Sun Of A Gun

Sydney Morning Herald

Saturday June 10, 2006

Susan Wellings

Valuers may be underestimating the true worth of Queensland apartments.

Sydney financier Kevin Lane has an eye for a good investment and he's keen on Queensland apartments because he has done well in the short term and he believes they provide healthy long-term capital growth.

In 2002, he bought a two-bedroom apartment on the beach at Coolangatta for $380,000. Two years later, he sold it for $610,000. Lane then bought a three-bedroom sub-penthouse in the same block. It has a larger balcony and 270-degree views from Surfers to the Tweed River.

"You can get great value in Queensland for far less than you'd pay in Sydney for comparable properties," says Lane, 55, the managing director of Residential Property Mortgages. "If my apartment there is worth $1 million, you'd pay $3 million here for something similar."

Lane is going against the grain when it comes to investing in Queensland apartments. Investors accounted for 60-70 per cent of the unit market in 2003 but now represent 40-50 per cent of buyers, according to independent researchers Matusik Property Insights.

A Matusik report suggests a major reason for the decline in interest among investors, particularly when it comes to new apartments, has been caused by a perception that prices are high. This is the result, the report claims, of valuers, employed by would-be buyers, underestimating the costs of building new developments.

"We believe many valuers do not understand new dwellings and the costs of bringing such product on to the market," principal Michael Matusik says.

In Brisbane, there has been a 2.4 per cent fall in apartment prices over the past quarter, according to Australian Property Monitors. However, in the CBD, the sluggishness has lifted slightly with 123 sales (from 380) in the Vision high-rise since its lauch earlier this year, says the developer, Austcorp. However, most of the activity is on the fringe of the city, where many new apartments are being built, including 1000 at Kelvin Grove Urban Village, 900 at Newstead River Park and a new community of 10,000 residents at the Port of Brisbane Corporation.

Brisbane real estate agent John McAndrew says units in the south-east of the state remain a good investment opportunity as vacancy rates are so low and rental yields are, on average, 4.5 per cent.

On the Gold Coast, 233 apartments were sold for $204 million during the December quarter, a fall from the previous quarter's figures of 373 sales totalling $357 million. "But this figure remains well above the historical gross sales values achieved prior to March 2002," says PRDNationwide analyst Lynda Campbell.

On the Sunshine Coast, marketers of the Coolum At The Beach project reported a lift in investor activity and a strong demand from owner-occupiers. "Ocean views are what a lot of people are looking for," Lane says, "and there's real capital growth in apartments on the coast."

In other parts of Queensland, areas close to bauxite or coal mines are benefiting from the resources boom and "people are fighting over stock", McAndrew says. "Demand is very strong, and often supply is limited."

In particular, there has been strong growth in towns such as Mackay, Mt Isa and Gladstone, where there has been a huge amount of spending on infrastructure.

AT A GLANCE

? Brisbane unit prices rose 2.3 per cent in the year to March.

? Brisbane house prices rose 0.5 per cent for the same period.

? Gold Coast units dropped 3.8 per cent.

? Gold Coast houses dropped 2.5 per cent.

PREDICTIONS

? Brisbane units will rise 23.7 per cent in five years.

? Brisbane houses will rise 22.7 per cent in the same period.

? Gold Coast units will rise 21.3 per cent.

? Gold Coast houses will rise 17 per cent.

Source: Australian Property Monitors.