QLD Unsure what to do with unit in Brisbane

Hi guys,

First post here please go easy. I've recently bought a unit in a development in Corinda for 455 (two bed two bath and one study) and now doing a fairly serious rethink about this property. It seems to be a bad investment off the bat. It was my first property and a probably should've done my research more.

I'm wondering what other people's feedback would be regarding selling it now? Or would I be better off holding on to it? It seems the market for units is expected to drop over the coming two years and I don't want to be caught in a tailspin.

Thanks guys.

 

You are already in a tail spin. I suspect the BNE unit market for new developments isn't going well anytime soon. I suppose it depends on how much of a hit you have to take if you sell now.

Is this an IP or a PPOR? Did you get a SD concession or a FHB grant?

 

What rent can you get for it? (provided there doesn't become a major oversupply dropping rents)

 

Hi @BrisbaneIP86 , I've sold a few sites in the area and know the market there reasonably well. Interested to know a little bit more info first. Assuming it's off the plan/new construct ? There is actually very little available in "Corinda" itself but quite a bit of stock either side in Sherwood and Oxley. How many Sqm etc ?


.

 

Rents will drop most likely

 

Wow guys thanks for responses!

(1) It's an off the plan property
(2) Currently rented out at $370 week for 6 month contract that ends in June
(3) It's neutrally geared
(4) Its 97sqm and yes off the plan
(5) It's located right next to Oxley but is technically Corinda
(6) It's an IP so no FHB

I guess what I'm looking to work out is whether it's better for me to sell and take the hit now or hold on and wait for the unit market to recover.

Thanks guys again!

 

What will you get for it if you sell it now?

 

That rent seems very low ?

 

The rent is quite low however I was keen to get somebody in immediately at a shorter contract and didn't want to be out of pocket.

The buyers agent who sold it to me said that as developments are drying up I should expect to see an increase in demand in the coming years and it's worth holding on to.

Bank valued property at 7 grand under purchase price recently but I don't have any formal idea as to what I would get for a property like that currently in the market.

I am young and looking at property as a long term investment so I'm leaning towards holding it and braving the storm but have read some very worrying reports about a 15-30% drop in unit prices around Brisbane. Should I expect this to happen?

 

I don't think it will be anything like that severe. A lot of it rides on potential settlement defaults in the larger inner city projects (no dilemmas reported so far) and how the media responds to that &, interest rates of course. There's a moderate amount of new stock around you but its not a critical over supply and the market out there has been starved of units for a long time. My advice would be to bunker in and try and get that rent up, selling now could be very painful.

 

We all know the glut of apartment has already started. Not the first time this is happening, locals all know what happened down at the gold coast apartment market some time back when they had a glut (definitely more than a 30% drop in prices when things got bad)

At the moment holding and hoping for upturn even in the medium term is a big gamble, unlikely anything will stop the glut coming in later half of the year and for next 2 years at least.. You might be looking at holding for quite some time before there is any upturn (maybe 5-10yrs)

If u are that uncertain on holding, I reckon it'd better for you to take the loss, sell ASAP and only buy in when the market actually shows some stabilising in rents and maybe some price gains as well. Live to fight another day

Pretty sure you'd be asking the same questions again in another half years time. Only by then no one is gonna wanna buy even if you are selling at a steep discount.

When we see posts like this, we know that the bleeding in the apartment market has truly started in Brisbane.

 

Personally, I would hang on to it.

There are quite a few things in your favour.
Corinda is a good area and not subject to the current high development of inner city suburbs.
At 97sqm you have a decent size unit, not like some of the shoe boxes that will be a dime a dozen and not very desirable to tenants.
Hopefully you are close to a railway station, the Ipswich line has a good service with easy access to the city and also UQ via the Indooroopilly station.
You did the right thing by getting a tenant in quickly, rather than hold out for high rent. Hopefully tenant will renew at a higher rental.
Being a unit, most maintenance will be taken care of by the body corporate, so should be a relatively easy investment for you.
And don't be sidetracked by the mantra that "land appreciates, buildings depreciate". Some of our best percentage capital gains came from units.

And speaking of depreciation, you have had a depreciation schedule done, haven't you? Deductions on a new unit should be substantial and help cash flow.

Gains may not be great in the short term, but should be steady. Property ownership should have at least a ten year time frame if possible, so don't panic and bail out. Selling fees and entry costs if possibly buying again will be a big hit to take.

I'm old enough to have lived through a couple of real estate downturns, and so long as circumstances don't force you to sell, most ride them out till things improve. At worst, you may have to adjust your rent to meet the market.

Above all, don't panic!
Marg

 

Quite true - for some.

I remember a rather well known financial adviser telling everyone to sell their Gold Coast apartments as they would never recover. They did.

And at that time there was a well known two tier market for those units on the Gold Coast. Locals bought at a realistic prices and in good locations.

Hordes of investors were flown from interstate, driven to outer suburb huge complexes (that locals would not touch) and signed up before being flown home that night. The prices were grossly inflated, and they were the ones that lost the well quoted 30% when owners realised they had been sold a dud and bailed out at the bottom of the market.

But many held on to their units, even the over-priced ones, rode the market down and then right back up again, and eventually sold at a rather nice profit.
Marg

 

Good advice by @Marg4000. Oxley is one of those good emerging areas, following on from Corinda / Sherwood etc. I heard QR are upgrading/replacing the signalling system along that line soon that should provide for a better train service. The unit appears to be quite big, and should be easy to rent or live in.

Whilst having rapid growth in the short term would be unlikely, long term growth trickling along is probable. What drives units, is the cost of the underlying land and labour cost to construct, as these things increase, new units become more expensive which drives the price of older units.

If you do the things as suggested, get depreciation schedule, slowly increase rents over time, keep an eye on the body corporate activities, either continue to save cash in an offset account or pay down the loan to increase equity, then there should be a long term benefit.

Yes, you will need to be looking at a 10 year time frame. (I once owned an apartment in Kangaroo Point, newly constructed in the 90s, it took 10 years to grow, I did end up selling it to pay down my PPOR debt at the time. That unit has gone up again, but it took a very long time).

If in the not too distant future if the property increases in value and you could recover costs, you could also exit then, otherwise it's a long game. In the meantime you can continue your property journey.

What concerns me of course is that you mentioned "buyers agent". I'm concerned because I would have thought a reputable buyers agent would have made a number of recommendations, e.g. older apartment closer to the city that you could add value, maybe a house on the outskirts of the city, etc. It would appear that the buyers agent's interest was more focused on themselves (getting the developers commission) rather than your own.

Agree, don't panic!

 

A buyer's agent can only act on the instructions given. Best results will come from doing your own research and narrowing down the type of property that you are interested in. Since we don't know the brief in this case it is a bit unfair to make assumptions.

I am concerned by the number of posts on this forum that seem to think that if they engage a buyers agent, he/she will scour all of Brisbane or another city and come up with an absolute bargain in a top location. If only it was that simple!
Marg

 

@Marg4000 : yup agree with what you said. Depending on Op's strategy, holding this investment might throw a spanner in the works and he might miss out on the chance to move on and invest in other markets which might be moving up, especially since this is his first IP, probably will have no chance of extracting equity in the next couple years.

But since its his first IP and we locals know how painfully slow things move along here ;P
Besides OP might not have the temperament to hold for 10yrs or more.

 

Buyers agents don't sell real estate. Are you talking about a buyers agent who you engaged and paid to find and negotiate a property for you. Or are you meaning a sales agent that "works with buyers" falsely calling themselves a buyers agent who is paid by the vendor or developer?

 

+2 for me, on what these ladies both said.

 

Rents have already dropped and are continuing to do so.