QLD Brisbane outer ring townhouses

Genuine question - appreciate feedback on why Brisbane outer ring townhouse values have stagnated, or often fallen in value over the last 5 years.

While not my preferred investment sites, the values for townhouses intrigues me. Suburbs such as Burbergary, Strathpine, Kippa-King, Bracken Ridge, etc all seem to experience the flat or falling value scenario.

 

You could say the same about practically anywhere in greater Brisbane between 2008-13. Only recently have things turned around and not all areas...yet.

 

Thanks Hugh72, although I don't think Brisbane has gone backwards. Here is one example I have looked at in Kippa-Ring:

http://www.realestate.com.au/property-townhouse-qld-kippa+ring-117077395

For sale at $259k

http://www.onthehouse.com.au/report.../Unit_12,_30_Fleet_Drive_KIPPA-RING_QLD_4021/

Last sold in 2010 at $339,950

 

To me town houses are like units, all to easy to build... Look around many area's they can stick 10-20-30 or more on one site... No point of difference when selling if there are others for sale in the same complex, usually limited parking which is not great if 3 bedrooms... I've been offered so many townhouse zoned blocks in Logan they will continue to go up (construction wise). I would only consider one close to the city and close to good transport if and when houses become very expensive like Sydney.

 

I have seen the same thing, you have to look at the strata costs, an agent told me about a townhouse development in Eagleby, $100 (approx) a week in strata fee's he said...! Less your agents fee's and rates and water doesn't leave much return hence why some are selling way under purchase price. Another agent told me about Deception Bay townhouses, investors aren't interested in them, but when he lists regular houses the phone runs hot...

 

Agree somewhat that townhouses can be similar to apartments or units in regards to prices, different to houses. Body corporates fees and what not.

 

Townhouses in Brisbane are similar to apartments/units in Sydney. During the boom time, so many of them went on the market. Its resale value generally falls noticably after wards during the bust period. But if you can pick up a townhouse which is below market value( in bust periond), you will still win during the next cycle.

 

I would agree with the last point: this is the advantage of TH to a house...they are generally better located with better transport options - a house with those characteristics [ and similar quality] will be very significantly more expensive, although will come with more land.

 

I had noticed these as well - all of the owners have taken a massive loss from when they brought new. I've spoken to a few agents about these and all have had the same opinion - don't touch them.

The whole complex is predominately rented so there's tons of choice, all the THs are small and not particularly well designed (thin walls / small rooms) and the quality of tenant is dropping as landlords struggle to fill vacancies. Why would somemone buy at $339k and then sell at $259k? They must be desperate to get out. It's not just this one person either, there's always a few on the market from that complex at $260k - $290k.

 

I have had a couple of clients do alright out of these from a positive cash flow perspective.

Their Strategy
1. Low offers on the ones like above where people have taken a hit and do so on multiple ones until they hit someone desperate enough to take an even bigger hit.
2. Repaint, recarpet and tidy up so that theirs is basically the neatest in the complex.
3. Stay on top of maintenance and ensure that their remains one of the neatest if no the neatest in the complex

That way, even with a higher vacancy rate, theirs is always the most attractive in complex so rents easily. These guys would go in at the $259k ones at around $219k. They get a lot of no's but it is the odd yes that makes them happy.

 

Great feedback. Thanks, this is the reason I come here!

Took a drive out there today and I was quite surprised at just how many townhouses are there. Must be a mile of them parallel to the new train line.

Interesting tactic RPI. More food for thought, but like I indicated at the outset, I don't think these suburbs (or such developments) are for me.

 

Most units are built as cheaply as possible. Only the minimum specs as "guessed" by the developer are built. Minimal storage, small garages and a generally cramped feeling. Not the sort of place you'd want to live in, except on a short term basis. Most developers would build without a toilet if they believed it would't affect the market price. But in this drive to maximize profit at all cost, it means the end product is less than desirable, and hence the minimal or negative capital growth. At least that's my take on it. There are a lot of developments (including inner city apartments) that aren't made to live in "for a lifetime" so to speak.

It would be nice if in general developers cared more about the end product but I can see it's a bit of a catch-22. Until the market drives developers to do this, they won't. And the only way they'll change is if and when developments start not selling or selling for less than expected, coupled with other developments that are "better" selling for more and quicker. It's a risk, and developers are generally very risk averse.

 

i think if you were to generalise any more, you'd be at risk of opinionating yourself out of existence.

 

@BarneyRubble. I have made a motza from near new/modern villas and townhouses, having doubled / tripled in value and yield.

The idea is to purchase good quality, well located property in high density areas (in metro area of capital cities), at or below fair market value, as fast as we could reasonably afford and then hold them long term in order to realise there compounding CG.

We chose to purchasing near new property over older style for the following reasons, in no particular order:

• To maximise non-cash depreciation deductions

• To minimise maintenance & repair costs

• More modern & attractive to tenants, thereby minimising potential vacancy rate

• Attract higher rent, thereby maximising yields

Without getting into the "which is better debate, houses or Units", our preference is for townhouses & villas with a 30%(of lot) land area courtyard so as to eliminate high rise apartments that only have balcony's, for several reasons in no particular order:

• lower maintenance & upkeep for the tenant

• lower purchase and entry level into a higher CG suburb

• rapid growing market demand for these type properties - one of the largest groups being the Baby boomers coming into their retirement years and having to downsize for financial & lifestyle reasons.

• greater cash and non-cash tax deductions in relation to IP purchase price, therefore maximising portfolio cash flow.

• able to hold more IP’s across our portfolio - thereby minimising suburb over exposure risks and maximising portfolio compounding CG exposure across increased multiple markets.

Early on in our journey we looked to purchase in metropolitan suburbs with a 7% historic CG that were approved for and/or were about to undergo gentrification...and that allowed us exposure to short-middle term CG to leverage against faster. I looked to where the government, commercial, retail and private sectors were injecting money, which ultimately beautified and uplifted the overall feel of the area.

This in turn attracted people wanting to purchase, thereby creating demand and putting upward pressure on prices. It also increased our rental yields due to the demand of people wanting to rent in these areas as well.

Later purchases we targeted metropolitan satellite cbd’s. We found these to be very good consistent CG areas with main arterial roads in/out of the suburb, public transport hubs, major shopping precincts, with high employment, good educational, medical & recreational facilities.. All the things people want to be located close by to and/or within easy commute.

I hope this helps.

 

Ugh, your point being ? *Here we go*

 

Don't worry about it.
I still think large townhouse developments are similar to large unit complexes. You don't have the 'scarcity' value.

 

CG for All property types comes down to supply/demand equation.

 

Rixter, how long ago did you purchase your earliest IPs that formed part of your posted townhouse/villa strategy (assuming you haven't since sold off some of the early purchases)?

Do you believe you would have had the same success if you were starting from scratch today purchasing comparable stock at today's prices with today's lending criteria and today's yield and we were having this discussion the same number of years in the future from your answer to my first question?

Cheers,
Dave

 

Supply... Demand... AND Confidence - without confidence at a local, state and federal level - people aren't going to stick their hands in their pocket and spend hundreds of thousands of dollars on a new home or an investment property... confidence has more to do with property markets than a lot of people realise.

 

Consumer sentiment is one the precursor fundamentals to the demand side of the equation .