The Blog

Mar 2, 2021

Brisbane's Month in Review

The Brisbane office market presently has a high level of uncertainty with more questions than answers about its future direction and the ongoing impacts of COVID 19. Almost a year on from the start of the COVID 19 crisis, it is clear that office markets remain the sector about which there is most conjecture and the greatest level of market uncertainty. Adding to this uncertainty is the volatile trajectory of the disease in Australia and the response that has seen offices quickly emptied as workers were sent home for lengthy lockdowns. Whilst the lockdown in Queensland was ostensibly the shortest of the three eastern states, there has been an extended period of work from home for many CBD offices which was only relaxed in the latter months of 2020. Even then, it is now clear that many workplaces are instituting far more liberal work from home arrangements with a consensus seeming to form around a two- or three-day office presence (with Mondays and Fridays the preferred work from home days). The impact of these arrangements on the ongoing need for office accommodation will be profound and have follow through impacts on office markets for years to come. At a basic level, it would appear that there is a significant under-utilisation of office space at the present time. Whilst the extent of this will oscillate through the working week and doesn’t therefore directly correlate to an ability to reduce office space by a commensurate amount, it is now putting a huge question mark on the future office needs of every organisation, with the prospect of widespread downsizing as leases expire. The immediate impact of this on office markets is: a heightened level of uncertainty; shorter lease terms; more flexible lease options; and significant increases in the availability of sublease space. This is likely to ultimately translate into reduced effective rent levels (initially via increased incentives) and will have longer term impacts on the viability of future development. To date we have observed substantially reduced levels of leasing activity for larger requirements, shorter lease terms and a dramatic slowing in the volume and size of office market transactions. There is not yet broad-based evidence of face rental reductions, however this is a high probability as overall vacancy increases. The principal impact has been felt in the CBD and fringe markets to date. Suburban locations appear to be holding up so far. It is however shining a stronger spotlight on the need for good quality buildings, strong locations, good parking ratios and accessibility as keys to securing tenants. In terms of investment activity, there are few transactions however those that have occurred have been for properties with strong lease covenants and a healthy WALE or term certain. In particular we note that properties with government backed leases are keenly sought and have formed the predominance of the post-COVID sales activity. A recent sale in this regard was 36 Brandl Street, Eight Mile Plains at an analysed yield of approximately 6.64% having a WALE of 4.85 years with a state government lease profile (74 per cent of the achievable gross income). The future of the Brisbane market is dependent upon how the COVID crisis continues to unfold. There is a large weight of money seeking good quality investment property, however confidence levels are very fragile and the markets could easily be spooked if there were further significant outbreaks.

Mar 2, 2021

Australian housing market values rise at the fastest rate in 17 years

Feb 26, 2021

SMSF LOANS - Maximise the growth of your SMSF property investment portfolio.

Some of the benefits include: Gearing: Using borrowed funds to make greater gains is one of the most effective long-term wealth builders available. The fact that your super fund can now borrow to buy property enables you to make use of this time-honoured strategy to increase your wealth without affecting your personal cash flow. Affordability: You may not be able to afford to buy another investment property or even your first investment property in your own name. However, given a reasonable personal super balance or a combined family member balance, you might be able to use the funds in your super to pay a deposit on a property and secure an SMSF loan to purchase investment properties within your own personal super fund. Cash flow options: When purchasing property using your super, the interest payments on the SMSF loan could be totally supported by the rental income and your normal compulsory employer contributions to the fund. This leaves no extra burden on your current household cash flow. Buying property through your fund might be a way for you to achieve your goal of owning an investment property or even owning your own business premises. Asset protection options: Buying property within your super fund can be an excellent way to reduce overall risk on your investment portfolio. Assets held in super funds are protected against some legal claims, depending on your personal circumstances. Choices for business owners: If you purchase your business premises through your super fund and then lease it to your business, the rent you pay to your super fund is tax-deductible to your business. Paying rent to your own super fund is a great way to accelerate your retirement savings without exceeding the concessional contribution limits. In fact, you may be able transfer commercial property that you already own into your super fund which allows you to unlock cash to invest in your business or in other assets.

Feb 26, 2021

Brisbane Market Update February 2021

Feb 9, 2021

RBA Predicts 30% Rise Over Next 3 Years

With Australia seeming to have transitioned through the worst of the pandemic so far, homeowners and buyers are starting to breathe out again. Confidence is growing, largely due to the fact that some of the worst-case property market predictions of 2020 simply did not eventuate. Analysis from the Reserve Bank of Australia in January, suggested house values could jump by 30% over the next three years. It’s thought that this growth will be driven by an unusual level of consumer confidence, that’s come out of the experience of the pandemic and will be sustained over the next few years - hence the RBA’s prediction. There are a few key components underpinning that confidence – the primary one being record low interest rates. “Interest rates have been this level for about 3 to 5 years now, so buyers have already factored that in”, Ray Ellis from First National Real Estate explains. “Low interest rates have not only become the norm, they’ll be the norm for buyers in Australia for many years to come. They look at all the forecasting, at what they see is going to happen, do their research, then factor the results into another 3 to 5 years.”  Not to mention the fact that low interest rates were sustained throughout the multiple complex challenges of 2020. This experience fuels their belief, strengthening their confidence in borrowing, which, according to the RBA could push property prices considerably high. This is great for existing property owners, but if you’re looking to buy, surely this raises deep concerns. Not according to First National Real Estate’s Ray Ellis. “Buyers are very willing to put their cash forward, because of their strong confidence in low interest rates. With the current average new home loan sitting around $530,000, Buyers aren’t afraid to have a slightly larger mortgage, if it means buying the property that suits their lifestyle of work requirements.” The age-old love affair Australians have had with property in general was reignited with so many of us spending more time than ever before in our homes. Ray Ellis explains. “It’s very difficult for two people to work from home in a one-bedroom apartment. It's very difficult for people to work from home in a small house with no backyard with children. So, the great Australian dream - that slightly bigger house with a backyard or an outdoor entertaining area is now right back in fashion”. Of course, the current seller’s market will be irresistible to many, evidenced by a dramatic increase in listings in late December. Many are making the choices around their new lifestyle requirements. “They're taking their agenda in their own hands and they're looking to downsize or change. What COVID has taught us is living and working requirements in our house is what's important, and the strong market is putting them in a strong position”.

Feb 9, 2021

Houses More Profitable Than Units!

CoreLogic's Pain and Gain report for the September quarter revealed that 88.1% of property sales made a profit; an increase of 1.8% on the June quarter report. Hobart had the highest rate of profit-making re-sales of all capital cities over the September quarter, according to the most recent data from CoreLogic. In contrast, Melbourne was the only city that saw a decline in the rate of profit-making sales over the same period. Yet regional Victoria was the most profitable ‘rest of state’ region, with 97.5% of dwellings sold for a profit in the three months to September, with the regions seeing the rate of profit-making sales increase faster than capital cities. Non-profitable sales did not grow in percentage, but their overall value deepened by $319 million to pass $1.2 billion, with investors more likely to sell for a loss than owner-occupiers. Further key points from the September quarter Pain and Gain report include: The Sunshine Coast hit a record high rate of profit-making sales in the September quarter at 96.4% Profitability across both houses and units rose across Australia Houses are still more profitable than units, but the gap is narrowing, moving from 11.2% to 10% A higher portion (17.1%) of property investors sold their dwelling at a loss during the September quarter compared with owner occupiers (10.4%) For profit-making sales, the median hold period was nine years, and for loss making sales it was 6.7 years Hobart has now held the highest rate of profit-making sales since March 2018 Eliza Owen, CoreLogic’s Head of Research Australia, says coastal regional markets were also very profitable for sellers. 'Profit-making sales represent over 95% of resales across six major coastal markets: Geelong, Illawarra, the Mid North Coast, the Newcastle Lake Macquarie region, the Richmond Tweed region and the Sunshine Coast. 'The combined regional Australian market saw the rate of profit-making sales increase 150 basis points, to 89.2% in the September quarter, while the rate of profitability across capital city markets expanded 30 basis points, to 87.2%.' Investors vs Owner Occupiers Ms Owen says despite the higher rate of loss observed in investor sales in the quarter, the rate of properties re-sold at a loss was down from 18% in the June quarter, while the rate of loss-making sales among owner occupiers was down from 11.1%. 'CoreLogic home value indices show dwelling values across Hobart have seen annualised growth of 7.9% for the five years to December 2020 – the highest annualised growth rate of the capital city markets'. Houses vs Units There was generally a higher rate of return for houses ($225,000) than units ($125,000), but unit profitability rose faster than that of houses. Even though the rate of loss-making sales declined faster across the unit segment, units were still about two times more likely to sell for a loss than houses in the September quarter. The portion of properties sold at a loss among houses fell from 10.2% in the three months to June to 9.6%, while the portion of loss-making unit sales fell from 21.4% to 19.6%. With record low mortgage rates, a faster than expected economic recovery and relatively low cases of COVID-19, profitability is tipped to trend upwards over the coming quarters.

Feb 6, 2021

Brisbane Rents Reach Record High!

Unprecedented rates of interstate and overseas migration have sparked one of Brisbane’s strongest rental markets in a decade, with the city clocking record-high median prices that, in parts, are outstripping Melbourne. Rental prices for houses rose by $10 to $425 a week during the December quarter, with units following close behind at $400 per week – up from $395 three months earlier, the latest Domain Rent Report shows. It’s the city’s second consecutive quarterly price rise, and one that industry experts say could spell the end of Brisbane’s budget property era, with the pandemic-fuelled migration and a soaring property market the key drivers. Domain senior research analyst Nicola Powell said for the first time in five years it was cheaper to rent a unit in Melbourne than Brisbane, with houses undergoing the steepest annual increase in seven years thanks to those two consecutive quarters of growth. “Brisbane gained the most interstate residents than any other capital over the June quarter … the lure of the city is real – from the lifestyle and the climate to the containment of the virus,” Dr Powell said. “Tenants are (also) seeking liveability, affordability and are no longer tied to a specific location in the work-remote era. Brisbane’s vacancy rate is likely to tighten further in the coming months due to the rising interest from southern states and the flow of residents from regional Queensland into Greater Brisbane. “This is a milestone because the commentary around Brisbane has been around that heightened unit development … but the city has passed that construction peak, and now we’ve seen that pool of stock decline.” Dr Powell said the estimated choice of vacant rentals had also dropped by about one third in recent months – a trend that had reverberated out to Queensland’s top lifestyle hot spots, the Gold Coast and the Sunshine Coast. “House and unit rents reached record highs in the Sunshine Coast and Gold Coast – in fact, they both outperformed Brisbane,” Dr Powell said. “Gold Coast house rents increased $20 over the quarter and year to $540 a week.” Across Brisbane, median rents are up by $15 a week compared to December 2019, with the vacancy rates down by one percentage point over the past 12 months to a tight 1.9 per cent. It comes as Brisbane emerges from its snap three-day lockdown, with open house inspections limited to 20 people until 1am January 22. Director of property management at Place Estate Agents Brisbane, Cathie Crampton, said the red-hot rental market led to a record-breaking month for their team during December – with an unprecedented 20 per cent of rentals leased by interstate or overseas tenants. “Some of those properties were leased sight unseen as well,” Ms Crampton said, adding that the vacancy rate was extremely low. “We had over 100 groups through one of our recent rental listings … in fact, the demand is so high we’re increasing the rent prices in 35 per cent of our listings. “[The market] has almost tipped to the edge – there’s just so much demand and no supply. I haven’t seen conditions like these in 15 years.” While the rental price hike could place pressure on low-income tenants, Ms Crampton said the market was undergoing a necessary price correction, following several years of sluggish growth. “There were no rental increases, quarter on quarter, for a long time … so it’s an inevitable adjustment,” she said. “And now we have optimum conditions to increase rent and improve yield – there has never been a better set of conditions in Brisbane.” Ray White Bulimba and East Brisbane managing principal, Brandon Wortley, said the soaring rental industry had particularly reached new heights in the prestige sector – with houses priced at $1000 or more a week in incredibly high demand. “There’s a lot of parts to this growth – but in our eyes, it’s the record migration from what we call ‘boomerang renters’,” Mr Wortley said. “These are people who were originally from Brisbane but who moved abroad to chase a career or life experience … and I think honestly in this period (during the pandemic) they’ve gone ‘holy smokes I’m so far from home right now’ so that’s driving a lot (of our rental market). “A lot of them have also forgotten a lot about the city, so what they are doing is renting (rather than buying) to test out a neighbourhood for six or 12 months. “But then there are those who want to buy – to take advantage of the record-low interest rates – but because there’s such a high volume (of people) in this sector, it’s also driving the rental market. “I think there’s a lot more interest in upper-end rentals than there has been historically … and we’re in that sweet spot right now and I think it will continue for a while.”

Jan 21, 2021

Brisbane Rentals Bounce Back!

As Queensland’s residential property market continues its upward trajectory into the New Year, the Real Estate Institute of Queensland’s (REIQ) latest vacancy data for the December 2020 quarter shows Brisbane’s inner city rental market is firmly making a comeback. In fact, in the six months to December 2020, rental vacancies skyrocketed to almost 5% in Brisbane CBD’s June Quarter. Half a year later and rental vacancies are placed at 3.3%, making it currently the only healthy rental market in Queensland. “While it’s extremely pleasing to see vacancy levels improve within the CBD, the market has yet to fully rebound. The capital was severely hit by COVID-19, particularly when businesses were forced into lockdown,” explains Antonia Mercorella, CEO of the REIQ. “Despite the tapering of Federal Government support such as JobKeeper, with business confidence reaching pre-COVID-19 levels, Brisbane CBD has seen around 5% rental share reclaimed off the back of the pandemic.” Beyond Brisbane’s CBD, rental vacancies around the city’s middle ring remain extremely tight, with a quarterly rate of 1.6% including Hawthorne (1.4%), New Farm (1.9%), Paddington (2.1%) and St Lucia (1.7%). Further out into Brisbane’s outer ring and vacancies are even tighter, recording a quarterly rate of 1.3%. In fact, every area within the outer region is currently presenting less than 2% stock availability including Ashgrove (1.6%), Camp Hill (1.3%), Cannon Hill (1.4%), Hamilton (1.9%), Holland Park (1.2%) and Moorooka (1.3%). “In the last six months we’ve witnessed some record lows across capital city suburbs; figures we’ve certainly not seen for well over a decade,” adds Ms. Mercorella. “It’s a similar scenario as you travel around the wider regions of Brisbane including Ipswich, Logan, Morton Bay and Redlands which all have uncomfortably low stock levels around 1%.” Across the State’s regional areas, Cairns (1.2%), Cassowary Coast (1.1%), Isaac (1.2%), Mareeba (1.5%) and the Whitsundays (1.4%) saw vacancies rise above 1%. However, for the remaining 90% of regional Queensland, rental vacancies have plunged further to record an all-time median low of 0.575%. This includes areas such as Bundaberg (0.4%), Fraser Coast (0.6%), Hervey Bay (0.9%), Mackay (0.7%), Toowoomba (0.7%) and Townsville (0.7%). Rockhampton recorded the lowest rental vacancies for the December 2020 quarter at 0.2%. “During the pandemic, the Palaszczuk Government introduced a range of measures keeping tenants in place for longer which is part of the reason we have incredibly low rental availability across Queensland,” says Ms. Mercorella. “We have also seen a significant amount of interstate migration, with renters also moving to Queensland, so all of these factors have contributed to our current tight vacancy rates.” The two most popular destinations for interstate migration still remain the Sunshine Coast and Gold Coast respectively. Citing liveability, affordability and lifestyle along with economic opportunities, education and an inclusive society, the Sunshine Coast may be drawing big crowds but its rental market hasn’t shifted in months, firmly gripped at 0.3%. Many areas such as Buddina (0.3%), Caloundra (0.3%), Maroochydore (0.5%), Noosa (0.4%) and Sunrise Beach (0.5%) have continued to tighten marginally over the last three months. The Gold Coast isn’t far behind, with rentals being snapped up across all regions. Surfers Paradise, which recorded more than 2,100 vacant rentals at the peak of the pandemic nine months ago, currently has 0.7% stock availability. In fact, its rental market has rebounded beyond pre-COVID levels to reach a record low never before recorded. What’s more, record low vacancies have also been reported across the entire Gold Coast. In the north, which has a median vacancy of 0.6%, stocks have reached all-time lows in areas such as Arundel (0.6%), Labrador (0.7%), Oxenford (0.1%), Runaway Bay (0.5%) and Southport (0.7%). It’s the same story in the south, with a median vacancy of 0.3% across suburbs including Broadbeach (0.8%), Currumbin (0.3%), Miami (0.2%), Palm Beach (0.3%) and Varsity Lakes (0.6%). “What we’re seeing is an unprecedented level of diminishing rental availability that’s placing significant pressure on our State’s housing sector – so much so that it’s unsustainable and why urgent action is required to better support both increased and ongoing property investor activity in the Queensland property market and the contributions they make to the state economy,” explains Ms. Mercorella. “Every Queenslander should have access to a safe, secure and affordable home that meets their needs and supports them. That’s why the Palaszczuk Government should consider abolishing stamp duty. It’s the most significant barrier to homeownership, discouraging housing turnover, restricting mobility and property investment – something we desperately require.”