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Sep 13, 2021

CoreLogic Market Update - Brisbane September

Aug 27, 2021

Office markets have recovered from worse crises than COVID, figures show

Reports of the death of the CBD office are greatly exaggerated, major national research covering 25 office markets around Australia has asserted. While COVID-19 has hit the office market hard in most of Australia’s capital cities – the vacancy rate increased to 11.9 per cent over the six months to July 2021, the highest in 25 years – it has bounced back from worse crises in the past. “The office market is not dead,” Adrian Harrington, the head of capital and product development at Charter Hall, told an online seminar of the Property Council of Australia (PCA) on Thursday. “It’s had a shock to the system, but we’ve had three other shocks in the past where demand dropped off more significantly than it has in this cycle, and it recovered. “We’ve had the recession of 1991-92, the tech boom and bust of 2001-02 and the global financial crisis of 2008 and none of those killed the office market either. That puts it into perspective and shows how resilient it is. The office market is changing and evolving, but it is still here, and it will continue to evolve as it comes out of COVID.” The PCA’s new Office Market Report examined data from around 4000 office buildings across the country and used historical data since January 1990 for total stock, vacancy, supply, withdrawals and net absorption, with a comprehensive list of future supply and development projects. It found that – contrary to many experts’ expectations with CBDs so quiet over the pandemic and companies talking about relocating their workforces to suburbs closer to homes – that the non-CBD vacancy rate increased more sharply than that in the CBDs. The main reason for that was an increase in the supply of offices in non-CBD centres, it found, with only East Melbourne and Sydney’s Macquarie Park recording vacancy rates below 10 per cent, joined by the CBDs of Canberra and Sydney. The areas hardest hit were West Perth with a vacancy rate of 19 per cent, the Perth CBD at 17 per cent, and North Sydney and Melbourne’s St Kilda Road, both at 16 per cent. In the six months to July 2021, however, Sydney and Melbourne were the only capital cities to record vacancy increases, from 8.5 per cent in Sydney’s CBD to 9.2 per cent, and up from 8.4 per cent to 10 per cent in the Melbourne CBD. Melbourne was the only capital to record negative demand over the period of nearly 100,000 square metres of office space. [caption id="attachment_8392283" align="alignnone" width="1024"] Industry experts attended the Property Council of Australia's online seminar.[/caption] In contrast, Canberra’s vacancy rate fell from 10.1 per cent to 7.7 per cent, Brisbane’s from 13.6 per cent to 13.5 per cent, Adelaide’s from 16 per cent to 15.7 per cent and Perth’s CBD from 19.9 per cent to 16.8 per cent. “When you look at sublease vacancies, from January 1990 to July 2021, CBD vacancies didn’t fall as low as after the tech crash or the GFC,” said Harrington. “So, COVID hasn’t hit as hard as people expect. “And since early 2019, sublease vacancy continued on its upward trajectory in both the Australian CBD and non-CBD markets. But we are seeing a move to prime buildings over secondary stock.” Supply of office space will continue to grow, too, over the next two years, with Melbourne stock, in particular, leading the way and set to contribute to more than half the supply due to be added to the Australian CBD markets over the next six months. Major projects to be delivered in Melbourne include the 66,000-square-metre 405 Bourke Street, the 33,000-square-metre 1000 La Trobe Street, the 30,000-square-metre 100 Queen Street and 750 Collins Street with 39,000 square metres of space, all due later this year. Next year, the 25,700-square-metre 637 Flinders Street should be finished. In Sydney, there’ll be 570 George Street with 18,000 square metres later this year, and next year will come the 19,000-square-metre 255 George Street, the 75,000-square-metre 50 Bridge Street and the 55,000-square-metre 180 George Street. In 2024, there’ll be the 31,000-square-metre 33 Alfred Street. Many companies still occupy as much space as they did pre-COVID but are reconfiguring it to provide more flexible work models, with staff dividing their time – out of lockdown – between the office and home. [caption id="attachment_8392284" align="alignnone" width="1024"] 1000 La Trobe Street, Docklands will be completed in the coming months.[/caption] Executive vice-president and co-head Australia of Brookfield Properties Carl Schibrowski said the new Brookfield Place on Carrington Street, Sydney, was close to fully occupied at the start of last year before the pandemic hit. “We saw some then fall away, but it continued onwards strongly,” he said. “A lot of companies were taking stock as to what their workplaces needed and would need going forward. They decided they needed more flexibility, but ultimately, they took up those floors and thankfully, it ended up being fully let at completion.” At QBE, head of property and facilities Steve Elliott said they’d conducted a review of what office space they’d need into the future. “We did a lot of listening exercises with staff,” he said. “They were enjoying working from home, and so we built flexibility into our future growth. “We found 10 per cent of staff wanted to work five days a week in the office, 10 per cent wanted to work from home, and 80 per cent wanted a hybrid model. “ Suzette Lamont, the global head host of client solutions at CBRE, agreed that the hybrid model is now the way forward for many companies. “Flexibility is here to stay,” she said. She listed the advantages of working from home as removing the drain of the commute and restrictions on where staff can live, and the opportunity to carve out the day as people want, to include laundry and exercise and an afternoon nap. “But the cons are less around individuals and more about our society,” Lamont said. “The biggest con is mental health, and there’s a lot of research around this showing that isolation can lead to anxiety and depression. There’s also the deflation of societal values.” People working from home may also suffer from a lesser sense of belonging and less communication with work colleagues, as well as the lack of opportunities for collaboration and exchanging of ideas, she said. One company in Singapore found that 50 per cent of new employees coming in during COVID had already quit. So, offices are still vital, believes Harrington, and in addition to domestic demand for office space, there are also a number of overseas investors looking to buy. “There’s a wash of global capital still coming into Sydney and Melbourne,” he said. “With vacancy rates below 10 per cent, that’s very impressive on a global scale.”

Aug 12, 2021

What the 2032 Olympic Games means for Brisbane’s property market

The Olympics should work as a positive influence on Brisbane housing market conditions, however, with the Games still some eleven years away, the flow on effects are likely to be gradual and centred around significant infrastructure upgrades and the associated medium-term uplift in jobs and longer-term improvements in transport efficiency. The most significant positive influence on the housing market is likely to be seen in the years leading up to the Olympics, rather than during the four weeks of the Olympic and Paralympic games themselves. Large infrastructure projects tend to have a positive influence on housing prices, with the extra requirement for workers creating additional demand for housing during the construction process. Large projects also tend to leave a legacy of a permanent housing demand uplift, either through additional employment or via other benefits such as improved transport options and travel efficiencies related to transport infrastructure projects as well as additional amenity introduced to the area including social and retail outlets. As more detail comes to light about where these projects will be located we should get a better understanding of the housing market opportunities, however the obvious candidate for an uplift in demand is Woolloongabba and the surrounding suburbs. The proposed billion-dollar overhaul of the Gabba stadium is set to be the epicentre of Olympic activity.  Along with the Cross River Rail terminal and plaza, this precinct is likely to see a lift in desirability. The area is already popular with investors, with around two thirds of the housing stock in and around Woolloongabba being rented.  The proximity of the Princess Alexandra Hospital and Mater Hospital provide a permanent level of localised housing demand, along with easy access to the Brisbane CBD, local universities and Southbank precincts. Currently, Woolloongabba unit prices are at the lower end of the inner south unit markets with a median unit value of $458,000; about $94,000 lower than Kangaroo Point’s median unit value, $85,500 lower than West End and $38,000 lower relative to South Brisbane. The lower price point combined with upcoming capital investment on infrastructure are likely to be a popular combination with investors and developers alike. Other areas set to benefit would be the proposed sites for athlete villages, earmarked for Hamilton and Robina, along with areas set to benefit from transport infrastructure upgrades including the Gold Coast and Sunshine Coast via upgrades to the M1 Pacific Motorway and Bruce Highway which could be accelerated.

Aug 10, 2021

CoreLogic Market Update - Brisbane August 2021

Jul 27, 2021

Mortgage serviceability cheaper than renting on over a third of Australian properties

CoreLogic analysis suggests servicing a mortgage is now cheaper than paying rent on 36.3% of Australian properties, which is higher than the pre-COVID proportion of 33.9% reported in February last year. The analysis was undertaken at the individual property level, using a set of mortgage assumptions and valuation estimates, to approximate mortgage repayments. These were then compared with rental estimates at the individual property level. Using these estimates of mortgage and rent, the data reveals striking differences in housing costs across different parts of Australia. The proportions of properties cheaper to rent or buy by region are outlined in Figure 1. The data is also broken down by SA4 sub-regions in figure 2. The highest proportion of properties where mortgage serviceability is cheaper than rent is across Regional NT (96.4%) followed by Darwin (86.5%).  Figure 1. Portion of properties cheaper to rent or buy Greater Capital city or rest of state region Portion of Cheaper to Buy Portion of Cheaper to Rent  National 36.3% 63.7% Combined Capital Cities 26.2% 73.8% Combined Regionals 60.1% 39.9% Regional NT 96.4% 3.6% Darwin 86.5% 13.5% Regional SA 79.4% 20.6% Regional WA 79.4% 20.6% Regional Qld 73.1% 26.9% Regional Tas. 71.4% 28.6% Perth 59.6% 40.4% Brisbane 55.3% 44.7% Hobart 50.2% 49.8% Regional NSW 48.2% 51.8% Adelaide 47.4% 52.6% ACT 43.6% 56.4% Regional Vic. 43.6% 56.4% Melbourne 7.3% 92.7% Sydney 4.9% 95.1% Source: CoreLogic. Mortgage assumptions used were an 80% loan to valuation ratio (i.e, it assumed the buyer had a 20% deposit saved), an interest rate of 2.4% (based on the average new lending rate for owner occupiers reported by the RBA at May 2021), and a 25 year loan term. No mortgage fees or transaction fees are assumed. The Loan value is derived based on the individual property value estimate. Rental repayments are based on the CoreLogic rental estimate of the individual property. Aside from Darwin, regional Australia generally has a larger proportion of suburbs where it’s cheaper to service a mortgage than pay rent. Property values and rents across the combined regional areas of Australia suggest 60.1% of properties are currently cheaper to service a mortgage than rent, while across the capital cities, this is only true of around one quarter of properties. The increase in areas where it is cheaper to service a mortgage than to pay rent across Australia, when compared with pre-COVID analysis, is a reflection of much lower interest costs on mortgage debt since the onset of COVID-19. Average new mortgage rates for owner occupiers have fallen from 3.21% in February 2020, to 2.40% as of May 2021, according to RBA data.  This is one of the factors that may have boosted sales activity coming out of COVID-19 restrictions in 2020; if it makes more financial sense to pay for a mortgage than rent, renting households may have been triggered to look for something to buy as interest rates have fallen.  However, reduced interest costs have not led to cheaper mortgage serviceability relative to rents in every instance. This is especially the case in Sydney, where property values have increased markedly against low interest rates, pushing up loan principals (the amount borrowed) and outpacing growth in rents.  Since February 2020, Sydney dwelling values have increased 15.2%. Sydney rents only increased 2.1% city wide in the same period. The relatively subdued rental growth may be largely due to a loss of rental demand from stalled overseas migration, where Sydney and Melbourne have traditionally been the most popular destination for international arrivals in the country. The combination of lower rent growth and very strong dwelling value growth has meant that even fewer properties across Sydney are cheaper to pay down a mortgage than rent, at just 4.9%. This is down from 7.1% when the analysis was done with the same assumptions in February 2020. This kind of analysis historically has also shown that just because an area sees cheaper mortgage costs than rents, does not mean people would necessarily want to buy there. Regional Northern Territory and Outback Western Australia are prime examples. Rental costs tend to be higher in these regions, because accommodation that suits a more transitory lifestyle would likely be in higher demand – for example, in proximity to FIFO mine sites. This dynamic is echoed to a small extent across larger, east coast cities. The regions where rent payments are more likely to outstrip mortgage repayments generally reflect lower socio-economic areas within a city, where property is not as expensive, but there is demand pressure on rental markets. This could be because of affordability constraints on barriers to entry around home ownership (such as a deposit hurdle, professional services or stamp duty payments).  However, the low interest rate environment is still conducive to better serviceability in many parts of the country. The analysis is a good reminder for renters to weigh up housing costs and savings, to see if it is time for a change in tenure.

Jul 27, 2021

BSHS 100th Anniversary

Brisbane State High School (BSHS) and its Parents and Citizen’s Association (P&C) will host the third State High Day (SHD) celebration of Blue-Red-Blue on Saturday 31 July 2021 on the upper campus, corner of Vulture and Edmondstone Streets, South Brisbane from 8am to 5.30pm. More than 3400 students, staff, friends, families, local schools and the community will join to support, celebrate the day, and days gone by with alumni. The day includes hotly contested centenary sporting rounds, buskers, bands and music to make you move. Belissima, Raggazi Choirs and the BSHS Chorale will delight and soar to new singing heights.  State High Girls Crew and Bollywood dance displays are set to dazzle.  There will be something for every imagination, with a Showcase and Marvel Market displaying the breadth of State High’s extracurricular activities such as a chess tournament, business entrepreneurs and innovators. Get your State High Day Passport to take you to campus corners, cultures and history with the State High Museum and student led tours for young and old to take you back in time.  The Food Festival with over 10 cuisines on offer will cater to all appetites, serving savory and sweet treats from 10:30am – 5:30pm, with COVID safety measures paramount at every stage. Wade Haynes, Executive Principal of Brisbane State High School says, “We are so proud and excited to be sharing State High Day with the Brisbane community. It is set to be an unmissable event on the local calendar.  There is something for everyone on this day.” The State High Griffin says “Its game on” at 11am with our senior girls First V Basketball playing Sheldon College, then at 1pm the fit and fast First V Basketball play Brisbane Grammar School (BGS) then at 2:15pm we have our fierce State High First XV Rugby against the BGS First XV. Don’t forget to visit our Rowing program, with an ergo competition, Tennis matches, and a Fencing display set to enthrall. All BSHS teams will be showing up to do the Blue-Red-Blue proud with the BSHS war cry destined to be heard all over Brisbane!  The finale will feature DJs, live entertainment and fireworks at 5.20pm. Come one, come all. “We are pumped to do our school, our friends, families and alumni proud, especially on the 100th anniversary.  It will be great to have heaps of supporters along to make some noise.”  Luke Hatherell, State High Captain. With more than 40,000 alumni, the day is set to bring back many past greats. Memories will be recounted, racquets restrung and spikes dusted for the afternoon alumni badminton and long jump competitions against our current co-hort. Make sure you are there to share in the Blue-Red-Blue through and through – State High until we die.  Save the date and see you there!

Jul 19, 2021

Brisbane Housing Market Update

Jul 6, 2021

Commercial Market Update - Brisbane South Cityscope

The latest research from Brisbane South Cityscope shows property sale figures have increased in the past three months and sales numbers have slightly increased. The last three months to the end of February 2021 recorded 12 sales for a total of over $57.9 million; with $35.5 million for commercial, $3.8 million for commercial strata, $1 million for retail strata and $18.4 million for other. In comparison, the three months to the end of February 2021 recorded 7 sales for a total of over $19.6 million; with $7.2 million for commercial, $1.3 million for commercial strata, $1 million for retail strata and $10.1 million for other. The 12 months leading up to the end of May 2021 recorded 28 sales for a total of over $97 million, over $107.2 million lower than the recorded figure for the same time period the year before. The table below shows sales recorded for the past eight updates of Brisbane South Cityscope: The most significant sales recorded this quarter together totalled just over $41.7 million Three properties on Cordelia Street (13 Cordelia Street, 15 Cordelia Street and 17 Cordelia Street) were bought for $15.2 million by Cordelia 17 Pty Ltd as trustee for 17C Unit Trust. The three properties have development approval for a 30-storey residential building with 265 one, two and three-bedroom units. The building will include a skygarden spanning over six storeys. 30 Merivale Street, South Brisbane has been purchased for $15 million by Meristock Pty Ltd. The property comprises a single-storey vehicle service centre to Merivale Street and a high-clearance warehouse to Cordelia Street. 176 Melbourne Street, South Brisbane has been purchased by Silverstone Developments for $11.5 million. The property comprises a three-storey warehouse/office building to Melbourne Street and a 500 sqm hardstand area to Edmondstone Street. Some current properties listed for sale include: South Central Commercial – the commercial section of South Central, comprising basement parking, retail space on the ground floor and commercial space over levels 2 to 5. Approximate net lettable area, 2,856 sqm. For sale in with an asking price of $17 million.  The property was advertised with a net passing income of $1,203,500 per annum. 74 Vulture Street, West End – a two-storey, 336 sqm office/retail building with car parking for two vehicles on site. For sale by offers to purchase. 20-24 Ferry Road, West End – a 1,308 sqm vacant block of land. For sale with an asking price of $4.5 million. Properties currently under contract (conditional or unconditional) include: 33 Vulture Street, West End – a three-level plus mezzanine retail/office building with 41 on site car parks and around 2,908 sqm of space. Unit 4, Montague Central, 170 Montague Road, West End – a 299 sqm, two-level unit.