THE BRIEF. BRISBANE CITY UPDATE.

BRISBANE CITY NEWSLETTER

The Brief.

Multipliers On The March.

After several years of declines, Brisbane’s rental market has turned the corner in 2019 and this has helped to drive a boom in the city’s permanent MLR sector with multipliers across all businesses trending upwards to never seen before levels.

newer buildings with quality amenities which are within walking distance to key locations such as business districts, schools and hospitals. In some cases there are waiting lists and these permanent lettings don’t stay on the market for long.

The bounce back in Brisbane’s letting market has been swift and quite pronounced and hard data from multiple analytics firms, and the sheer volume of inquiries we’ve received, indicates that the much publicised over-supply of units in Queensland’s capital has now been absorbed.

Based on this, we are receiving a high number of enquiries from existing managers looking to expand their portfolios in addition to the already extensive number of people looking to get into the industry. This creates an unprecedented level of depth to the buyer market and, quite simply, this means there is more demand for Management and Letting Rights and naturally this puts upward pressure on prices.

What we’re seeing on a daily basis confirms this. Many buildings now have low vacancy rates, particularly

35

D E A LS S O FA R T H I S FINANCIAL YEAR

$104M

IN SALES

The emerging Business Only category has also hit a note with buyers because they offer a substantially higher return and, again, this has forced multipliers up. We are regularly seeing properties in excess of $500k profit reaching the 6X level and beyond. Furthermore, at the lower end of the market, businesses netting less than $100k, which have traditionally seen much lower multipliers are regularly being sold at the 5X and above. This is up by 1 to 1.5X from a few years ago.

While we don’t envision an end in sight in the immediate future, it’s always prudent to “expect the unexpected” and now might be a good time to consider your position if you’re holding a management rights business.

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What The Experts Are Saying.

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Meet some of our specialist inner city Brisbane team.

THE REAL ESTATE INDUSTRY IS BUZZING WITH QUESTIONS ABOUT THE SO-CALLED RECOVERY IN PROPERTY MARKETS, AND RENTALS IN PARTICULAR. IS IT REAL? DOES IT HAVE LEGS? IS IT A DEAD CAT BOUNCE? ACCORDING TO SOME OF AUSTRALIA’S LEADING ANALYSTS, THE BOUNCE BACK IS REAL AND IT’S HAPPENING NOW.

Gareth Closter Broker - Brisbane Central

• Moody’s Analytics reports Brisbane’s letting market is predicted to outperform the rest of the nation over the next two years as it bounces back from a unit supply glut, underpinned by rental demand.

• According to CoreLogic’s Cameron Kusher: “The past year has seen a change of direction for the Brisbane rental market … following a number of years of declines, rents are now climbing again.”

• CoreLogic’s recent quarterly rent review revealed rental yields are rising in Brisbane at 4.6 per cent, which is higher than the national average of 4.1 per cent.

• Domain research analyst Eliza Owen says Brisbane’s rental market is performing well and has shown signs of tightening, with asking rents up and landlords back in the driver’s seat.

Nathan Eades Broker - Brisbane Central

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2018/19 RECENT OFF THE PLAN SALES

Year To Date Snapshot.

Chester + Ella Newstead, Brisbane

3 1 9 A PTS

THERE IS SOLID EVIDENCE TO SUGGEST THAT MULTIPLIERS ARE WELL AND TRULY ON THE MARCH AND THIS COMES FROM ACTUAL SALES PRICES ACHIEVED.

High Net Profit Multipliers

Gallery House Hamilton, Brisbane

3 1 5 A PTS

Illumina Toowong, Brisbane

2 2 1 A PTS

Omega Bowen Hills, Brisbane

1 3 0 A PTS

It is now becoming the new normal for 6X multipliers being achieved on high net sales regardless of the need to buy real estate. Here’s a sample of what we have currently under contract or already settled: South Brisbane

South Brisbane Central Village Riverside

Vue

$760k net @ 6.1X (with a manager’s unit) $440k net @ 5.9X (business only) $1.5m net @ 6.6x $500k net @ 5.9x $485k net @ 6x

Business Only Deals We are also seeing Business Only multipliers for low nets climbing and we aren’t seeing these multipliers having issues at valuation. The low volume of available stock and high demand is forcing these previously low multipliers upwards.

We currently have contracts on the following to support this: Toowong West End

Boondall (caretaking only)

$180k net @ 5.6X $145k net @ 5.4X $33k net @4X

The State Of Play In Off The Plan.

NOW THAT ABSORPTION RATES HAVE RISEN AND ARMAGEDDON WAS AVERTED, WHERE ARE WE HEADED? There’s definitely been a cooling off in the development cycle in the OTP market and this seems to have developed fairly quickly given the doom and gloom predictions in recent years about an apparent oversupply of stock coming onto the market.

The media hype suggested things would become seriously ugly for anyone investing but even during this period we did not experience anything near the swathes of nonsettlements that were being forecast.

One really good indicator of where the market is at and where it’s headed is the RLB Crane Index, which for Q1 2019 reports: “Brisbane suffered the biggest decline in Australia with a decrease of 13 cranes, resulting

in 59 cranes standing opposed to 72 six months ago. Inner Brisbane accounted for the eight dismantled cranes, driven by the mixed use sector. Cranes were removed from Howard Smith Wharves, 949 Ann Street, Queens Wharf and South City Square.”

is helping drive demand for this asset class. It also means existing management rights businesses are hard to come by as well and whenever these hit the market, we are getting multiple offers at high multipliers.

In 2015, Brisbane had 105 cranes so we’re down to just under half the construction activity on this measure alone. So what effect has this had on the market?

Another factor to consider is that people in the existing businesses are holding on for longer and this can be put down to many of these MR setups being run under management which basically means there is less burn out being experienced by the operators.

Some development sites with a DA for residential switched to commercial and this is another real sign of a turning market. This has led to a real lack of Off The Plan management rights stock which

The oversupply of units looks to have been absorbed by the market already and the bottom line is that the current market conditions are looking good for anyone who is looking to sell.

WE’VE GOT YOU COVERED. MEET OUR BRISBANE TEAM.

GARETH CLOSTER Broker - Brisbane Central

N AT H A N E A D E S Broker - Brisbane

B R E N T STA K E R Broker - Brisbane North

JA N E FA N G Broker - Chinese Liaison

M. 423 182 766

M. 0448 339 920

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TIM CROOKS Director of New Developments

ALEX COOK Director

TRUDY CROOKS Managing Director

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