FYI, i did some check before for the TM project.
Their selling price is around AUD 821 psf, with cost of AUD 42 psf.
The cost of building is around AUD 200 psf in australia.
With the total GFA and roughly 95% sold out (according to latest Quarterly report), the profit is handsome even after 20% discount for the error of estimation.
The project is about to TOP in 2017, for FRS 115, this will only capture in 2017.
I lock in the profit of TM, with current price, i treat it as a valuable and cheap stock. If the CB project and Perth can add more chemitry into it, that will be better.
AUstralia property is in hot cake situation. local might feel annoy for this high price proeprty due to the affortability. However, good location project still selling like hot cake, especially with yield of around 5-6%, this attract many investors from China, Hong Kong, Singapore and indonesia.
The other sides, there is too much property company step into Australia now, projects are ton waiting to launch. SO, the faster CEL launch the project, the better it is. This is my personal view.
Now, even some Malaysia seminar guru is setting fund and convincing investor in Malaysia to invest their fund to buy property in Australia. Selling the idea and manage the fund for investor. Sound familiar?
Last edit: 10 years 2 weeks ago by RT Knight. Reason: adding more info
RT Knight - I prefer physical properties and avoid buying property shares as I don’t want over exposure in this cyclical sector. I find residential properties easier to assess while property counters have mix portfolio, which is way above my head. Even then, I have only bought/sold properties in cities I have lived in ( 5 cities in 3 countries ) as I believe in local knowledge advantage.
CES should be congratulated if they have sold 95% of TM at AUD821 psf. IMHO, most buyers must be foreigners as locals can’t afford this price. Foreigners can only buy new properties, so if you buy a new home , you can’t re-sell to another foreigner. Locals + PRs can buy pre-owned apartments in the same Melb CBD area for AUD600 psf , so no need to buy new homes.
As Melb is now more relaxed in approving high rise residential buildings in line with other global cities ( I think mainly due to traffic jams/ poor public transport to CBD where most jobs are ) , many developers are rushing in, including foreign developers from as far as China. Hence expect an oversupply in the next few years, in fact apartment prices are already softening.
Oz property prices have defied gravity for so many yrs, so I think there will be a correction coming, except maybe certain suburban areas ( with good schools, amenities etc ) which attract rich Asians like magnets. Investing on a condo unit at AUD821 psf will only get nett rental yield abt 3.3% ( before tax ) at best, same as bank term deposit . ( mortgage rate now abt 5% is all time low, which I think is near bottom)
When new foreign developers come to Spore, they don’t have the local knowledge and will have to learn fast or get hit. Same applies to foreign developers coming to Oz as they have to compete with large established local developers. I think yrs ago, developers can only sell max 50% of new apartments to foreigners. Laws change all the time, depending on the situation ( ie Spore/M’sia imposed higher tax/stamp duties for foreigners recently to cool market ).
The median household income is about AUD60K/yr and they pay high income tax. Even a yuppie who earns AUD100K/ yr ( has to pay close to 25% income tax if single ) can’t afford AUD821 psf. Assuming he buys a AUD821K condo ( 2 bedroom 1K sq ft, and don’t forget 5% stamp duty ), he has to borrow 80% at 5%/yr interest plus pay about AUD6K/yr condo mgt fees.
Young Aussie couples are already complaining about the unaffordable home prices in suburbs with good infrastructure/amenities . What they do is to buy homes in new suburbs up North or West , about 20 to 25 km from CBD. They can build a nice 4 bedroom bungalow on 5,500 sq ft freehold land for total abt AUD500K. But they need to suffer an hour’s drive to work in CBD. To get the right perspective, Melb is more than 5 times the size of Spore, hence there are still a lot a cheap virgin land within 30km radius from CBD.
Thanks for the fruitful information. That include alot of regulation that i don't really know for the Oz property market.
I was surprised when the TM project sold at AUD 821/sf and there is 56% of the total 581 units sold when launched. Or maybe the price i get is from the quotation, there is always discount when we go into the purchase stage. The AUD 821/sf is what i get from the initial floor plan and asking price.
You seem like know Oz very well. Can help to comment/advice on the CB project as well? I am trying to get more information regarding the development at that area.
RTKnight – Sorry I don’t follow property counters. If the CB project is in Swanston St, it should have no problems selling but question is at what price ? Homes in CBD are easy to sell or rent but price will depend on supply/demand. IMHO, buying to stay long term is fine as its difficult to quantify with $$$ the happiness in living in your own condo unit in CBD for lifestyle, convenience etc, otherwise I think prices have already peaked and needs time to consolidate. But be prepared for traffic noise, esp lower floor units facing the road.
Holding costs are high as cost of funds is steep. When there is a glut, weak developers can’t hold on to large stocks of unsold properties, so will have to clear some. I think those foreigners who invested in Docklands area , which was hot few yrs ago are sitting on paper loss now.
interesting. the CEL project at CB area is at junction of Victoria street and Bouverie Street. That is right besides the RMIT University.
i check the google map, Docklands area is just 1-1.5km in distance from the CB area. I think the view will be superb, that is facing the Victoria Harbour. Do you what happen for the project? Is that because the selling is too high and the investor is in paper loss?
RT Knight - I thought you wanted to buy a condo? Anyway, I think CB project is in a good location, close to Melbourne and RMIT Unis. Docklands used to a wharf, which has been cleared of warehouses etc not that long ago and converted into residential/commercial precinct. Condo units facing the harbour have been snapped up at launch. I believe these units have appreciated and will be worth a lot in future as supply is limited. However there are many condos built near the harbour at Docklands which were sold at high prices few yrs ago. I think those foreigners who bought then are sitting on some paper loss now, but IMHO should have no worries in the long term as it is great area to live ( only a short distance to the city’s main shopping area in Bourke St. )
In my earlier post, I said that property counters have mix portfolio which is beyond me, hence don’t think can be assessed based on one project alone. Just after the 2008 subprime or even 2012 EU crisis, one can buy anything and make heaps $$$ to boast about it now. The SGX is now at the right level, and all funds and smart investors are scrapping the barrel to find bargains. Funds have huge resources, specialized talents and network, even direct lines to CEOs, so if you find a hidden gem you are lucky. But once the gem is discussed constantly in forums, it is no longer hidden and there are reasons why funds do not buy them. Maybe they are about fully valued as funds look few yrs ahead. ( Buffett said 5 to 10 yrs at least ) My views only. Not vested.