuilding by developers. What were they thinking?

Where overbuilding has coincided with a sharp drop in demand because of a pause in the resources sector, values have dropped as much as 40% from their peak levels, including in Karratha in Western Australia and Moranbah in Queensland.

Inner city apartment markets, including those in Brisbane, face the same risk.

I’m not sure what the solution is, with councils and state governments eager to approve anything that’s proposed and trumpet the outcomes as a construction boom benefiting everyone. Until Chinese investors realise they’re being sold over-priced apartments for which there is little or no tenancy demand, developers will continue throwing up high-rise in inner Brisbane and elsewhere.

The outcome, in some places at least, will be a market crash that will be ugly to behold.

I’m urging investors and owner-occupiers to stay well away from these markets”

AT A GLANCE •Property management, Rental services. •Individual solutions to fit our client's needs •High performance property sales, specializing in sales of properties with tenants in place. •	Body corporate management •	Competitive Commission Rates •	LET FEE FOR REFERRALS, We are a business built on Referrals. •	NO Lease Renewal & Comparable Market Analysis’ Fees/Charges •	PHOTOS TAKEN ON ENTRY •	Hands on approach to all Property Investment Management and & Sales Matters. •	Tenants are shown about safety switches and water mains etc at handover at the property.  We meet all tenants on site for handover. Register your interest to receive property updates and our real estate blog.

AT A GLANCE
• Property management, Rental services.
• Individual solutions to fit our client’s needs
• High performance property sales, specializing in sales of properties with tenants in place.
• Body corporate management
• Competitive Commission Rates
• LET FEE FOR REFERRALS, We are a business built on Referrals.
• NO Lease Renewal & Comparable Market Analysis’ Fees/Charges
• PHOTOS TAKEN ON ENTRY
• Hands on approach to all Property Investment Management and & Sales Matters.
• Tenants are shown about safety switches and water mains etc at handover at the property. We meet all tenants on site for handover.
Register your interest to receive property updates and our real estate blog.

While in September had heard reports of rents softening, with rents previously “quite inflated”.

“About what’s driving growth in Brisbane’s apartment sector and what this means for the property market.

What are some of the growing trends in Brisbane’s inner city off the plan apartment market?

We’ve never really seen this much activity in Brisbane.

It’s a pretty exciting time for Brisbane, with this level of development and also infrastructure growth, through master plans and government infrastructure.

Brisbane is growing very quickly, from a demographic point of view. Nationally, there are some major changes happening right now in the residential market, and we’re seeing new fundamentals emerging.

What demographic trends are driving the growth of the inner-city apartment market?

The residential market is built off two major demographic groups: the 25-30 year old bracket, which is very large and growing significantly, and baby boomers.

They’re very complex groups, so I normally hate to say “Gen Ys and baby boomers”. But they are major demographic groups in the residential market.

We’re seeing major changes in the type of properties that they’re looking for. The trade off they have to make to cope with the cost of living is definitely having some implications for demand.

We’re also seeing changes in infrastructure and where that’s being invested. We’re seeing much less urban sprawl and much more upwards development. It’s cheaper to upgrade and put infrastructure in central areas where there’s already a major population, rather than emerging regional areas.

Where is apartment growth focused?

The major development is happening is along corridors where there is existing infrastructure, or proposed future infrastructure. Running from Woollongabba/South Brisbane coming through to the CBD and going into FortitudeValley/Bowen Hills and going all the way up to Portside Wharf/Hamilton – that’s where we’re seeing a lot of supply and demand.

Portside Wharf, Hamilton

 

These emerging developments are all still fringe based. The CBD is probably undersupplied – it’s got a few developments on their way, but it predominately the growth is in the fringe areas.

For apartment developers, there were better opportunities in the fringe. In South Brisbane, there was very little supply, and it made perfect sense to develop because the infrastructure was already there. The same was the case in Fortitude Valley.

Is there a threat of oversupply in the Brisbane apartment market?

There are a couple of things we need to get clear on in terms of apartment development from a supply point of view. We often talk about 23,000 apartments in the inner Brisbane market, which are either in the application, presale, or approvals stages, but you can’t look at thin air.

We care more about settlement, which has been pretty fragmented. There is a lot of stock coming through the off the plan through to the end fo 2015. It’s a very hot market, but it really is about that settlement.

Rents are definitely aligning. They’re starting to move away from the inflation period we had that was created on low supply. That, to me, is saying that developments are doing what they should.

2015 is definitely going to be very competitive for the off the plan apartment market. We’re probably going to see a lot of developers not get off the ground, which is going to affect supply.We look at a lot of these developers playing in Brisbane and to be honest, there are some that have not proven themselves yet.

There are still a lot of challenges when it comes to taking that glut of supply and making it a tangible product.

At the moment, there are going to be areas that are going to have some fluctuations, which always happens. We’re going to need continued population growth, through migration and international students, which are very important to Brisbane’s inner city rental market.

Brisbane is also very closely related to what’s happening in Sydney, and prices are obviously high there, which may drive demand for Brisbane.

The one thing that we definitely know is that we’re going to see more renters come through.

The cost of living is unfortunately not getting any easier. In Australia, the employment opportunities are very centralised. The infrastructure is very challenging as we go further out, and in the capital markets, the 15 kilometre to 20 kilometre ring from the CBD is very difficult market to get into for young buyers.

The ability to own their own home is a big trade off for younger people – if they buy further out, that’s going to cost them more in terms of fuel. Thats why we’re looking at the apartment market. Sure, supply is coming through, but the challenges facing buyers and the demand growth is here to say.

It will go through the fluctuations, and developers are great at getting a good thing while they can, and then we’ll see a correction.

How will the influx of new apartments affect Brisbane’s rental market?

We are hearing that rents are softening.

The owner occupier market is really taking an effect on the existing apartment market and the more mature stock on the market, taking that away from renters. So the new apartment market is obviously catering to renters.

Rents have been quite inflated, so we have a buffer. Now, we can make things align, and it’s getting a bit better from an affordability point of view. The time to fill an apartment is growing, but still pretty good. Instead of one week, it’ll take a month or two months to fill an apartment.

To me, this is a normal thing, and means developers are doing their jobs.

Historically, December always seems to have a lot of vacancies, and so does the March quarter because it includes January. In June it always comes back again, to around the 3% mark.

There are going to be pockets where there are going to be some realignment in rentals, which I think is positive. It’s a good thing for the renter, who can see what amenity they get for their dollar. There’s going to be some good choice there, and affordability will improve. That’s a good thing.”

Do you believe that Brisbane’s inner city is getting weak too?

Best Regards Linda & Carlos Debello “Your Local Property Management Specialist” LJ Gilland Real Estate Pty Ltd (http://www.ljgrealestate.com.au) PO BOX 19 ZILLMERE 4034 (07) 3263 6085 0400 833 800 (Mob 1) 0413 560 808 (Mob 2) 0409 995 578 (Linda)

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AT A GLANCE •Property management, Rental services. •Individual solutions to fit our client's needs •High performance property sales, specializing in sales of properties with tenants in place. •	Body corporate management •	Competitive Commission Rates •	LET FEE FOR REFERRALS, We are a business built on Referrals. •	NO Lease Renewal & Comparable Market Analysis’ Fees/Charges •	PHOTOS TAKEN ON ENTRY •	Hands on approach to all Property Investment Management and & Sales Matters. •	Tenants are shown about safety switches and water mains etc at handover at the property.  We meet all tenants on site for handover.

AT A GLANCE
• Property management, Rental services.
• Individual solutions to fit our client’s needs
• High performance property sales, specializing in sales of properties with tenants in place.
• Body corporate management
• Competitive Commission Rates
• LET FEE FOR REFERRALS, We are a business built on Referrals.
• NO Lease Renewal & Comparable Market Analysis’ Fees/Charges
• PHOTOS TAKEN ON ENTRY
• Hands on approach to all Property Investment Management and & Sales Matters.
• Tenants are shown about safety switches and water mains etc at handover at the property. We meet all tenants on site for handover.

 

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