Home' API Magazine : June 2014 Contents 56
API JUNE 2014
JUNE 2014 API
SL: I’d have a further chat with the agent and discover more.
You can’t complain about an investment property going up that
much in value over a short period of time
¿ . ST LUCIA, QLD
$360,000 - $400,000
St Lucia is located just four
kilometres southwest of the Brisbane
CBD. Its river frontage and university
tenant base means properties vary
broadly. Buyers can look at anything
from multimillion-dollar waterfront
real estate to older single-bed student units and most property
in-between. The suburb was also severely impacted by the 2011
flood, which had a dramatic effect on its market at the time.
The chosen listing for this suburb comprises a two-bedroom,
one-bathroom unit with single-car accommodation. The unit is
in a 1970s/80s brick, walk-up complex, and appears to have been
well maintained and partially renovated.
The property is listed with an asking price of $360,000 to
$400,000, but no rental estimate has been provided.
Your Property Hound
¿ WHAT WOULD BE A REASONABLE WEEKLY RENT FOR
K Y: The advert states what the previous tenant was paying,
but it still pays to do your own research as rents change over
time. Looking at comparable properties for rent on realestate.
com.au and rpdata.com, I would expect this property to rent for
$390 to $410 per week. It’s important to compare properties with
similar attributes, for example two bedrooms, one bathroom,
one car space, as differences in these attributes will alter the
MR: $370 per week seems reasonable in the current market. I
would also plan to renew the lease at a peak time, to achieve
a higher rent ($400 per week) and to reduce the chance of
vacancy. Demand for rentals in St Lucia is highest in February,
coinciding with the start of the university calendar.
¿ WHAT ARE ITS PROS AS AN INVESTMENT PROPERTY?
K Y: This property has three big pros that make it appealing as
an investment – location, price and condition. This property
is virtually next door to the University of Queensland, it’s
conveniently located for South Bank access via the river and City
Cat (catamaran ferry). It’s also close to three major hospitals. All
of these nearby facilities draw people to the area and provide a
potential pool of tenants. The price is very affordable and it has
been renovated, so there really is minimal work to be done.
MR: The property is within walking distance of the largest
university in the state – currently home to more than 33,000
students and 6000 staff, with continued growth anticipated. The
increasing demand for property in the area will support capital
growth and rental returns. The property is nicely presented and
well proportioned, making it appealing to tenants. It appears
solidly constructed and should function as a low maintenance
investment. The unit’s floor plan would allow the addition of a
second bathroom which would add significant value and rental
yield to the property.
¿ WHAT ARE ITS CONS AS AN INVESTMENT PROPERTY?
K Y: The cons that stand out for me are that this property is very
close to the river and in an area of Brisbane that does flood. A
flood search using Brisbane City Council website resources will
show the property is in an area of medium risk – it did flood in
the large floods of 1974 and 2011 – and the property’s ground
levels are below the recommendation for minimal habitable floor
level. I would definitely recommend calling a few insurers to get
quotes on building and landlord insurance for the property as
these costs may be high due to the flood risk. The other main
drawbacks of this area are the very high vacancy rate (6.5 per
cent as reported in API April 2014) and negative growth figures
over the last few years.
MR: Council records indicate the lot was submerged by
floodwaters in 2011. This will affect the capital growth potential
of the property, given legitimate concerns over future flooding
and the potential for financial losses due to structural damage,
clean-up costs and lost income caused by extended vacancy.
The property is approximately 30 years old, so offers minimal
depreciation benefits. Vacancy rates for units in St Lucia (4.75
per cent) are significantly higher than the Brisbane average (2.2
per cent) indicating an oversupply of rental properties in the
¿ WHAT ADDITIONAL QUESTIONS WOULD YOU ASK
K Y: Why are they selling? Did the property see water above its
floor level in 2011? What are the outgoings of the property – body
corporate, rates etc.? How much does the sinking fund currently
hold? Can you provide the minutes of the last body corporate
meeting? Note – the agent should provide you with the BCCM
(Body Corporate and Community Management) Form 14
information sheet with the Contract of Sale for the property.
MR: I would want to know the amount of damage caused by
recent flooding and the impact it has had on body corporate
fees, special levies and the balance of the sinking fund. I would
enquire whether the building is insured for flooding and I would
be prepared to substantiate this information by performing a
search of the body corporate records.
¿ HOW HAS THE MARKET BEEN PERFORMING IN THIS SUBURB
AND FOR THIS PROPERTY TYPE?
K Y: I’d have to say not great. Vacancy rates are very high in St
Lucia at 6.5 per cent and capital growth has been poor, with
significant negative growth exhibited over the past 12 months
(-10.3 per cent) and pretty much zero growth in the last five
years. The long-term average is just okay, at 5.5 per cent, but
generally I’d say there’s an oversupply of units in St Lucia and
the market reflects this.
MR: Over the past four years property prices in St Lucia (and
the wider Brisbane area) have been stagnant. There have been
several recent sales in the complex between $360,000 and
$395,000. This is similar to sale prices achieved in 2010.
¿ WHAT IS THE MARKET OUTLOOK IN THIS SUBURB AND FOR
THIS PROPERTY TYPE?
K Y: I always say that predicting the future is a tricky game
so the best we can do is look at all of the fundamentals of the
area, assess historical performance, look at future projects and
plans, and make an educated assessment of what we think will
OPEN FOR INSPECTION //
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