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Property market update: Brisbane, July 2020

Property market update Brisbane, July 2020

While most major property markets struggle to stay afloat, Brisbane market is believed to be exhibiting resilience yet again. How will the Queensland capital city market fare in the remaining months of 2020?

Despite the overall median data trend showing slight falls in house values, Brisbane continues to witness a significantly high demand for quality housing, according to property professional Melinda Jennison.

“Over July, some open homes we have attended over the month of July have seen more than 30-40 groups through. This illustrates that buyers are still very active in the Brisbane property market,” she highlighted.

“Advertised properties that are listed for sale in desirable locations are being sold very quickly in Brisbane. Often, the sale is a result of multiple offers being submitted on the property. If listed for sale by auction, they are achieving high prices with multiple registered bidders.”

While Sydney and Melbourne lead the fall in capital city values with as much as a 1.2 per cent decline, Brisbane continues to witness strong prices still being paid for quality properties in many regions around the city, as well as several properties being traded off-market.

Ultimately, the COVID-19 outbreak has not resulted in a measurable fall in property prices across Brisbane, so buyers should not expect a bargain brought about by the pandemic, according to Ms Jennison.

Property values

House prices across Australia have fallen by 2 per cent, while unit prices are down even further at 2.2 per cent over the quarter, according to the latest edition of the Domain House Price Report.

While all major capital cities saw unit prices fall, house prices fell in most of them except Adelaide, Canberra and Hobart.

Brisbane, in particular, saw property values drop by just 1.4 per cent over the quarter – buffering price falls better than Sydney and Melbourne.

Over the month of July, the latest Hedonic Home Value Index data by Corelogic found dwelling values in Brisbane declining by 0.4 per cent.

Median house values for the greater Brisbane region fell by -0.3 per cent over the month, bringing the median house value to $555,284, while unit median values declined by -0.5 per cent, bringing the median unit value to $384,681.

According to Domain, Brisbane is showcasing a “two-speed property market” as Brisbane City, Moreton Bay, Scenic Rim and Somerset house prices all fell over the quarter, while Ipswich and Logan remained stable.

Domain’s Dr Nicola Powell said: “Prior to COVID-19, there was promising growth in prices for Greater Brisbane. Although this has reversed over the quarter, the fall in prices to date has been minimal considering the economic aftermath of border closures and shutdowns.”

“An initial pullback in seller and buyer activity during the lockdown acted to underpin prices, government financial support has kept distressed or urgent sales minimal, and incentives have encouraged buying journeys to begin.

“The outlook for residential property has improved vastly in recent weeks.”

Ultimately, despite value losses across major capital city markets, Domain noted that the impacts “have been minimal” as the expected drastic price falls were buffered by significant government stimulus, mortgage holidays and the continued low-interest rates supporting home values that have also kept distressed and urgent sales low.

Supply and demand

For the week ending 26 July, CoreLogic found that, of the 1,315 reported auctions, 54.1 per cent returned a successful result, which is an improvement from the week prior when a 53.1 per cent final clearance rate was recorded.

In Melbourne, 540 homes were scheduled for auction, but less than 50 per cent of these returned a successful result.

In Sydney, the final auction clearance rate fell across a higher volume of auctions last week as there were 594 homes taken to auction, which returned a final auction clearance rate of 60.6 per cent, lower than the 61.4 per cent over the week prior when 515 auctions took place.

Across the smaller cities, Canberra was the best-performing capital city, with 77.6 per cent of homes selling at auction. However, this was lower than the week prior when an 88.6 per cent final clearance rate was achieved.

Following Canberra’s results are Adelaide (60.7 per cent), Brisbane (43.9 per cent) and Perth (28.6 per cent).

Rental market

Over the quarter, unit rental yields fell by 3.2 per cent (equivalent to $15 per week), marking the biggest drop in more than 15 years as COVID-19 pushed landlords to reduce rates, Domain’s latest research found.

House and unit rental prices fell across most major capitals, with Sydney and Hobart unit rentals hardest hit.

According to Dr Powell: “The rental market has become highly fragmented in recent months. With weaker conditions for units compared to houses, tenants have a better chance of nabbing a cheaper unit.”

“This weakness has been led by significant rent reductions in Sydney and Melbourne inner-city areas due to a surge in advertised rentals from March to June.”

Meanwhile, Brisbane house and unit rents also fell over the quarter, but year-on-year data showed that rents remained flat.

At a city level, the rental market in Brisbane has definitely recovered, according to Ms Jennison.

With over 1,200 REIQ property management member agencies surveyed throughout Queensland, results show that only 6.05 per cent of residential rental tenants qualified as “COVID-19 impacted” under the state government’s COVID-19 Emergency Response Regulation. This represents approximately 3,950 renters from a state total in excess of 577,000 residential tenancies.

However, there are still some at-risk markets around the city, particularly in terms of the imbalance in supply and demand.

While Brisbane real estate has not been impacted like other cities with international border closures, plummeting foreign student numbers, job losses and pay cuts have still made their mark, with Brisbane’s CBD particularly exposed to reduced rental demand.

“The vacancy rate in many locations is trending down and is very tight. The areas where this trend is not happening are in the Brisbane CBD and locations immediately surrounding this and also in areas where there are a lot of higher-density unit developments. In these locations, vacancy is still a big problem. Therefore, these markets remain high-risk,” she said.

2020 outlook

Moving forward, there remains a lot of worry and concern about what might happen to property values across the country when the government’s fiscal response starts to taper in October and repayment holidays expire at the end of March next year.

For one, experts are forecasting a rise in distressed properties coming to the market.

However, they have yet to see whether this would also mean any downward pressure on prices.

“This is where I think the different property markets around Australia will each experience something slightly different,” according to Ms Jennison.

According to the Commonwealth Bank Home Buying Spending Intentions Index, there was a 6 per cent rise in home buying intentions nationally up to the end of June 2020. This index showed the index had returned back close to levels seen in March – after much weaker readings in April and May.

“We are definitely seeing this trend on the ground with the current high volume of buyers in Brisbane. Because of this, I’m sure we could see some moderate increase in new listings come to the market without any significant impact on the supply and demand balance,” she highlighted.

“Remember, property prices will only fall when supply outstrips demand.”

With dwelling approvals now at the lowest level in eight years, the future supply pipeline also looks tight. The most recent Australian Bureau of Statistics data showed a decline of -10.9 per cent in new detached house approvals in Queensland.

Overall, real-time demand remains strong in Brisbane as property buyers are being fuelled by the lowest-ever interest rates, good levels of affordability and strong rental yields compared with many other state capitals.

Amid economic uncertainties, Atelier Wealth’s managing director Aaron Christie-David said that conditions are likely to be more difficult in the short-term, but those with a long-term view will most likely prevail.

“For investors wanting to sell, days on the market have increased as has vendor discounting, which could further impact median prices,” Mr Christie-David highlighted.

“The good news is that while yields have been trending downward, in May rental yields recovered by 3 basis points. There continues to be opportunities for investors, with supply at record lows and demand strong in certain suburbs.

“Areas which will benefit from First Home Buyer incentives and where incomes and jobs have been less impacted by the economic downturn will remain attractive to investors and will withstand any potential deeper price falls from September.”

Home upgraders will also have good opportunities in today’s market, according to him.

“Falling property values will allow for upgraders to access better homes. Steeper falls will lead to better discounts, but will also affect those opting to sell their PPOR. Record low-interest rates are also making purchases much more affordable,” he said.

Meanwhile, first home buyers will have government incentives, record low-interest rates and falling prices providing them opportunities.

Mr Christie-David advised them to focus on saving for their deposit right now so they could take advantage of the dropping property values.

“The higher the deposit, the lower the [loan-to-value] ratio (LVR) which may potentially allow you to avoid lenders mortgage insurance… If rates fall again or remain steady, this can provide good opportunities for first home buyers,” he said.

While there’s no certainty about the future of the property market, Mr Christie-David advised investors to avoid panicking and, instead, watch the market closely.

As September is a potential danger zone, he strongly encouraged undertaking extensive and engaging professionals in order to assess how any investment decision will affect their portfolios in the short, mid and long-term.

For those keen to buy, Propertyology’s head of research Simon Pressley highlighted five major government projects in Queensland that are tipped to lift the housing market:

  • Inland Rail project: A $10 billion 1,700-kilometre rail infrastructure project connecting ports in Melbourne and Brisbane to meet demand for an anticipated 75 percent increase in Australia’s freight over the next decade. The inland route was strategically chosen to more efficiently transport food and general cargo throughout the eastern states and to reduce the volume of trucks on highways. Completion of the project will provide enormous scope for Australia’s vast agricultural precincts to ramp up production as a global giant food supplier. The post-construction economic benefits for regional communities will be substantial and will have a positive influence on property markets in communities such as Seymour, Bendigo, Shepparton, Albury-Wodonga, Wagga Wagga, Griffith, Parkes, Dubbo, Narrabri, Armidale, Goondiwindi, Toowoomba and Beaudesert.
  • Australia-Singapore Military Training hubs: The Australian and Singaporean federal governments have signed an agreement for Australia to provide advance military training to 14,000 Singaporean military personnel every year for 25 years. Singapore has committed to investing $2.25 billion, which will benefit Townsville and Rockhampton through facility infrastructure development. In addition to construction jobs, the 25-year provision of goods and services to trainees will provide long-term economic benefits for Rockhampton and Townsville, increasing the demand for real estate in both regional cities.
  • Maroochydore City: A $430 million development of a modern CBD for the Sunshine Coast. The region’s population grew at a higher rate than any other location in Australia over the last decade. The new Maroochydore city centre development will include commercial, retail, high and medium-density residential development, high-speed internet, parklands, waterways and bicycle tracks.
  • Queens Wharf: A $3.6 billion world-class entertainment precinct in Brisbane’s CBD, meaning that Australia’s third-largest city will (finally) have a world-class precinct to rival Melbourne’s Crown entertainment and Sydney’s Barangaroo precincts. Due for completion in 2022 and developed across five city blocks, this game-changing project will attract a staggering 1.39 million visitors per year, bring billions of dollars to the coffers of Brisbane’s economy each year, create approximately 10,000 new jobs and breathe an exciting new energy into the Brisbane community.
  • Hells Gate Dam: Agribusiness and general economic development for northern Australia will be big winners from this $5.3 billion irrigation and energy project by constructing an enormous dam on the upper Burdekin River, north of Charters Towers. According to a viability assessment conducted by Townsville Enterprise, if Hells Gate Dam is developed to full capacity, it has potential to inject billions of dollars into the North Queensland economy. The property market beneficiaries of this game-changing project will be Cairns, Townsville, Innisfail, Ingham, Ayr and Charters Towers.

 

 

 

This article is republished from www.smartpropertyinvestment.com.au under a Creative Commons license. Read the original article.

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Brisbane

Mirvac Sells Golden Triangle Tower for $87m

Golden Triangle Tower

Melbourne-based property fund manager Forza Capital has picked up a prominent office building in Brisbane’s “Golden Triangle” from Mirvac for $86.7 million.

The property, located at 340 Adelaide Street—on the corner of Adelaide and Wharf Streets, comprises 12,800sq m of B-Grade office space across 17-levels, together with a ground floor cafe and parking for 100 cars.

In recent years, Mirvac has refurbished the building, upgrading the lobby and repositioning the external ground plane and retail.

Mirvac chief investment officer Brett Draffen said the proceeds from the sale will be redeployed into prime and A-grade commercial assets as well as its $22.4 billion development pipeline across the residential, office and industrial sectors.

The deal, negotiated by CBRE’s Flint Davidson, Tom Phipps and Bruce Baker, represents an 11 per cent premium to its book value in June.

“As the first major, post-Covid capital markets transaction in the Brisbane CBD, this deal highlights the demand from onshore investors for quality office assets,” Phipps said.

Golden Triangle Tower1

The building is 93 per cent leased to tenants Covermore, Cerebral Palsy League and Oracle, and has a weighted average lease expiry of 3.8 years. Image: Supplied

“As travel restrictions ease we expect the market to awaken in the first half of next year fuelled by historically low financing costs and Brisbane’s attractive yield spread.”

Forza Capital director Ashley Wain said the asset represented exceptional value, given the building’s comprehensive refurbishment program, and was transacted with a high degree of certainty over a period of one month.

“Shortly after Covid struck, [we] identified the opportunity to prepare our investor base of sophisticated investors for opportunistic property investments.

“Speed to transact was anticipated to be critical and we believed getting early capital commitments and being able to transact quickly would be paramount to securing new investments on attractive metrics,” Wain said.

The acquisition represented $52.5 million of equity from Forza’s client base of family offices, high net worth advisory groups and individuals, and will now sit in the newly-established Forza 340 Adelaide Street Fund.

“The uncertainty in office investment markets has created really attractive investment metrics which, when combined with highly competitive debt funding, results in a target 8 per cent per annum distribution yield over the first five years of the investment,” Wain said.

Last week, Dexus listed a neighbouring A-grade office tower, located at 10 Eagle Street, with price expectations of $300 million.

 

The post “Mirvac Sells Golden Triangle Tower for $87m” by Ted Tabet appeared first on the theurbandeveloper.com Blog

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Brisbane

Yeronga trophy home fronting the Brisbane River listed

Brisbane River

A riverfront Yeronga, Queensland trophy home has been listed without a price guide.

The five bedroom, five bathroom abode is being marketed by Heath Williams and Nick Hurwood of Place.

Situated at 363 Brisbane Corso, the tri-level home fronts the Brisbane River.

Set on 916 sqm, it features two swimming pools and a private boat pontoon.

Other features include full-height stacked glass sliding doors opening out to a covered balcony which capture sweeping Brisbane River views as well as a ground-level rumpus or games room equipped with a bar, a projector and a linked balcony.

It is located seven kilometres from the CBD.

 

The post “Yeronga trophy home fronting the Brisbane River listed” appeared first on the propertyobserver.com.au Blog

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Brisbane

Mirvac offloads Brisbane office building for $87m

Mirvac office building

Mirvac has offloaded a 17-storey office building in Brisbane to Melbourne-based property fund manager Forza Capital for $86.75 million in one of the first institutional grade office deals to take place in the city since COVID-19 struck.

The building, which is in Brisbane’s ‘Golden Triangle’ at 340 Adelaide Street, had undergone an extensive refurbishment by Mirvac and sold at an 11 per cent premium to its last book valuation in June.

The property, which is 93 per cent leased to tenants such as Oracle, Cover-more Insurance and the Attorney General’s Office, has a 3.8 year weighted average lease expiry.

Brett Draffen, chief investment officer at Mirvac, said proceeds from the sale would be redeployed to grow its asset creation business and would allow the group to “capitalise on opportunities to create Australia’s next generation of workplaces, residential communities and mixed-use precincts”.

The office tower is the first asset to be acquired by Forza Capital following a $240 million capital raising from its client base of family offices and high net worth advisory groups in September and will sit in the newly established Forza 340 Adelaide Street Fund.

Forza Capital director Adam Murchie said they had advised their investor base to be prepared for opportunistic property investments shortly after COVID-19 had struck.

“Speed to transact was anticipated to be critical and we believed getting early capital commitments and being able to transact quickly would be paramount to securing new investments on attractive metrics.”

Forza Capital director Ashley Wain said the uncertainty in the office market had created attractive investment metrics.

“When combined with highly competitive debt funding [the metrics] result in a target eight per cent per annum distribution yield over the first five years of the investment.”

The deal was negotiated by CBRE’s Flint Davidson, Tom Phipps and Bruce Baker, and Matt Lawrence arranging the debt.

“As the first major, post-COVID capital markets transaction in the Brisbane CBD, this deal highlights the demand from onshore investors for quality office assets,” Mr Phipps said.

“As travel restrictions ease we expect the market to awaken in the first half of next year fuelled by historically low financing costs and Brisbane’s attractive yield spread.”

 

The post “Mirvac offloads Brisbane office building for $87m” appeared first on the afr.com Blog
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