Apartment oversupply - Brisbane

Markets like Moorooka seem to be experiencing oversupply- one street off Mayfield rd has had a bunch of new appts put on market lately selling v slooowwwlllyyy. One guy has paid 600k for a block and spent a ton more on plans only for finance to drop off so he tried to sell with DA but still no luck- holding costs must be problem....

 

Transitioning to townhouses now. See the mercy laundry site.
https://brisbanedevelopment.com/cedar-woods-plans-new-residential-development-for-wooloowin/

 

Hi Andrew,

One year on from your post on Apartment situation in Brisbane, have you seen any major drop in rents or sale price of apartment fall drastically

- Perry

 

Hi Perry,

Absolutely. Rents have fallen in quite a dramatic way - up to $100 per week in some cases on what some investors were getting as part of their initial rental guarantee. Vacancy rates rose from just above 3% to around 6% as a result of huge amounts of new stock. Prices have also fallen.

Brisbane city council is a disgrace in more ways than one (see my previous posts on the two tiered rating system that many Qld councils gouge investors on) and the approval of so many new apartment blocks has decimated the apartment market in Brisbane for the short (and possibly medium term), all in the name of revenue.

Fortunately, many projects have now been put on hold as developers are aware of it and banks simply won't lend on any more new stock in many cases. When they will, huge deposits are required.

The pain for apartment owners in Brisbane isn't anywhere near over yet unfortunately.

 

Great post, and 100% agreement from me! I don't think we're anywhere near the bottom yet either.

It's worth noting that completed stock coming onto the market is pretty well completely dried up by 2019, and there's a notable lack of applications to replace stock from then on. I'm looking forwards to an over-correction circa-2020....

 

Agree with the rental market being slow.

As for sales, I have yet to see major price drop. A small 2-beddder still commanding over half a mil,, and Newstead still asking over $600k, without locked-up garage. A friend got excited with a car offer, only to find out the property costs a lot higher than others....There's probably plenty of stock esp South Brisbane but there seems to be no panic sales yet....

 

Values haven't dropped anywhere as significantly as rents.... yet! I imagine it's mostly because developers are stuck between a rock and a hard place where they can't really afford to reduce the listed price, so they just end up with a low rate of sales. Slow sales and vacancy inevitably results in drops in value, just depends on how resistant the selling market is to the correction.

 

Hi Thomas,

Keen to understand more when you say "stock coming onto the market is pretty well completely dried up by 2019, and there's a notable lack of applications to replace stock from then on. I'm looking forwards to an over-correction circa-2020".. are you saying we will once again see approvals for apartment construction commence in 2020

Cheers
Perry

 

I shouldn't be so dramatic, there's still development expected, but with lending tightening and prices compressing I expect things to keep looking a bit bleak until about 2020.

 

This is the weekly rental (over recent years) for my 2 bed 2 bath furnished apartment in Newstead.
Currently rental guarantees getting thrown around market as well as a free months rent etc These are obvious red flags.
Potential tenants in the area are putting in cheeky offers (I would do the same in their situation)
recent val on mine 530k. Higher than expecting but westpac sit at 70%LVR on assets in area.
Developers are acquiring, getting the planning then selling on without coming out of ground.
(the sweet spot with instant profit.)
Banks are putting the brakes on while council appear to still have foot on accelerator.
I'm appreciating the banks position.

2010 rent 550
2011 rent 575
2013 rent 590
2014 rent 590
2015 rent 590
2016 rent 570
2017 rent 500

For those interested in a bargain from a developer ....
Sure you'll get that stone bench top with miele appliances BUT!
The sales guy will tell you the the body corp is only $1500 a year.
On completion and handover the builder will go off site, you'll get your shiny new apartment.
In a year or two when your at your body corp your fees will have to go up to $6000
because those machines in the gym as well as the lap pool, otis lifts and onsite management
are no where near going to be covered by $1500 !!!!!

If you're going to do it,
find out body corp costs of established neighbouring props that align with your target in features offered. Apply that figure NOT the one given to you by a sales guy.
go direct to builder (cut out sales team if poss)
Then put an offer in that is low. If you're not uncomfortable/embarrassed with your offer then it's too high.

All they can say is no.

Good luck

PS don't just check your apartment. Check all common property. Make sure auto gates etc are commercial grade, not residential. or that will be another expense to blind side you at the first meeting where the figures aren't stacking. That stone bench top is to seduce you and stop you looking behind the curtains.

I will never buy another property with lifts, gyms, pools, onsite managers etc. again.
Lesson learnt! Properties that stroke egos empty pockets !

 

Good post.

Our rents have dropped $100 per week for both or inner city apartments at Bulimba and Hamilton since 2011...can pick up excellent basement priced apartments atm (not new OTP but established apartments that are only a few years old) as investors struggle to hold with no growth past 7 years and interest rates rising

 

As a property manager, the best piece of advice I can offer to anyone considering purchasing a unit as an investment is to see a property manager first. A property manager will identify for you the accurate price you can expect to receive in rental return, not the inflated one often sold by developers. There are many tricks that they use to portray the rental return of the property but a property manager will be able to tell you realistically how much you'll get for it.

 

What was it before it transition to townhouses?
Was the plan different?
I wonder how much these will sell for?

 

Totally agreed. And if it is in a Complex, be it apartment or townhouse, do approach the Onsite Managers. They may not be the most glamourous or confident people sometimes, but often they deliver good results, especially if you know how to leverage their knowledge......
PM me if you want to chat more.

 

More than the Median house price in Brisbane is my guess. Woollowin is a very nice suburb full of renovated Queenslanders.

 

Just had a quick look at recent for sale in wooloowin for these type of 3-2-1 New townhouse is fetching anywhere from 700k to 850k.