Generally we like our blog posts to inform our clients: stick to some sales and rental facts and insights and let you make your own mind up about what’s happening in the Brisbane property market. This week is a little different. After biding my time for some years, I bought a Brisbane apartment this week.
Is it the perfect time? I’m not sure. Is it the perfect property in the perfect location. Who knows. So this is just one investor’s story – full of opinions and self-justifications about what I bought and why!
Like any parent I want to help my kids get a start, and you’d rightly expect a real estate agent to think first of property. My instinct is we have some strong growth in prices ahead of us and if I’m right it’ll only get harder for my daughter to buy an apartment. An investment that could become her home. So I’ve just done this for her. I worked in property through the flat 1990’s, the soaring 2000’s and the flat (and down a bit) 2010’s. Yes 2021 saw some strong rises but I believe Brisbane apartments have far more growth to come and I want her to benefit from that.
Our new inner-city apartment is 8 years old and its previous owner paid 6% more than we have. But I didn’t grab a bargain – it was on the market a number of weeks and I offered above asking price to secure it in a multiple offer competition. Adding purchase and sale costs it’s a large loss for that investor, and no doubt makes it a property he regrets owning. He bought at a peak (with a new property premium) and even recent rises haven’t eclipsed the drop in value he experienced. They must have good reason to sell – or completely disagree with my market optimism!
But I sometimes wonder if we expect too much of property investments. For the rewards to come too quickly. I guess I’ve learned that you can wait a long time for those rapid growth patches – a decade or more sometimes – and I’m punting Brisbane apartments are heading into one. I’m punting that the previous owners’ 8 years were the bad ones and I’m lucky enough to be there for the good ones. That we might see the doubling in prices that can happen in just a 3-4 year window.
ABS release: October 2021
Investors are coming back and in big numbers. The latest ABS data shows Queensland investment lending near record highs, 4 times more dollars borrowed to buy property than at the COVID-induced trough. I can see our sales teams’ enquiry and results and the past decade has been all about owner-occupiers. Rents largely flat-lined and most Brisbane apartments showed little promise of significant price growth. Investors had little reason to buy. But both have changed, as rents soared in 2021 and I think they’ll grow faster in 2022. Apartment prices are already up almost 13% this past year.
Astute Finance’s Matthew Jackson says: “We have seen more investor activity. This has come from low rates, strong equity in existing properties and interstate buyers looking to invest in QLD property.” Bank Of Queensland’s Brett Smith agrees, but says houses may be losing some appeal: “I am seeing more people asking about using the increased equity in their homes to leverage into an investment property. However, when they look at the price of houses & the low rate of return they are not proceeding to application stage.”
Investors are noticing the huge rental undersupply of Brisbane’s apartments right now. We have the first inspection booked for our property this week – with 29 groups of tenants registered!
And the simple math on this property we’ve just bought? With a higher but still affordable price, healthy rents, and an interest rate comfortably below 3%, we can ‘hold’ this apartment for very little expense. Minimal cost to own, even allowing for an occasional leaking dishwasher or broken shower screen or any of the other thousand things that can annoy and distract us as property investors. We’ve chosen an interest only loan until my daughter is old enough to make her own repayments. I’m not buying her a property – just locking in her ownership, minimising the holding cost but getting her foot on the property ladder sooner.
Was I nervous about the decision (and extra debt)? Of course.
I read all the soothsayers and I’m punting that much of the media commentary about a cooling market is not relevant to our city: CBA now says Brisbane prices will grow another 9% this year (their forecasting track record is not flash…) SQM Research says Brisbane will outperform other capitals and rise 14%. One market expert I trust, CoreLogic’s Director of Research, Tim Lawless said this: “Brisbane and Adelaide, along with regional Queensland, are the only broad regions where there is no evidence of value growth slowing just yet, with the monthly rate of growth reaching a new cyclical high in December.”
I like what’s happening in Brisbane’s inner city – infrastructure, amenity, appeal. I like the lifestyle changes and I bought into a suburb that’s changing as I think that adds to the chance of a capital gain. I feel like I’ve made a good investment toward my daughter’s future.
And if I’m wrong and the value drops 6% like it did for the last owner? She’ll have her first lesson in the eternal patience required to be a Brisbane property investor!
Rob, like you we are looking for our daughter but find the very high Body Corporate fees off putting. Did you buy in one of these complexes and do you have any thoughts on this aspect?
A rough estimate would be $5,000 to $6,000pa as an average body corp fee for a 2 bed apartment Damien. With rents rising and interest rates still very low my overall holding cost for the property is almost nothing. I also don’t think most of us fully compare BC fees with house ownership costs as they cover insurance, external maintenance and sinking fund for future expenses. In my books it’s not a big premium but, importantly for me, buying an apartment over a house means I can get a property at reasonable cost in a central location where I’d want to live – and so will lots of tenants. My opinions only!