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Monday 22 August 2016

There is no doubt that if the pronounced apartment developments were all to commence this year in addition to those under construction there will be an oversupply.

However not all of them will commence due to failure to obtain support from lenders and not all of them will sell well due to competition from imaginative, well designed, high quality developments.

Based upon our 50 years in the residential property investment arena and having experienced the property cycles – seven of them – at the bottom of the market, we offer the following guidelines for selection of an apartment for investment or owner/occupation.

If they are quality build and design, located in proximity to infrastructure, transport, employment, schools, shopping and medical services, in our opinion they will continue to produce capital gain and that is why we suggest that now is a good time if you select carefully.

Another reason to invest wisely now is the multi-billion dollar transformation of Brisbane CBD about to commence now into 2022, making Brisbane a truly world class city.

Being within walking distance to employment and Brisbane CBD is the desire of many owner/occupiers and tenants now and in the future.

There are plans for plenty of those properties to be on offer later this year and the three years following – BUT will they hold their prices, produce capital gain and above average rental yield for the location and, more important, how will they value by the banks 12 or 24 months from now when it is time to settle?

In our opinion, and in the opinion of many major lenders, the developments with good prospects are those focused upon the occupants and their lifestyle requirements.

Those who have put quality first, last and always - the essential differential.

No longer are the basic multi-storey buildings with standard fit out and basic amenities going to compete with developments offering quality design with a lifestyle environment for occupants.

• Some developers may be overloaded with slow selling properties affecting their ability to complete on time. Slow selling because they are not meeting buyer expectations.
   
• Many of the properties offered are standard build with no interesting design features and certainly little or no leisure or recreational facilities
   
• Some have the potential for sky high body corporate charges for services into the future
   
• Most investments or purchases are made on the basis of a small deposit with balance upon settlement. There is a genuine concern among investors and lenders as to whether valuations upon completion will be substantially lower than the sale price.
   
• SMSF investments could be seriously affected if the property does not value and additional equity is required to complete the purchase
   
• Some developers are currently offering rental incentives indicating that they are not selling well with low or no demand from prospective tenants. There is now competition for tenants. The developers of the style and quality we recommend do offer rental guarantees from time to time as evidence of their confidence in the ability to attract tenants.
   

The solution 

• The oversupply situation will correct itself
   
• Developers who offer an imaginative, lower cost per square meter project, attractive to both owners and tenants will value higher because developments with the tenants’ lifestyles in mind will outsell those offering basic accommodation with no leisure or relaxation facilities. 

• Quality design and fit out with professional building management will win the tenants.
   
• Well engineered services designed to minimise expenditure and body corporate charges.
   
• Developers who can build quality at a competitive cost and can offer a larger apartment for the same price will win on valuation, price and tenant demand.
   
• Cost per square meter for high quality is a factor to be considered.
   
• Successful developers will have the support of lenders so their track record is an important consideration
   
• Locations outside of the CBD will not be over supplied, with recent infrastructure projects bringing many suburbs within a 15 minute drive of the city.
   
• The ring areas alongside the CBD are producing some apartments which meet our selection criteria for investment e.g. RNA $2 billion development, Bowen Hills and environs.
   

Don Duncan
Principal Consultant

mediwealthaustralia.com
meredon.com.au