Too many apartments is never enough for those who think big

Tracey Grayson
26feb05

THE apartment market in the eastern capitals is sending out mixed messages as demand for residential property generally cools. Sales have dipped and some projects are unlikely to go ahead, but prestige property is still attracting buyers, particularly in Brisbane.

PRDnationwide's December-quarter Brisbane Unit Report, released this month, shows investment interest has softened, but the prestige end of the market is undersupplied.

Report author and property research analyst Paul Barratt says investors are exercising caution and a number of projects in inner-Brisbane are unlikely to proceed. "Gone are the days where people placed large deposits on multiple units with the intention of reselling them prior to settlement," he says.

But sales are strong at the top end of the Brisbane apartment market. In 2004, 110 apartments worth more than $1 million were sold off-the-plan in the inner-city. This $1 million-plus market represents 7 per cent of available stock in the inner-city and developers can't meet demand.

"This has resulted in the need for a number of developments to amalgamate units in order to satisfy an appetite for very large apartments," Barratt says.

"Developers of Saville Southbank, Skyline Apartments and Riparian Plaza have all responded to purchasers' desire to join apartments together."

A report on the Sydney property market released this week by the Real Estate Institute of NSW showed there were 4350 unit sales in the December quarter, a decrease of 48.15 per cent on the previous year. In the CBD, sales dropped by more than 69 per cent to 176 units between the quarters. Institute president Rowen Kelly says that, despite lower volumes, the median sale price of a unit in Sydney remains steady at $370,000. In the CBD, the median unit price is $451,000.

The statistics don't bother property developer Greencliff Developments, which chose this week to launch Lumiere at Regent Place, a residential project to be built on the site of the former Regent Theatre in Sydney's CBD. Lumiere, one of two towers in the $550 million Regent Place project, will comprise 456 apartments over 56 levels.

Greencliff marketing manager Marcus Chang says more than 100 apartments sold in six months of pre-launch marketing, including 23 priced at more than $1 million. "There has been some negative sentiment in the market, but the thinking of buyers is that we are at the bottom of the cycle and it has three years to pick up again before the development is finished," he says.

Melbourne's apartment market recorded a median sale price of $302,000 in the December quarter, an increase of 2.4 per cent over 12 months, the Real Estate Institute of Victoria says. Inner-Melbourne sales decreased by 40.5 per cent to 684 between December 2003 and December 2004, while sales numbers were down by 31 per cent for the Melbourne CBD, 40 per cent for Docklands and 59.3 per cent for South Melbourne.

REIV chief executive Enzo Raimondo says the new apartment market remains oversupplied, with large numbers due for completion this year, but the longer-term prospects are good.

Apartment prices likely to slide as interest rate hike looms

Anthony Klan
12feb05

APARTMENT prices in Melbourne and Sydney could fall by a further 10 per cent this year as the Reserve Bank gears up for further interest rate rises.

Despite the announcement yesterday of a 1.2 per cent rebound in housing finance in December - led by a 2.9 per cent increase in borrowing for investment property - the apartment market is expected to soften further as investors come to grips with looming rate rises.

Australian Property Monitors director Louis Christopher said renewed warnings from the Reserve Bank of a rate rise meant a turnaround in investor sentiment would likely be seen at auctions as early as today.

He said the market expected rates to rise by half a percentage point this year, which would likely lead to a drop in apartment values across the nation of between 5 and 7 per cent, with values in inner Melbourne and Sydney expected to fall by as much as 10 per cent.

"We've never had a situation before where the Reserve Bank has lifted rates in a market which is already declining," he said. "We don't know exactly what is going to happen, but we're very sure we are going to see further price falls."

AMP Capital Investors chief economist Shane Oliver said housing loans to investors had rebounded by 15 per cent since October, which meant the housing bubble was beginning to reinflate.

"It looks like the shock of the November and December 2003 interest rate increases has long worn off as far as homebuyer sentiment is concerned," Mr Oliver said. He said any move to increase interest rates would quickly take pressure off the housing market.

Premium property - long held to be the shining light in the softer market - is now also beginning to show signs of weakness.

This week it was announced an $80 million Sydney CBD apartment project, Dakota - which was to offer Manhattan-style apartments priced between $3.5 million and $10 million - had been scrapped.

But despite the problems in the apartment market, rents are expected to increase on the back of falling vacancy rates.

APM's Louis Christopher said rents would rise by more than 5 per cent in Sydney this year, with rises in other cities expected to be more moderate.

Developers are chasing celebrities to help sell their projects

Brushes with fame

By Stephen Nicholls
February 24, 2005

Developers are chasing celebrities to help sell their projects.

What's in a name? An awful lot, it seems, if you're talking about adding a celebrity to your marketing campaign. And developers of apartments, resorts and golf-course estates across the country have gone into product-endorsement overdrive.

At the time of going to press, Dannii Minogue was expected to attend last night's launch party of the $160 million Chevron apartments in Melbourne and the press releases have been flying about her association with the project. She's apparently not being paid, but promoters would neither confirm nor deny whether she was given a discounted price on an apartment.

Multiplex Living hadn't even received approval to build the Cotton Beach resort in Casuarina on the far North Coast before it announced Jodhi Packer would be its public face, saying she "embodies the philosophy behind the development: relaxed, sophisticated beachside living".

Other celebrity promoters include Thorpey, who's plugging Q1 at Surfers Paradise, Delta Goodrem (Portside Wharf in Brisbane), Matthew Johns (Knightsbridge Tower, Newcastle) and Mimi Macpherson (Luxe Apartments on the Gold Coast).

When it comes to golf-course estates, developers are jumping the gun, keen to link a famous face to a project even before it's approved. South Africa's Ernie Els recently walked the course of Bradcorp's still-to-be-approved Wilton Parklands, near Picton. Graham Marsh is the face of Twin Creeks resort at Luddenham; Greg Norman designed golf courses at estates in the Hunter Valley; and Craig Parry is designing the Kooindah Waters Residential Golf Resort at Wyong.

Agents know the importance of a famous face and its potential impact on buyers, and often trot out the names of celebrities who have been "spotted" at homes they're selling. Tabloids are always eager to report "rumours" about Kylie's imminent purchase or mysterious "sightings" of John Travolta at an open house.

In Sydney, high-profile promotions are also about the stylists of display apartments.

Last October, we had the Vogue Living penthouse, where the magazine's editor,

David Clark, fitted out a $3.9 million top-floor Ivy apartment at St Margaret's with $500,000 of finishings. In May, there'll be the Ralph Lauren-styled penthouse at Beau Monde in North Sydney. And last week was the launch of "The Apartment" at Space in Alexandria, designed by Belle magazine's editor-in-chief Eric Matthews. The Apartment isn't for sale, but it might help sell some furniture.

Apartment approvals rise

Kathryn O’Meara
February 04, 2005

The sharp increase in building approvals for high rise apartments and townhouses in December 2004 should not be interpreted as a turning point in this segment of the market, according to the Master Builders Australia.

According to the figures released from the Australian Bureau of Statistics, apartments and townhouses, rose by a massive 27%, 10.1% higher than last year.

The total number of dwelling units approved seasonally adjusted rose by 2.7% to 13,060 units but were 11.3% lower than last year.

“Building approvals for high rise apartments are traditionally highly volatile, therefore it is too early to tell whether the jump in December 2004 is a turning point in investors’ sentiment or whether this is simply land banking by developers in anticipation of a recovery sometime in the future; it is more likely to be the latter.” MBA Wilhelm Harnisch chief executive said.

HIA senior economist Harley Dale said that a moderate decline in building approvals for the December quarter overall was in line with expectations for a manageable correction to new housing activity.

“Clearly the urgency of potential home buyers has abated. Not to an extent, however, to generate a substantial drag on the industry. The current more relaxed attitude on the part of potential buyers is expected to translate into a market contraction of around 13% over this year and next.

“The underlying fundamentals that drive the demand for housing are very sound and a healthy underlying requirement should subsequently come back into its own,” Dale added.

Private sector house approvals fell by 5.6% to 8,217 dwelling units and were 19.8% lower than the same time last year.

On a state by state basis, seasonally adjusted approvals rose in New South Wales, up 0.8%, South Australia, up 3.4%, Queensland, up 6.1%, and Western Australia, up 8.8%. Approvals held steady in Tasmania while they were down by 10.7% in Victoria. In original terms, approvals increased by 28.1% in the Northern Territory and by 98.5% in the Australian Capital Territory.

PropertyReview

Unit glut leads to discounting

24-02-2005

From: News Interactive

Slow sales ... Emerging oversupply is forcing some developers to cut inner-city unit prices in Sydney by up to 20 per cent to entice buyers

HEAVY discounting of inner-city apartments is helping to lift their affordability, especially when combined with first home owner grants, according to the Housing Industry Association.

The association's chief economist, Mr Simon Tennent, said lack of investor interest in Sydney apartments meant some developers were discounting stock in the hope of capturing the first home buyer market.

Properties were also being discounted in inner-city Melbourne and Brisbane, where there is a glut of units.

"I know of an (apartment) developer who has dropped prices 20 per cent to make sales and they've already had an impact at the lower-priced end of the market," he said.

This discounting could bring city apartments within reach of first home buyers, especially when combined with state government stamp duty concessions and the Federal Government's first home owner's grant, Tennent said.

"There is still some way to go. The first home buyers are a bit thin on the ground, but we're optimistic," he said.

However, Mr Tennent said first home buyers would have to be vigilant to spot bargains as he did not expect to see developers discounting across the board.

Real Estate Institute of New South Wales president Rowen Kelly agreed that first home buyers would be a strong force in the apartment market in 2005.

But he said apartment developers had already cut the amount of new product coming on the market and this, combined with other factors, would keep prices stable.

"I think 2004 has been the big year for substantial decrease in turnover, yet we've still only seen a 1 per cent drop in median sales price (for apartments)," he said.

Mr Kelly also said the State Government's controversial vendor exit tax created an "artificial undersupply" in the market, as many investors were not prepared to sell properties.

Figures released this week by statistician Residex showed apartment sales in Sydney in the December quarter 2004 were down 48.15 per cent on the same quarter in 2003.

The slump was even more dramatic in Sydney's CBD, where sales in the December quarter 2004 were down 68.34 per cent on December 2003.

Apartment prices fell by only 0.8 per cent between the two periods.

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