Record levels of new apartment completions in inner-Brisbane’s apartment market has seen it tipped into oversupply, with 52 projects abandoned or deferred over the 2017-18 period.

A new report from economic forecaster BIS Oxford Economics shows 8300 apartments will be completed in 2017-18, up from the 5,700 apartments that came on line last year. Another 5000 apartments are in the pipeline for 2019.

Due to these numbers, vacancy rates in the inner-Brisbane market have increased, sitting at four percent in the December quarter for 2017.

The flow-on effects of the large-scale development and high-rise projects flooding the market have ensured downwards pressure on rents and prices for Brisbane residents.

Brisbane’s record levels of apartment completions, buoyed by an investor-heavy market, has been well publicised, and BIS has signalled that the inner Brisbane apartment market may level out.

Inner Brisbane Apartment Area

Inner Brisbane Apartment Area

Brisbane’s CBD and Spring Hill area, West End, Toowong, Woolloongabba, Hamilton and Brisbane’s inner east and north are the key areas with high saturation of large scale and high rise projects.

Suburbs West End, CBD and the inner north have the highest number of apartments yet to come to market, followed by Toowong and Woolloongabba.

The inner Brisbane market has experienced moderate growth since 2013 which BIS attributes to attractive yields, low or volatile returns for other investment options and low interest rates.

Falling rents and price growth coupled with restrictions on interest-only loans and a stamp duty surcharge for overseas investors have also diminished investor demand. BIS expects to see fewer projects able to achieve the pre-sales requirements for projects to begin.

Nearly 20 per cent of Brisbane apartments are currently sitting unoccupied.

Nearly 20 percent of Brisbane apartments are currently sitting unoccupied. Source: ABS, BIS Oxford Economics

Challenging conditions in 2018

The outlook for property nationwide will be modest at best this year, according to a recent report released by ANZ economists. National housing prices have fallen for the past six months, and house prices were just 0.8 percent higher than at the same time the previous year.

Those numbers are compared to a 10 percent year-on-year price growth 12-months earlier.

Although outright falls are unlikely, ongoing price growth will be sluggish as conditions for the housing market for the remainder of the year remain uncertain.

Recently released 2016 Census data shows private rental apartments accounted for 56 percent of the total apartment stock in the inner Brisbane apartment market area – contrasted with a 33 percent share in the greater Brisbane region.

Unoccupied dwellings accounted for 17 percent of total apartment stock in the inner Brisbane area, compared to eight percent across greater Brisbane. The increased number of properties not entering the private rental market reflects the increasing number of overseas demand.

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2017 federal budget addresses housing affordability

The 2018-19 federal budget had no measures that specifically addressed housing supply and affordability, according to the Real Estate Institute of Australia (REIA).

The 2017 federal budget included a range of measures to address housing affordability with both supply and demand measures.

Listed below are some of the budget’s highlights:

Unlocking greater supply

The federal government aims to boost the supply of housing and encourage a more responsive housing market by:

  • Providing $1bn to fund critical infrastructure, such as water infrastructure, to help speed up the supply of housing
  • Working with the states to deliver planning and zoning reform to expedite development
  • Releasing suitable Commonwealth land, beginning with Defence land at Maribyrnong in Melbourne, for housing development
  • Investing more than $70bn from 2013-2014 to 2020-2021 on transport infrastructure across Australia
  • Specifying housing supply targets via new agreements with the states and territories

Implementing incentives

The federal government is creating incentives to improve housing outcomes, including:

  • Helping first-home buyers save a deposit via voluntary contributions into superannuation
  • Reducing barriers for retirees attempting to downsize to free up larger homes for young families
  • Improving the targeting of housing tax concessions
  • Strengthening the capital gains tax rules to ensure that foreign investors are paying their fair share of capital gains tax
  • Reforming foreign investment rules to discourage investors from leaving their property unoccupied
  • Supporting economic growth and the jobs market to boost real wages

Improving regulator tools to address risks to the housing sector

The federal government is working to ensure that the Australian Prudential Regulation Authority (APRA) is able to respond with greater flexibility to financial and housing market developments that pose risks to financial stability.

This includes giving APRA new powers over the provision of credit by lenders outside the traditional banking sector. The government also recognises that housing pressures and risks may not be uniform across the country. As a result, the government will give APRA the ability to use geographically-based restrictions on the provision of credit where APRA considers it appropriate.

Whereas, there was nothing in this year’s budget that directly addressed this,” said Malcolm Gunning, president of REIA. “It was, however, pleasing to see that the government recognises the important role that the current taxation arrangements for negative gearing and capital gains tax play in increasing supply, keeping rents affordable and easing the burden on social housing by leaving these unchanged.”

Gunning added that the budget’s approach recognises the state of the property market and the impact that the Australian Prudential Regulation Authority’s (APRA) measures had in cooling the market, particularly in Sydney and Melbourne. Hence, Treasurer Scott Morrison, saw no need to make further adjustments.

“A boost to infrastructure spending, modest improvements in housing income for lower income earners, continued tax write-offs for small to medium business and growth in employment can be expected to be mildly expansionary, particularly for regional economies,” Gunning said.

“The good news for home buyers is that the budget is not expected to put pressure on interest rates as inflation is expected to remain within the RBA’s target zone. This expected interest rate stability comes at a time when housing prices in some of our major cities are showing signs of easing, leading to improved affordability for first-home buyers.”

According to Paul Drum, head of policy at CPA Australia, this year’s budget has been framed against a backdrop of a strengthening economy, with the forecasted additional revenue being used in part to fund personal tax cuts as well as an increased investment in infrastructure and the ageing population.

“The budget includes a raft of income tax, GST and superannuation changes that will impact individuals, businesses and super funds and therefore the provision of client-based business and investment advisory services,” Drum said.

“The government’s seven-year personal income tax plan promises much over a new glide path similar to the ten-year Enterprise Tax Plan. But, like the company tax cuts, the question is whether this plan will garner the support it needs to get through the parliament.”

 

Best Regards

 

Linda 姬琳达珍 and Carlos Debello (LREA)

琳达姬琳达珍Debello LREA – LJ Gilland Real Estate Pty Ltd

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New data confirms two-thirds of investors who negatively geared property were on taxable incomes of less than $80,000 a year.

The latest tax office data suggests Labor’s policy to amend the widely used property purchasing practice would mostly hit more lower-income earners with only one investment property, according to Treasury analysis of the 2015-16 tax records published in The Australian.

The statistics also included figures on the number and occupations of people affected by Labor’s $20bn plan to scrap negative gearing after the next election on any new purchases of established properties, showing 62 percent were on taxable incomes of under $80,000 a year.

The opposition has argued that the move would target the wealthy with multiple investment properties.

However, the data shows that more than 70 percent of negative gearers did so with only one property.

The Tax Stats are an overview of 16 million income tax returns for 13.5 million individuals, 940,000 companies, as well as superannuation funds, partnerships and trusts lodged for 2016. who_negatively_gears

 

 

They further reveal that teachers rank behind only company chief executives and senior managers as the largest group of property investors to negatively gear, with 58,000 claiming rental losses on their tax returns.

While 72,000 investors were listed as company executives, 99,000 people claiming rental losses on their tax returns were either teachers, nurses or midwives.

Labor has long rejected claims that lower income earners would be hit by scrapping negative gearing.

It maintains 70 per cent of the value of benefits went to the wealthiest 10 per cent citing analysis by the Grattan Institute.

In the ATO data, out of the professions, surgeons had the highest average taxable income of $393,467, followed by anaesthetists on $359,056, internal medicine specialists on $291,140, financial dealers on $263,309 and psychiatrists on $211,024.

Other medical practitioners came in sixth on $199,590, followed by judicial and other legal professionals on $198,219, mining engineers on $166,557, chief executives and managing directors on $158,249 and engineering managers on $148,852.

According to the ATO, out of nearly 1200 occupations recorded, there were fewer than 100 where women had a higher average taxable income than men — they included receptionists, schoolteachers and beauticians.

“Reports in The Australian on ATO data showing that almost two thirds of investors are on an average income of less than $80,000… affirmed independent research undertaken for HIA by The CIE,” said HIA’s principal economist, Tim Reardon.

“Changes to negative gearing would adversely impact on the housing market, exacerbating the current undersupply of housing and further reduce the efficiency of the housing market.

“This reduction in house supply would also adversely impact on wage growth and GDP.

“Driving investors out of the market will force up the price of renting as nearly 25 per cent ofrental stock is provided by private investors,” he noted.

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Brisbane New median house price: $557,214 Change: Down 0.6 per cent New median unit price: $380,196 Change: Down 4.3 per cent House and unit prices have fallen again in Greater Brisbane as the pace of annual growth slows to a five-year low. Read the full news report

House and unit prices have fallen again in Greater Brisbane as the pace of annual growth slows to a five-year low.

Greater Brisbane’s sluggish performance, as revealed in the latest Domain Group’s quarterly house price report released on Thursday, shows median house prices have fallen by 0.6 percent across the five LGAs, which include Brisbane, Ipswich, Redland, Moreton Bay and Logan. Units have fallen across Greater Brisbane by 4.3 percent.

Brisbane as a city did not fare much better — over the past six months, the median house price fell 0.4 per cent, while unit prices were down 1.9 per cent.

House and unit prices have fallen again in Greater Brisbane.House and unit prices have fallen again in Greater Brisbane. Photo: Tammy Law

It’s a case of a broken record for the Brisbane market, which has been flatlining for a number of years, Place advisory director Lachlan Walker said.

“It’s very typical of Brisbane’s market to sit there for 10 to 15 years — and then seemingly overnight, within a two to three-year period, we play catch up,” he said.

“We look back through the last eight years and the 2011 floods was that point in time where it was a make or break for us. Unfortunately, it broke us … we haven’t quite recovered from that.”

The Brisbane market has been flatlining for a number of years.The Brisbane market has been flatlining for a number of years. 

Buyer activity had changed since the end of 2017 around Brisbane’s inner west.

“Late last year it got exciting; there as this incredible urgency, multiple offers and prices going beyond expectations,” he said.

“The first few months of this year though, there’s less urgency. We haven’t seen the same level of buyer activity and that’s had an impact.”

Luxury apartments and suburbs with desirable school catchments continue to outperform.Luxury apartments and suburbs with desirable school catchments continue to outperform. 

Mr Jordan said sectors of Brisbane’s market that continued to outperform were luxury apartments and suburbs with desirable school catchments.

“Downsizers are out buying luxury apartments, that market has some strength in it, plus those moving into school catchments — they still trend well,” he said.

“Overall though, I think the change to Sydney’s market is affecting our confidence. When Sydney is going up, we look at them as a leading indicator, so when they turn, confidence in our market also goes down.”

But it was not all doom and gloom for Brisbane.But it was not all doom and gloom for Brisbane. 

Median house prices

LGA MAR-18 SEPT-17 MAR-17 6-MO YOY
Brisbane $665,000 $668,000 $650,000 -0.4% 2.3%
Ipswich $380,000 $370,000 $364,400 2.7% 4.3%
Logan $419,000 $419,500 $400,000 -0.1% 4.8%
Moreton Bay $455,000 $458,000 $450,000 -0.7% 1.1%
Redland $545,000 $542,500 $520,000 0.5% 4.8%
Source: Domain State of the Market Report. Data is aggregated for six months to March 2018.

Brisbane is funny like that. Overall, the data might show not much is happening but in certain areas, there will be a real momentum and demand driving things along. We’re also a very seasonal city when it comes to property — traditionally things are quieter in the March quarter and September quarter.

Median unit prices

LGA MAR-18 SEPT-17 MAR-17 6-MO YOY
Brisbane $436,500 $445,000 $449,000 -1.9% -2.8%
Ipswich $303,500 $306,500 $329,900 -1.0% -8.0%
Logan $260,000 $297,000 $300,000 -12.5% -13.5%
Moreton Bay $345,000 $355,000 $359,900 -2.8% -4.1%
Redland $436,500 $448,500 $435,000 -2.7% 0.3%
Source: Domain State of the Market Report. Data is aggregated for six months to March 2018.

 

Domain Group data scientist Nicola Powell said Brisbane’s affordability would ultimately help drive prices forward in the coming years.

“If you look at the latest migration figures, Queensland now has the highest rate of internal flow,” Dr Powell said.

“Combine that with the uptick in overseas migration and you’ll find that Brisbane, with its relative affordability compared to other capital cities, will turn around and prices will move forward.”

Despite another decline in Brisbane’s apartment market, the fall over the past six months was minimal, Dr Powell said.

“Those declines have certainly slowed. I think we saw the worst of that in Brisbane in 2016 and 2017,” she said.

Apartment market is very flat and many people are only selling because they have to get out.

“It’s hugely weighted towards investors but after this year, that will be it — there will be no more supply delivered, stock will be used up and then we’ll be back into another part of the cycle.”

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Rental market 23-4-18

Global data analytics provider CoreLogic has released its first Quarterly Rental Review for 2018, which tracks the median rental price of houses and units across Australian capital cities and regions.

The quarterly report measures the percentage change in rental prices over the first quarter, which is typically the strongest for rental appreciation and growth, as well as over the past 12 months to March 2018.

According to CoreLogic researcher Cameron Kusher, “The data suggests that in most capital cities the rental market has softened, although values are still rising they are doing so at a slower rate than they have over recent first quarters of the year.”

“From an investor’s perspective, large new housing supply additions and slowing rental growth means that they will need to find ways to differentiate their properties from others.  Whether that is on rental cost or by renovation, we would expect that competition for tenants in most capital cities will increase.”

“Rental yields are climbing slightly from historic low levels however, they remain lower than they were a year ago.  Investors remain most active in NSW and Vic and have been targeting capital growth rather than rental return.  With values now falling, active investors should be more focused on those regions with stronger prospects for value growth and higher rental returns.”

Key findings

• Nationally, rents climbed by 0.3 per cent in March to be 1.1 per cent higher over the first quarter of 2018 and 2.2 per cent higher over the 12 months to March 2018. In comparison to the first three months of 2017 when rents increased by 1.5 per cent, the growth in rental prices has slowed (-0.4 per cent).

• Rental growth over the first quarter is higher in the regional markets (+1.2 per cent) than in the capital cities (+1.0 per cent). This trend is also reflected in activity over the past 12 months – rents are up 3.1 per cent in the regions compared to an increase of 1.9 per cent across the capitals.

• Over the first quarter, rents climbed in all capital cities except for Darwin (-0.3 per cent). The highest quarterly rental increases were in Hobart (+5.0 per cent), which also reported its strongest first quarter growth on record, and Canberra (+2.3 per cent).

• Over the past 12 months, Hobart reported the highest growth in rental rates (+11.7 per cent). Rents climbed higher in all capital cities except Perth (-1.3 per cent) and Darwin (-1.6 per cent).

• The national median rent is $427 ($426 for houses and $430 for units). Across the capital cities, the median rental is $459 per week. The median house rental in the capital cities is $460 compared to $453 for units. Across the regional markets, both houses and units averaged $355 per week.

• At $374, Adelaide has the cheapest weekly rent out of all the capital cities. The highest median weekly rent is in Sydney, where the cost is $582.

• Rental yields have increased nationally by 0.1 per cent over the past 12 months to 3.68 per cent. The highest rental yields are in Darwin (5.83 per cent) and Hobart (5.01 per cent). Melbourne (2.93 per cent) has the lowest rental yields, followed by Sydney (3.20 per cent).

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雲程的雙魚鏡 Apartment boom article of interest April 2018 via blogger

Apartment boom over Both new residential building and renovation activity declined significantly in 2017, with total seasonally adjusted dwelling starts down to 52,600 by the final quarter of the year, well down from the peak of 62,300 in the first quarter of the calendar year 2016. The drop was driven by a 17 percent year-on-year decline in attached dwellings, with Brisbane’s inner city apartment market the prime culprit. Sundry indicators suggest that activity across Queensland should now trend moderately upwards, spurred on by a healthier spread of boutique developments, ‘plexes, and townhomes. But inner Brisbane’s new build high-rise sector is absolutely cactus as the renters move in. Interestingly, despite the extremely high level of apartment starts through this cycle, total dwelling completions continued to decline for another quarter, suggesting that all is not well in developer-land. Crunch looms for developers By the end of the year there were still some 150,000 attached dwellings under construction. for the seventh consecutive quarter. Drilling down a level it’s clear to see that while apartment activity was fading fast in Melbourne and Brisbane respectively, Sydney and the state New South Wales had more than 68,000 attached dwellings under construction. To say that this is unprecedented would be an understatement; the numbers are off the charts! Now it does take a long time to see apartment projects through from approval, but in Sydney the completions just haven’t been hitting the market in the numbers expected. Total dwelling completions in 2017 for New South Wales were 61,600, with just over half of that total accounted for by attached dwellings, which on a net completions basis is barely keeping pace with demand. Officially, of course, everything is fine. There are few reported defaults, and settlement valuations are holding up reasonably well despite the softening of the resale market and the total evaporation of the offshore Chinese bid. With pre-sales flagging it’s certainly hard to envisage as many new projects getting off the ground, as investors grapple for finance in the midst of a Royal Commission into banking misconduct. It’s become a vicious circle, with nervous banks requiring higher pre-sales which developers are unable to achieve, and finance for construction thus not forthcoming. In any case, a raft of actioned and proposed budgetary and regulatory macroprudential measures have made property investment less appealing at the margin (and totally unappealing for foreign investors). Another compelling indicator of troubled times ahead for developers is the sheer number of dwellings approved but not commenced at 46,400, mostly accounted for by apartments and by far the highest figure in Australia’s history. What happens next? Now sure, the plural of anecdote is not data, but I believe that we’ll see many of Sydney’s apartment projects running into trouble. The official line is that defaults are low, and everything is going swimmingly, but I’m not so sure. By the way, don’t rely on anything you read here either, this is just my opinion. Take a drive around, speak to a few sales staff, observe how apartment projects are progressing. In addition to the astonishing boom and collapse of Chinese investors, another potentially unique aspect of this cycle is that construction and materials costs could remain high in Sydney, even in the face of a sharp drop in apartment activity. Forged on the back of a stamp and transfer duty bonanza from both residential housing and asset sales, the state has embarked upon an overdue thrust at tackling its infrastructure deficit, in turn propelling total construction employment to even greater heights. As a result construction employment surged higher than it had ever been before both in absolute terms and as a share of the workforce, squeezing developer margins. Receivers and cashed up opportunists will standby at the ready. written by Pete Wargent

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