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Factor’s driving continued Chinese investor interest in Australian property

The continued appreciation of the yuan could put pressure on the Chinese Government to ease the capital outflow restrictions which have impacted investment in Australian commercial property.

The issue for China is that the yuan is up massively over the last 12 months and that has been driven by the new capital control regulations which have been very effective in turning around the outflow of capital.

However that appreciation could see Chinese goods becoming less competitive and that is not what the Chinese will want to see.

If that is the case then it seems clear that some tinkering with those new capital outflow regulations, and among them those pertaining to real estate transactions, will occur and that will help to both stabilise the yuan at a level that is acceptable to China, and of course benefit Australian commercial property.

According to a report from London based Pictet Wealth Management, China’s total capital outflow was estimated at US$166 billion in 2017, down 78% from US$761 billion in 2015 and 67% from US$500 billion in 2016 as a result of the new regulations.

China’s initial tightening of capital outflow rules in 2016 followed a fall of nearly 7% in the value of the yuan against the USD which had been the largest depreciation since 1994.

The foreign exchange turnaround, he said, had seen the yuan appreciate 10.4% against the USD over the 12 months to December.

But more importantly if we look at the movement over the last two months from December when  1 USD bought 6.62 yuan and then last week when 1 USD bought 6.29 yuan we see an appreciation of 5.2% in just six weeks.

That is a huge appreciation of the yuan on top of the significant rise over the last 12 months, and, if it continues, then it must be troubling for at least some sectors of the Chinese manufacturing industry which of course is a hugely significant contributor to capital inflow.

The sheer weight of Chinese capital seeking offshore property investment remains very significant with Australia still the number two destination in the world behind the US for Chinese investors.

We need to keep in mind that while investment outflows from China have been curbed, Chinese investors are adjusting to the new rules and fine tuning their investment strategies.

To date in the new year we have seen little change in interest from Chinese investors, if anything, what may have restricted sales volumes, has been as much about the lack of quality stock in increasingly tightly held markets.

That has been particularly the case in the retail sector, while falling vacancy and incentive levels have been very encouraging for office market landlords.

A further factor driving continued Chinese investor interest in Australian property were regulations aimed at curbing Chinese domestic real estate activity in restricting developers’ ability to raise finance for their projects.

On the one hand we have the regulations restricting developers from seeking off-shore opportunities and on the other hand also being restricted in their activities at home.

It is a difficult time for property developers on the domestic front, who, under the centralised banking system, already face limited options for funding new projects.

It is not inconceivable then that the further restrictions on their ability to raise finance through debt and equity, may have them looking offshore where finance for their projects may prove easier to come by. Source CBRE

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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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Housing’s puzzling strength

Australian housing finance approvals beat expectations again in November, the number of approvals for owner occupiers up 2.1% vs expectations of a flat result. Approvals ex refi rose 2.4%mth to be up 9.2%yr.

The value of housing finance approvals to investors also posted a rise, up 1.5% but is down –8.3%yr.

The Nov detail showed continued strength in first home buyer loans (+4.5%mth, 36%yr) concentrated in NSW and Vic where state government stamp duty concessions are giving a big boost and activity is coming from a very low starting point.

Construction-related approvals were up 2%mth, 7.6%yr.

By state, gains in NSW (+1.9%mth), Qld (+4.3%mth) and SA (+2.1%mth) offset falls in Vic (–0.3%mth) and WA (–2.7%mth). Annual growth remains strongest in Vic (+16.8%) and NSW (+10.9%) bearing in mind that this is owner occupier approvals only (ex refi) and that the slowdown in investor activity has had a more material impact in these two states, NSW in particular.

Overall, the total value of finance approvals ex owner occupier refi was up 2.1%mth, and 1.7%yr. That compares to turnover, down around 16%yr, auction clearance rates, down over 13ppts, and an abrupt slowdown in price growth, down from a double digit pace mid-year to a sub-5% annual pace currently.

While the pull back in investor finance approvals is broadly consistent with macro-prudential tightening measures impacting this segment, the continued strength in owner-occupier activity has been surprising, particularly given material slowdown in wider housing market activity evident in other measures. Overall, the total value of loan approvals including investor loans and ex refi has firmed over the last year, up 1.7%yr.

The comparison with the previous macro-prudential tightening episode in 2015 is also intriguing. This resulted in a similar slowdown in wider market measures and a sizeable 10%+ decline in the total value of finance approvals.

The differences are puzzling but may be an indication that weaker foreign buyer demand – evident in the wider housing market performance but not captured by finance approvals – may have had a greater hand in the 2017 slowdown.

Matthew Hassan is senior economist with westpac

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Urban Land Supply Report & CommSec SOST 30-4-2015

Urban Land Supply Report. The release of new residential housing lots is currently undergoing an historic boom across most of Australia’s largest cities, according to the findings of a new report on urban land supply recently released by the Urban Development Institute of Australia (UDIA). The 2015 UDIA State of the Land Report has found that the number of new greenfield residential lots released for sale nationally in 2014 increased by a massive 31 per cent relative to 2013. Departing from previous years’ reports, the 2015 UDIA State of the Land has been undertaken in partnership with Charter Keck Cramer and Research4, utilising data from the National Land Survey Program (NLSP), which adds additional consistency and depth to the report. “The NLSP data highlights that Melbourne and South East Queensland led the way in new residential land supply being made available to purchasers in 2014, with new lots released increasing by 61 per cent in Melbourne, and 55 per cent across South East Queensland,” said Charter Keck Cramer Director, Robert Papaleo. “Sydney also experienced a strong 29 per cent increase in new lots released, although Adelaide experienced a small decrease in greenfield releases.” UDIA National President Cameron Shephard said that whilst the lift in new lots released was great news for new home buyers and the development industry, it was not an excuse for governments to be complacent about new housing supply. “The increased activity identified in the 2015 State of the Land Report is great for the Australian economy, housing affordability, and jobs in the construction industry, but in many ways it has masked a number of underlying problems with Australia’s housing market,” he said. “Nationally, Australia still suffers from a marked undersupply of new housing stock, caused by inadequate investment in urban infrastructure, slow planning and approvals systems, and high taxes and charges on new housing supply. “Even now, we’re still not building enough new homes to meet underlying demand.” “Whilst low interest rates and strong market conditions have helped to create the current uplift in new lots released, these conditions won’t last forever.” “What’s really needed is for governments to take action to remove the underlying structural barriers to new housing supply,” he concluded.
Australia’s Economy and the Property Market. The quarterly CommSec State of States report assesses key indicators to establish the performance of the states and territories. Let’s take a look at how the states and territories are currently shaping up across a range of factors. Economic growth: The Northern Territory is continuing to lead Australia’s economic activity, sitting at just under 45 per cent above its ‘normal’ decade average. This region also has the fastest annual growth rate in the nation, up 3.2 per cent. The next strongest state for economic growth is Western Australia, sitting at 26 per cent above the decade average, followed by the ACT which is up by 15.2 per cent. Both Tasmania and South Australia are seeing modest rates of less than 1 per cent above decade averages. In terms of retail spending, New South Wales has seen the strongest growth being up by 6.3 per cent, followed by Victoria which is up 4.1 per cent and Tasmania with an increase of 2.4 per cent. Construction: Construction work is sitting higher than decade averages in six of the states and territories. The Northern Territory was up almost 171 per cent, followed by Western Australia (33.4 per cent), Queensland (10.7 per cent) and New South Wales (10 per cent). Tasmania is now sitting at 4.7 per cent below the decade averages and the ACT are just scraping by at 0.2 per cent. Population: Annual growth has eased in all states apart from the Northern Territory. Western Australia is looking the strongest with an annual growth rate of 2.12 per cent, however this is trending at 20.3 per cent below decade-average levels. Victoria came in second with a growth of 1.77 per cent, followed by New South Wales at 1.43 per cent. Tasmania has seen the strongest growth rate in 2.5 years at 0.64 per cent. Unemployment: The latest unemployment rates are above their decade averages across all states and territories. Northern Territory has retained its position as the nation’s strongest job market with an unemployment rate of 4.3 per cent, followed by ACT at 4.4 per cent and Western Australia on 5.7 per cent. Tasmania’s unemployment figures appear to be on the improve with the jobless rate falling to a 39 month low of 6.5 per cent. Housing finance: Victoria has taken over the top spot in Australia for housing finance with commitments at 11.5 per cent above the long-term average. Next were New South Wales on 10.4 per cent and Western Australia at 5.5 per cent. Northern Territory remains the weakest market for housing finance with commitments 23 per cent below its decade average. The next weakest was South Australia down 13.7 per cent and Tasmania at 10.8 per cent below its decade average.

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Housing Goals are Changing….

Most of us would be familiar with the categorization of generations – where people are classified based on when they are born.

This is widely used in popular culture, where sociologists and consumer research organisations look to categorise and predict our likely social, financial and economic behaviours based on when we were born and in relation to how the world has changed around us.Happy Young Couple Moving House

Generation categories typically comprise of:

  • The Lost Generation – born 1883-1900
  • The Greatest Generation – born 1901-1924
  • The Silent Generation – born 1925-1942
  • Baby Boomers – born 1943 to the early 1960’s
  • Generation X – born early 1960’s to early 1980’s
  • Generation Y – born early 1980’s to the 2000’s
  • Generation Z – born around and after 2005

However, a new type of classification has made its way to our shores from overseas – and it has nothing to do with our birth date.

Instead, it is about whether we can afford to buy residential property as an owner occupier.

Those who cannot afford to do so, or those who choose not to, are aggregated into what is widely being regarded as Australia’s growing number of Generation Rent.

HOUSING GOALS ARE CHANGING

It is no secret that first time buyers continue to get priced out of the market, and that is it getting harder and harder to get onto the property ladder as an owner-occupier.

bigger housesThere are many reasons for this, including lack of affordability, accelerated house price growth, lack of desired supply and being unable to bridge the deposit gap.

In fact, research by Swinburne’s AHURI Research Centre indicates that around 4.5 million Australians now rent their homes, and renters range in demographic – singles, couples, families, the young and the old, so it pretty much affects everyone, everywhere.

This figure is almost double to the number of renters in 1981, when the Baby Boomer’s started to enter the market.

The significance of this is what appears to be a noticeable shift in housing tenure behaviours. That is, more and more of us are renting because it’s too expensive to buy.

For instance, Swinburne’s research shows that around 600,000 of the 1.8 million in private rental accommodation have been renting for more than 10 years.

That’s a long period of time to rent and may reflect, in part, the difficulty of trying to save a deposit while paying rent and meeting everyday living costs.

Furthermore, a survey of prospective first home buyers released by finder.com.au last December revealed that 1 in 3 people surveyed had chosen to rent rather than buy, despite record low interest rates.

This represented a significant increase from the 1 in 10 reported in the previous survey and is a possible indicator of changes in housing aspirations.

RENTING IS NOT NECESSARILY A DIRTY WORD

houseThe harsh reality is, there is and will be a generation of Australians who will be permanent renters (by necessity or design), or they will buy their first home much later in life – certainly later than the Baby Boomers did.

However, this is not necessarily all doom and gloom.

Yes, it is highly disappointing that many people simply cannot afford to buy their own home (the Federal and State governments need to fix this), but there are some benefits to renting that may help alleviate the disappointment of delaying home ownership, or not being able to become a home owner.

Specific benefits include:

NO MORTGAGE DEBT

One of the biggest barriers and turn-offs is the need for many borrowers, especially first time buyers, to borrow at or beyond their comfort levels.

Apart from signing a lease and paying a bond, there is no long term financial commitment.

AFFORDABILITY

More often than not, it is cheaper to rent than buy – with buying including saving a deposit, paying legal fees and stamp duty, and of course paying ongoing mortgage payments.

With this removed, there’s less stress on finances, and with less net income devoted to housing costs there’s more money left over to spend, save or invest.

GREATER FLEXIBILITY

Buying means committing to an area for a minimum period of time, usually 5 to 7 years if you are looking for capital growth.

If you sell early, you may end up being worse off if prices don’t move and you take into account your purchase and selling costs.

On the other hand, it is much easier for renters to move due to career changes, to get a better home or location, and to perhaps even get cheaper rent.

You can also move into areas you can’t afford to buy into – like inner city areas or other popular suburbs.

Less Risk

Home owners are exposed to financial risks like interest rate hikes, negative equity, repossession, capital loss, default and adverse credit reporting.

As a renter, the most you’re likely to lose is your bond, although you must ensure you make your rent payments on time each month as this is something future landlords will be looking for.

NO MAINTENANCE COSTS

When you are renting, repairs and maintenance is your landlord’s responsibility.

Landlords are also responsible for council rates and taxes, and building insurance.

folder tools repair

As a renter, you are required to pay your rent and other utilities like water, gas, electricity and telephone, as well as insurance if you want to cover your own belongings.

So despite what you might read in the press, it’s not all bad news when it comes to renting.

It might not be everybody’s end goal, but there are positives that come from being a renter – the main one being able to afford to put a roof over your head.

However, to make renting more appealing and more equitable form a social perspective, and to help alleviate some of the downsides of renting, the laws protecting tenants could do with a bit of tightening up.

This is especially so around things like lease terms, the ability for tenants to make minor alterations, keeping pets and the issue of eviction notices.

In other words, addressing these problem areas would help provide tenants with better lease tenures and encourage them (or better still, require them), to take as much care of their rented property is if it was their own.

That way, everybody wins.

Article by Peter Boehm is the Consulting Finance Editor with onthehouse.com.au which offers a unique information source on virtually every property in Australia and provides data on a property’s sold and rental history as well as current property valuations

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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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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http://www.ljgrealestate.com.au/index.php?lan=ch   <image001.jpg>   Confidential email:- The information in this message is intended for the recipient name on this email.  If you are not the recipient please do not read, copy distribute or act upon the message as the information it contains may be privileged.  If you have received this message in error, please notify the writer by return email.  Thank you very much for your assistance in this matter and your co-operation

 

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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Filed under Brisbane Inner City, family, LJ Gilland Real Estate Pty Ltd, ljgrealestate, Spring Hill Bowen Hills Fortitude Valley South Brisbane East Brisbane

Louis Christopher on what to expect from the SE Queensland Property Market 2015

Dear Friends,

We consider Louis a person of influence as well as a friend.  This is his view on what to expect from the 2015 South East Queensland Real Estate Market.

We have been receiving increasing enquiries about the South East Queensland property market. And given what happened with the state election over the weekend plus new developments on the interest-rate front, I thought I would provide the following frank update.

Gold Coast
The market is recovering, however, the improvement appears to be slow and could stall. The rise in listings in recent months could very well be due to desperate vendors finally putting their properties on the market given they now have a stable market to be able to sell into. Have you ever heard of the catch phrase “pent-up demand”? Well there can also very well be “pent-up supply”. That’s what the Gold Coast has – too many vendors who have been sitting on their underperforming property for years. They are now finally selling their properties given the chance to unload them because the market has picked up.

Still, I think the Gold Coast is in a slow but sure recovery. Low vacancy rates and a nice rental yield are attracting investors. Economic conditions for the Coast are also favourable in that the lower Australian dollar is attracting more domestic and international tourists to the strip. Plus, there is increasing optimism on the Commonwealth Games in 2018. While there won’t be any massive infrastructure boost from current levels – it is the ‘Budget Games’ after all – there will be a positive effect nonetheless.

Overall, I anticipate Gold Coast prices will rise from here and outperform the Brisbane market, possibly posting another 5%-7% rise, which is what happened last year is most likely on the cards this year.

Sunshine Coast 
The Sunshine Coast council has some interesting statistics on the local economy. One of which is the main economic industry of the region, which the council describes as “health care and social assistance”. If I was writing a resume for the Sunshine Coast, I think I would want to hide that fact somewhere.

Nevertheless, the Sunshine Coast has been working hard to widen its economic base in recent years and the reality is that it has a very stable work force that commutes daily to and from Brisbane. This assists in creating a stable housing market, particularly at the southern end of the region.

Similar to the Gold Coast, the Sunshine Coast housing market experienced an extended and acute housing downturn between 2009 and 2013. Prices in some areas fell by more than a third. A combination of heavily inflated prices due to a 10-year run up (1999 to 2008), elevated unemployment numbers, a big drop in local tourism numbers, higher unemployment and higher interest rates (in 2010) all created the perfect trigger for an almighty property crash.

If you want an example of this, look no further than Noosaville. The area went into an extended downturn. But as we can also see, there has been a recovery taking hold since this time.

I think these areas have strong futures, not just in the long term, but also over the short term, as Australians rediscover why these geographically beautiful locations have been our playground for over sixty years.

Investors need to be very mindful that these Queensland regions have most certainly experienced more volatility in their property market, have more con men and spruikers per head of population than Nigeria, and that the best course of action is to avoid off-the-plan developments unless value can be proven.

My personal opinion is these areas are not good for novice, first-time property investors. Rather, they are potentially more suitable for experienced investors who need some diversification, who invest purely on the numbers and can see through the glitz for what it is.

Brisbane
Our statistics on Brisbane are not particularly exciting, other than to say we are not recording any material rise in listings at this stage. Overall, I am more cautious on Brisbane than I was 12 months ago, particularly now given that the state will have a very left leaning government in place or a hung parliament. Both of which are not exactly favourable for economic development.

Those in my industry that called for a big property boom in 2014 totally got this wrong (yet will never be held to account..once again). There was never going to be a boom last year and that was because of the ongoing overhang of housing supply that was always going to keep a lid on prices, plus the ongoing economic downturn created by state government’s austerity and the mining downturn.

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.

Leave a comment

Filed under family, LJ Gilland Real Estate Pty Ltd, ljgrealestate