Brisbane Apartment's blog

Brisbane Apartment Blog

This is a backup site for the Brisbane Apartment blog.  The main site is located at

www.brisbane-apartment.com.  

Usually, the main site is update first and more regularly.  This blog contains information for investors, buyers, sellers and renters who have an interest in apartments and apartment developments in Brisbane.

Brisbane Apartment Market Trends

This blog post sets out my thoughts about the inner Brisbane apartment market, based on my non-scientific observations:

• Most of the apartments sold in inner-Brisbane in the past year have been one bedroom apartments.
• Thus, the medium price will be lower, because the kind of apartments selling are the smaller, cheaper apartments.
• However, many apartments are being sold below the previous sale price for that same apartment.
• In a number of buildings, the prices being achieved for apartments are equivalent to prices in 2007.
• Two bedroom apartments above $600,000 are not selling.  If they do sell, the contract often crashes.
• In some quality buildings, prices have not deceased, but there have been few sales.
• Vendors are discounting if they need to sell.
• Rents are increasing, but so are body corporate fees.
• Apartments being sold off-the-plan are being sold at prices that well exceed the price of similar existing apartments.
• January was slow for sellers, but the market picked up in February.  So far, March has been mixed.

For example sales, see here.

Brisbane Real Estate Capital Losses

RP Data reported recently that Brisbane apartments in 2011 lost suffered a capital loss of 6.5% (when looking a medium sales prices of apartments that actually sold in 2011).

Let's assume Mr Investor purchased a Brisbane apartment on 31 December 2010 as an investment paying $485,000.  Assume that he borrowed 80% of the purchase price, including stamp duty.  Stamp duty is $14,850.  So the total purchase cost, including legal fees and bank fees, is just over $500,000. Thus, Mr Investor put in $100,000 of his own money, and borrowed $400,000. 

That apartment, if it went down 6.5% in value, is now worth $453,475.  That is a capital loss of $46,525. 

So Mr Investor has had an actual capital loss of over 46% in one year.  That is the risk of leveraging.  A small decrease in value means a large capital loss where there is a leverage situation.  (If Mr Investor had to sell, he would pay over $10,000 in real estate agent fees, making his capital loss even greater.)  If values decrease further, Mr Investor will be completely underwater.  I suspect that there are many apartment owners in Brisbane who have little or no equity left, especially those who have purchased off-the-plan in the last 5 years and paid too much.  The only saving grace is for foreign investors who may make a profit on exchange rate gains.

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