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Recently I was speaking with an investor who was facing a major dilemma. He had bought an apartment in Abbotsford off the plan and now that the property was due to settle he was having problems getting finance approved.
This was causing him significant stress, as the penalties for not settling are significant. They include losing his deposit and the risk of being sued by the vendor to cover any out of pocket expenses.
As we discussed his situation it soon became clear how murky his position had become.
The sales person told him the property had originally been purchased 12 months earlier for $450,000 and was now being on-sold prior to completion. Due to the fact the property had never been settled there was no way to confirm this was correct.  On the surface, to this individual, it appeared  that the asking price of $406,000 was a bargain to good to refuse and he signed a contract to purchase the property.  
Prior to signing the contract he had put in place a loan preapproval so he was confident getting a loan would not be an issue and as a result did not buy subject to finance. The next hurdle to clear was to get unconditionally approved. To do this his bank ordered a valuation and this is where his problems started.  
The valuation came back a long way below the contract price at $340,000 and he was being forced into a position where he would be unable to settle. The real estate mantra of caveat emptor, buyer beware, meant severe penalties were looming.      
However, not all was lost and like going to a doctor for a second opinion, he approached a different bank. Sure enough the valuation came back at the purchase price and his loan was approved.
So how can one bank value a property so much less than another? The answer lies in the individual banks tolerance for risk and the kind of property they view as being a safe security.
The Abbotsford apartment had one bedroom and was only 37 square metres. Although one-bedroom apartments can make great investments if they are under 50 square metres, at many banks alarm bells start ringing. A small apartment size is a signal the property may be a serviced apartment or student accommodation, which most banks approach with trepidation.
In addition, banks have postcode restrictions in place that determine their lending policies and these vary from bank to bank. Established apartment markets such as <a href="/news">South Yarra</a> and <a href="/news">Port Melbourne</a> are more likely to get the nod. However, an apartment under 50 square metres in an emerging market like <a href="/news">Abbotsford</a> is more likely to face harsher lending policies.  
Although the valuation is independent, the valuer will have an understanding of the banks policy and you should take this into account. Remember if a valuation comes in too high and the bank loses money on the loan then the valuer maybe legally liable.
Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.
 
       
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The murky waters of bank valuations: Don't get caught out on your finance approval

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I love this image as it tells us so much about the world and how the wealth has been dispersed. The lights illustrate the dominance of the Unites States and Europe, in addition to the emergence of India and China as future super powers.  
<img src="/images/stories/2014/01/29/world_at_night_jan_29.png" width="470" height="235" alt="world_at_night_jan_29">
Photo: C. Mayhew &amp; R. Simmon (NASA/GSFC), NOAA/ NGDC, DMSP Digital Archive
When we look at Australia the image can also tell us a lot about the local property market and gives us an insight into why it has been reasonably solid compared to some other countries.  
Australia is an enormous country with access to significant mineral wealth. However most of the country is not a palatable place to call home. As a result many Australians decide to live in major cities close to the coast with very few venturing into the middle of the country.  
<img src="/images/stories/2014/01/29/oz-at-night.jpg" width="470" height="282" alt="oz-at-night">
In Australia over 70% of our population live in our 10 biggest cities. This means we have a very centralized market with the majority of people competing for scarce land close to major cities where they are more likely to find stable employment.  
Because most of the population wants to live in these defined areas it creates somewhat a housing shortage. But Australia does not have a housing shortage – it only has a shortage of housing in areas where the majority of people want to live.  
This competition for a finite commodity puts pressure on the value of land and results in a more robust property market.  While the overall market has come back a bit from the highs of 2010, some areas are performing better than others. The property markets that are feeling the effects of a softening market most are the outer-lying suburbs where supply of land is not an issue and job stability is less reliable.
By contrast the image shows that much of the United States has been populated. In the US only 13% of Americans live in the 10 largest cites. They obviously have a much larger population than Australia so have to spread out across the country. But if we take it a step further we find that only 25% of Americans live in the 50 most populace cities. The American market has a more decentralized population and as a result the pressure on the value of land is less.  
The US has traditionally had very well established small town communities with schools, transport and entertainment. These small towns often do not have a shortage of land and while this does create more affordable housing it also increases the risk of price volatility.  
Many of these small towns have been smashed by falling property prices and unemployment. With the vast majority of the population living in these areas it has had a catastrophic effect on the overall US property market. As a result it will take the US market significantly longer to drag itself out of the doldrums.  
While the property market in Australia has been through a natural softening phase, and is not out of the woods yet, the demographic make-up of our population will result in less dramatic falls. As a result some assets will hold their ground and weather the storm and be well positioned for future growth while others will languish for a few years to come.  
Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.
 
   
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Why Australia's population dispersal creates stability in the property market

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It is that time of year again when Australians pack their bags and head off to their favourite holiday spot for the summer. As you do this, chances are you’ll flirt with the idea of going one step further and buying your own slice of paradise.  
A holiday home can either be a great getaway for your family and friends, or a constant drain on your finances. It all comes down to the type of asset you buy and whether you can truly afford it.  
Many people buy a holiday home when they’re feeling flush, only to run into trouble when things get tight. Often, they already have a substantial mortgage on the family home and take out a second mortgage to buy the holiday home. They tell themselves that the holiday home is an investment because they can rent it out when they’re not using it, and put the rental income towards paying the mortgage.  
Don’t be fooled. To be a true investment, a property must produce a consistent level of income.  
Holiday homes can produce considerable income at peak periods such as school holidays, Christmas and Easter when demand is strong, but far less at other times.  
This inconsistency can make it hard to plan your finances, meaning you’ll probably have to pay most of the mortgage from your own pocket. You’ll also have to find money to furnish the property and fund ongoing costs like council rates, property management fees, insurance and maintenance.  
What’s more, being reliant on peak rental periods to help pay the mortgage will limit your own use of the property to non-holiday periods when the weather is less than ideal and you’re less inclined to go there.  
If you borrow to buy a holiday home while you’re still paying off your family home, you’ll be more vulnerable to the effects of changes in your finances. For example, if your household income drops because of a job loss or unpaid parental leave, you may be unable to meet the costs of holding two properties and be forced to sell the holiday home.  
If the change is one that affects the wider property market, like an interest rate rise, it may be difficult to sell your holiday home because potential buyers will be feeling the squeeze too. You may have to sell it for a substantially reduced price, or worse still, be unable to sell it at all.  
In short, it’s sensible to treat a holiday home like a second home, not an investment. If you’re going to buy one, it’s probably best not to do it until you’ve paid off your family home so that you only have one mortgage at a time.  
If you can genuinely afford to buy a holiday home, it’s vital to choose the right kind of asset. When economic times tighten, your property stands a better chance of holding its value if it is located somewhere that’s readily accessible from a major CBD. Try to buy something within two hours’ drive of the city and easily accessible via major highways.  
Select a location with a distinctive natural attraction such as a lake or beach; something that gives people a specific reason to go there. The property should also be close to amenities such as shops, cafes, pub or golf course.  
And yes, views really do count. A good view of a natural attraction can add considerably to your property’s value because potential buyers feel that they’re buying a slice of exclusivity.  

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Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.
 
       
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'Tis the season to be jolly, and smart about buying a holiday home

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When Australia’s biggest underwriter of lenders mortgage insurance rules a line through an entire asset class of property then investors should take note.  
Recently Genworth announced that from December 19, 2013 they would no longer accept off-the-plan or new properties as security when purchased in self-managed super funds. The announcement reads:
“Off-the-plan purchases and new properties that have been completed for less than 12 months are no longer acceptable. A “new property” is defined as being any property (including any house, unit, villa or townhouse) that has been fully completed for less than 12 months and/or has not been previously sold since construction (i.e. the vendor is a developer/builder or a related party of the developer/builder).”
Genworths’ role in the finance world is to ensure a bank does not lose any money if a borrower cannot meet their loan repayments. If the bank is forced to sell the property and is still left short the mortgage insurer fills the gap.  
Lenders mortgage insurers are very conservative by nature and they are sending a clear signal that they do not see a positive capital growth outlook for these types of properties.  
Genworth is looking to protect its own bottom line and are ruling out allowing their SMSF clients to invest in properties they think are risky investments. While the main reason for this is self-preservation it does provide a level of protection for these investors.  
At the same time that Genworth is waving a red warning flag to wealthy SMSF investors the government is still encouraging first homebuyers to buy this exact kind of property.  
Our government knows how important the building industry is to our economy so they are making it appealing for first homebuyers to invest in new properties only.  
For example a payment of up to $10,000 is available for eligible first home owners in Victoria for contracts entered into on or after July 1, 2013 to build or purchase a new home valued at up to $750,000.  In NSW the grant is currently $15,000 for first home buyers who build or buy new property.  
The government is leading first home buyers to focus on one particular type of property. Again the focus is to underpin the building industry but the byproduct is many first home buyers are in danger of being placed in a dangerous position.  
This is because new properties tend to have a low land to asset ratio meaning most of the value is tied up in the building not the land. It is land that appreciates in value and buildings depreciate. The result is capital growth that is more likely to fall behind the rest of the market. In addition new homes and apartments tend to be clustered together and can often be located in areas where there is an over supply of similar property.  
The current first home buyer policy solves a short-term problem by creating jobs in the building sector. However in the long run it is likely to place young first home buyers under financial pressure. The policy fails to acknowledge the dynamics of the property market and lures them into buying properties that well educated investors are avoiding.    
 
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 Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.
 
 
 
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The first home buyer policy is luring people into properties investors know to avoid

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When it comes to owning an investment property, investors tend to put most of their efforts towards selecting the asset, financing it and negotiating the purchase. After they buy, they attend to day-to-day issues like tenant selection and property maintenance, but seldom take the time to review the performance of their asset and assess whether it’s doing the job they need it to do.
Ideally, residential investment property should be held for at least seven to 10 years to ride out market fluctuations and maximise compound capital growth. However, each property performs differently—and not all of them perform at a rate that justifies their long-term inclusion in your portfolio. For this reason, it’s essential to review your property’s performance every two or three years and make the necessary adjustments if it falls short of the mark.
How do you evaluate whether your property is producing the goods—and what should you do if it isn’t?
The best way to find out whether your asset is up to scratch is to determine whether it is growing in value at a faster or slower rate than the median. To do this, ask a couple of local real estate agents for an appraisal of the property’s current market value. Divide this figure by the purchase price and subtract one to work out the percentage increase for the total holding period.
Then, find out the current median value in the city the property is located, along with the median for the year you bought the property. Divide the current median by the older median and subtract one to work out the percentage increase for the holding period.
If you want to take things a step further, you can compare your property’s growth rate with the growth rate for your suburb. Be aware that the small number of properties sold in some suburbs means that a few exceptionally strong sales results can skew the median figure. For this reason, the city wide median should be your primary benchmark.
If its growth rate is higher than the median growth rate, you know it’s earning its place in your portfolio. Sit tight and review its performance again in two or three years’ time.
If its growth rate is lower than the median, there’s a reasonable chance that this trend will continue. At this point, you need to put emotion aside and look at your investment with a critical eye. Is it worth holding on to your asset in the faint hope that ‘things will turn around’, or are you better off selling it and putting the proceeds into something that will work harder over the long term?
If your property’s performance is pretty much level pegging with the median, you’re in somewhat of a grey area. Here, it may be helpful to consider how much longer you’re intending to hold the property. If you’ve already held it for seven to 10 years and only plan to hold it for a couple more, time is working against you because transaction costs like agent’s fees, advertising expenses, capital gains tax and stamp duty will eat substantially into your profits. In this case, it’s probably appropriate to sell it in two years’ time as planned.
On the other hand, if you’ve only owned the property for a few years and plan to hold it for the long term, time is on your side. It may be best to sell it now and reinvest your money in an asset that will work harder for you.
When you’re assessing your investment property’s performance, it’s also a good opportunity to evaluate your financing arrangements. The residential loan market changes constantly, so reviewing your loan structure, interest rate and fees could save you a substantial amount of money, freeing up funds which you can put towards reducing your debt.
By taking the time to crunch the numbers every so often, you’ll be in a better position to make an objective assessment about whether your property is holding its own, or whether it’s best to sell up and put your investment dollars into something that will truly deliver.
 
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 Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.
 
 
 
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Knowing when to sell your investment property

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Congratulations — you’re having a baby! Your head will be full of plans for medical check ups, baby names, cots and prams.
In the midst of all the excitement, there’s one issue many expectant parents overlook. If you’re taking leave from paid employment to be with your child, how will this affect your finances? Will you be able to afford your mortgage and other living expenses, or will you need to reshuffle the deckchairs?
All too often, parents leave these considerations until after the baby is born, their income is significantly lower, and they’re struggling to meet their commitments.
That’s why, after you’ve called your family and friends to break the good news, it’s important to contact your lender, broker or financial adviser and put plans in place to ensure you can fund your new lifestyle.
If you have a mortgage and think your finances may be stretched, speak with your adviser about reducing your repayment amount. It’s particularly important to do this well ahead of your baby’s birth, because — regardless of whether you’re varying the terms of an existing loan or changing to a different one — lenders use a ‘snapshot’ approach when assessing your application.
This means you must present yourself and your finances in the best possible light — which is why the best time to apply is when you’re still earning the maximum possible income, not after the birth when your income has dropped substantially. The last thing you need on top of sleep deprivation and wet nappies is to be forced back to work early because of financial pressure!
There are several ways to reduce your repayment amount.
Extend your loan term.
Let’s say you have 23 years left on a 30-year principal and interest loan of $300,000 at the standard variable rate of 5.9%. Your minimum monthly repayment will be $1,989. By extending your loan term back to 30 years, the amount would drop to $1,779.
 
Change from principal and interest to interest only.
Loans for owner occupiers are usually structured so that you pay off a small amount of principal alongside the interest. This helps reduce your loan balance faster than if paying interest alone. However, when your income drops after having a child, changing to interest only can ease the squeeze. Using the example above, the borrower’s new repayment would be $1,475 — a saving of a further $304 per month.
 
Renegotiate your interest rate.
The home loan market is constantly changing so if you’ve had your loan for more than two years, there may be a better option out there. For example, many lenders will offer a discount of 0.7% or more off the standard variable rate.
By extending their loan term, changing to to interest only and negotiating a discounted rate, our $300,000 borrower will pay $1,300 per month — freeing up a massive $689 to help meet expenses while their income is reduced.
Find your safety net.
Make sure your loan includes a redraw facility. If your property has increased substantially in value since you bought it and/or you’ve made extra repayments, a redraw facility can help you access these funds. Alternatively, you may be able to establish a line of credit, enabling you to draw on some of your equity to fund living expenses if required.
By planning your property and loan commitments well ahead of time, you can stop worrying about your finances and concentrate on something far more important — your new son or daughter.
 
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 Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.
 
 
 
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Great expectations: How to stop your bundle of joy burning a hole in your pocket

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It’s a common misconception amongst property investors: “never sell your property.” Although residential property investment requires a long-term outlook to ride out market fluctuations and maximise the effects of compound capital growth, even the best quality investment asset has a use-by date.  
The whole point of investing is to improve your quality of life. At some stage, you’re likely to reach the point where selling a property is the only way to help achieve further investment or lifestyle goals. Here, we look at four situations in which it may be appropriate to sell.
 1. Making room to move.
If you have a growing family, you may need to renovate or extend the family home. If you take out a loan to meet these expenses, you’ll pay the full amount of interest, because expenses associated with the family home are not tax deductible. By contrast, if you sell your investment property, you can use the proceeds to pay for the home improvements outright. 
When you’ve completed the renovations, focus on paying down the remaining debt on your home so that you’ll be well positioned to buy another investment property later down the track. 
2. Hanging up your hat
If you’re nearing retirement and you have an investment property that you’ve held for many years, it may be worth selling it and transferring the equity into a more tax effective structure. When you’re working, your aim is to generate income through a wage or salary and purchase assets that will create capital growth.
Once you retire, however, it’s the job of your investment assets to generate the income for you. To maximise the available income, you need to minimise the tax payable. If you sell your investment property and put the proceeds into a superannuation account, the income generated will be tax-free when you draw on it in years to come. 
3. Ditching an underperforming asset
Regardless of your stage of life, there’s little point in holding on to an investment property if it’s not performing to an acceptable standard. It’s important to review your property’s capital growth performance each year, relative to the wider market. If it fails to outstrip the median increase for a couple of years running, chances are this situation won’t change anytime soon. It may be better to sell the asset and move on to something more productive. 
4. Getting away from it all
 Many people who are reaching the peak of their careers like to escape to the coast or country on weekends and recharge the batteries. If you’ve held an investment property for 10 years or more and it has achieved significant capital growth, it may be appropriate to sell the property and use the proceeds to buy a holiday home outright. 
Generally speaking, properties in holiday areas have a more volatile capital growth pattern, and should not be regarded as prime financial investment prospects. They’re really an investment in lifestyle.
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Remember the decision to sell an investment property should never be undertaken lightly. Regardless of your personal and financial situation, seek independent personalised advice before you make a decision.  
 
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 Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.
 
 
   
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Knowing when it’s OK to sell your investment property

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The spring property market is in full flight with a record number of properties changing hands. But Christmas is approaching fast and many buyers may start to feel the pressure to buy before the market goes into the summer recess.  
I have seen this happen to many buyers in the past. They get tired of looking for a property and they just want to get it over and done with. They end up taking short cuts and make decisions without getting all the facts.  
By finding out as much about the property as possible, you can make an informed decision about whether to bid or negotiate for the property.  
There are three stages of due diligence you should carry out (preferably assisted by a solicitor or conveyance who specialises in property transactions).  
The first concerns structural integrity. There’s little point in spending hundreds of thousands of dollars on a property, only to find after the purchase that you need to spend thousands more rectifying structural problems in the roof, walls, floor or sub-floor space.  
If you’re buying a house that isn’t brand new, obtain a building inspection from an architect or registered builder who can reveal any problems you aren’t aware of. If you’re buying a unit that’s part of a building with an owners corporation, it’s the owners corporation’s responsibility to maintain the building in good structural order. You can find out about the building’s structural integrity through the vendor’s statement (also known as a ‘section 32’ statement).  
This is where the next stage of due diligence comes in. Under Victoria’s property laws, the vendor is responsible for providing you with a statement providing important technical information about the property and its immediate surroundings. The vendor’s statement should have a copy of the title to the property including the main buildings and any ‘accessory units’ such as garages or car spaces. This will tell you exactly what you’re buying for your money.  
The statement should provide documents from the local council indicating whether any works are planned on adjoining properties which could affect your use and enjoyment of the land. For example, if you’re buying a single level house and the owner of the property next door has plans to put on a second story, knowing this in advance means you can consider how it may impact on your privacy and light levels.  
The vendor’s statement should include documents from utility providers such as electricity and water suppliers regarding the presence of any ‘easements’ over your land. An easement is a portion of land that you legally own but which must remain accessible to the utility provider if they have to undertake repairs to storm water drains or overhead power lines. This may affect your use of that portion of the land, including whether you can build on it.  
The last, but by no means least important stage of your due diligence is to make sure that, when you sign a contract to buy the property, you will have sufficient funds available to meet settlement on the agreed date. If you can’t meet your obligations under the contract, the vendor is legally entitled to keep your deposit. If they re-sell the property for a lesser amount than they sold it to you, they can sue you for the difference.  
Undertaking all this legwork may sound daunting, but it’s infinitely better than buying in haste and discovering major issues when it is too late.
 
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 Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.  
 
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The three stages of due diligence to conduct before buying an investment property

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The debate around underquoting is never ending because the focus is on the vendor’s reserve price.
Many people have suggested that vendors should be made to disclose the reserve prior to auction. However this would fly in the face of very robust auction laws that state a vendor has the right to withdraw a property from sale at anytime.  
Legislating what the agent must do is one thing but making a law that binds the vendor is fraught with danger.
The vendor is in complete control of the reserve and agents who do underquote are able to hide behind their vendor’s instructions. This makes the current laws around underquoting very difficult and costly to implement. They are in the best case weak and at worst they are unenforceable.
I believe the solution to the underquoting does not lie in using the stick of law but rather the empowerment of knowledge.
The benefit of a public auction for a vendor is they give themselves the best opportunity to maximize the sale price.
The trade-off should be vendors loose their right to privacy. All results should be in the public domain so future buyers can gauge where the market is.
However vendors currently have the right to not disclose the result. This means they can have their cake and eat it too while purchasers are left in the dark.
Take for example the sale of this one-bedroom apartment at <a target="_blank" href="https://www.realestate.com.au/property-apartment-vic-hawthorn+east-115013031">3/1 Brookfield Court, Hawthorn East</a> that went to auction on Saturday.
{yoogallery src=[images/stories/2013/10/30/haw]}
The property was advertised to sell for between $300,000 to $320,000 and as the auction progressed multiple bidders competed. It sold under the hammer in a public forum but when the auction results were released the following day it was reported as undisclosed.
<img alt="hawthorn_oct_30_chart" height="295" width="470" src="/images/stories/2013/10/30/hawthorn_oct_30_chart.png">
If you were able to attend this public auction you would know the property sold for $408,000. However if you were not there this information would be locked away and only available to licensed real estate agents.  
The next time a comparable one-bedroom apartment comes onto the market and is advertised at $300,000 to $320,000 purchases will not be able to source this valuable information.
The logic behind this bizarre state of affairs is due to privacy laws that allow vendors to keep the result out of the public domain. However if a vendor decides to sell their property by public auction I think they have should have waived their rights to privacy.
In some cases it is the agent that keeps auction results under wraps because it means people who want to know what it sold for will call them. This is a lead generation tool for agents as the first thing they ask is ‘are you looking to sell a property?’
If the real estate industry really wants to stamp out the negative effects of underquoting, either real or perceived, they need to be more transparent.
The answer to underquoting is simple. Make agents disclose all results within 24 hours of the auction and make this information either freely or cost effectively available to purchasers.
This will give purchasers the knowledge they need and make price quotes redundant.

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Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.              
 
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Underquoting: the clear and transparent solution

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Ever wondered why agents underquote? The simple answer is because it works. This may not be a popular view of underquoting and as frustrating as it may be, underquoting is a necessary evil in Melbourne’s auction system.  
Growth in property prices this year has highlighted the widespread practice of underquoting and the frustration of buyers who miss out when properties sell for much more than the advertised estimate.  
Ironically, the practice that frustrates buyers is the same one that enables the auction system to work in the first place.  
When a real estate agent auctions a property, the vendor is paying them a fee to achieve the highest possible price in the prevailing market conditions. To achieve this, the agent must do their utmost to maximise the intensity of competition on auction day.  
At any given auction the bidders will have a range of spending limits. Some limits may be close to the advertised sale price estimate, whilst others may be much higher. By competing in the auction up to their respective price limits, each underbidder plays a vital role by increasing the intensity of competition.  
Although some buyers fall by the wayside when bidding goes beyond their limit, each one plays a part in pushing the bidding higher and, ultimately, determining the final sale price.  
Even if the agent researches the sales results of comparable properties and advertises a price estimate that they genuinely believe is realistic, there’s no guarantee that the property at hand will sell within that range.  
Therefore, in a free market economy, advertised price estimates and sales results for comparable properties should be taken as guides, not ironclad predictors, of the actual sale price a particular property will achieve. Ultimately, it’s the different spending limits of each bidder and the intensity of competition that count on auction day.  
As I see it, the real problem isn’t underquoting per se, but the public’s (understandable) misconception that an advertised price estimate is the level at which the property is likely to sell. In fact, the advertised estimate is a marketing tool; a way of drumming up interest from a wide range of buyers to create competition on auction day and maximise the eventual sale price.  
It’s the old adage: “Quote ‘em high, watch them die. Quote ‘em low, watch ‘em go.”  
The rationale behind taking an asset to auction — whether it’s a property, a work of art or even a consumer item on humble old eBay — is to test the market. Unlike a private sale, where the vendor advertises a clear price at which they’re prepared to negotiate, auctions put the onus on the purchaser. They’re the vendor’s way of saying, “Sure, I know the price I’d like to achieve, but I want you to tell me what you think it is worth.”  
The public’s misconception about the purpose of advertised price estimates highlights another equally important issue — the shortage of supply relative to demand, particularly in the inner suburbs where most auctions take place. Buyers who bid there encounter the lowest ratio of supply relative to demand, and therefore the strongest competition from other bidders. In this situation, they must accept that a greater possibility of failure is a by-product of their participation.  
In a perverse way, underquoting works because it brings in bidders who can’t afford the property — encouraging competition and driving up the eventual sale price. When transacting a privately owned asset in a free market economy, the highest bidder wins. The fact that some buyers will miss out is an unfortunate fact of life.  
 
<hr>
 Mark Armstrong is a director of <a href="https://www.ipropertyplan.com.au/">iProperty Plan</a>, which provides independent analysis and tailored advice to investors and home buyers.  
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Underquoting - the auction system’s necessary evil: Mark Armstrong

Developers and apartment buyers have a narrowing window of opportunity before Brisbane's Olympic infrastructure pipeline begins competing directly with residential construction, pushing up costs, tightening labour supply and making new projects increasingly difficult to deliver.

While Brisbane's apartment market continues to benefit from strong population growth and limited housing supply, industry research suggests the years leading up to 2027 could prove to be the most important period for developers looking to secure builders and buyers hoping to purchase before the next wave of price increases.

A new Colliers report, Brisbane 2032 Olympic and Paralympic Games: Creating Solutions, highlights the scale of the challenge. While thousands of new homes are planned across South East Queensland, the Brisbane Olympic Athletes Village alone will deliver more than 10,500 beds during the Games before being converted into around 1,750 to 2,000 apartments. Equivalent to almost two years of typical inner-city apartment supply, the project will also absorb a significant share of the construction workforce and building materials.

The broader construction pipeline paints an even clearer picture.

Construction Skills Queensland's Horizon 2032 report forecasts Queensland's annual construction pipeline will average $69 billion over the coming years before peaking at $75 billion in 2027-28. Demand for construction workers is expected to increase by 17 per cent to almost 150,000 people, with the industry facing an annual shortfall of around 19,000 workers that could blow out to as many as 35,000 during the peak construction period.

The Olympic venues, athletes village and supporting infrastructure will account for billions of dollars worth of work across South East Queensland through to 2032, creating intense competition for labour at a time when Australia's residential construction sector is already under pressure.

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Colliers Queensland Residential Director Andrew Scriven said the convergence of these projects is creating a clear window of opportunity for both developers and buyers.

"From 2027 onwards, the market will shift dramatically," Scriven said.

"Labour will increasingly be locked into government-led infrastructure and Olympic projects, which means private residential developments will face higher costs and tighter margins. The developers who move now are the ones most likely to get projects off the ground."

Scriven said the same dynamic would also affect buyers, with fewer apartment projects expected to launch once construction capacity tightens.

"If you're looking to change your lifestyle over the next five years, now is your window of opportunity to buy."

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Developers are already positioning themselves ahead of that window.

Following the success of Monarch at Toowong, Consolidated Properties is preparing to launch two new Brisbane apartment projects in the second half of 2026. They include <a href="https://www.apartments.com.au/new-apartments/gloriette-30-bedivere-street-yeerongpilly-qld-4105">Gloriette</a> at Yeerongpilly Green, a 25-storey tower within one of Brisbane's key Olympic precincts, and <a href="https://www.apartments.com.au/new-apartments/castile-47-skyring-terrace-newstead-qld-4006">Castile</a>, a recently approved 25-storey riverfront development at 47 Skyring Terrace in Newstead.

Hutchinson Builders will deliver both projects, with early works already underway at Yeerongpilly and Newstead expected to commence later this year.

The timing comes as Brisbane's fundamentals continue to strengthen, with strong interstate migration, population growth and vacancy rates remaining below 1.5 per cent.

Colliers Queensland researcher Pragya Sharma said Greater Brisbane is forecast to require around 40,000 new apartments between 2021 and 2031.

"There's a real mismatch emerging between when housing is needed and when it will be feasible to build," Sharma said.

"As a result, the period leading up to 2027 presents a key window of opportunity for developers to secure approvals, funding and construction capacity, while buyers will have greater choice before supply constraints intensify."

Colliers research outlines a critical pre-2027 window to start residential projects before labour squeeze: now is the time to buy

Joel Robinson

Developers, buyers on watch in South East Queensland ahead of construction crunch: Colliers

It's taken less than nine months for developer Sherpa Property Group to sell out all 51 apartments in its <a href="https://www.apartments.com.au/new-apartments/flourish-oasis-palm-beach-7-9-sixth-avenue-palm-beach-qld-4221">Flourish Oasis</a> development in <a href="https://www.apartments.com.au/developments/palm-beach-qld-4221">Palm Beach</a>, over a year before its anticipated completion.

&nbsp;

Located at 7-9 Sixth Avenue, the $67 million development has resonated strongly with both local owner-occupiers and downsizers seeking high-quality apartments within walking distance of the beach, dining precincts and everyday amenities.

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Christie Leet, Founder of <a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Group</a>, said the sell-out reflected both the strength of the Palm Beach market and the success of Sherpa's community-first approach to development.

"The sell-out of Oasis is a fantastic outcome and reinforces the strong demand we're seeing for thoughtfully designed apartments in lifestyle locations," Leet said.

"From the outset, our vision was to create a development that genuinely enhanced the Palm Beach community while providing residents with exceptional homes and wellness-focused amenities.

"We've been incredibly encouraged by the level of local support throughout the campaign, 72.5 per cent of buyers are locals, with a significant proportion of purchasers choosing Oasis as their future home rather than an investment."

[smartcode_project:default project_id=151449 project_image_fid=357463]

Construction is now progressing following development approval, with trusted builder LPS Group delivering the project and completion anticipated in Q3 2027.

Oasis forms part of Sherpa Group's successful Flourish collection, which has become recognised for its focus on wellness, community and elevated coastal living.

[smartcode_project:default project_id=151449 project_image_fid=357469]

Residents will have private access to a rooftop amenity space featuring a pool, gym, sauna, steam room, hot and cold plunge pools, spa and barbecue facilities.

"The success of Oasis demonstrates that buyers continue to prioritise quality, location and lifestyle," Leet said.

"We are proud to have delivered a project that has resonated so strongly with the market and look forward to bringing Oasis to life for our future residents."

Sherpa recently launched <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a>, its third instalment of the Flourish brand in Palm Beach following Flourish Oasis and <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>.

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Sherpa sells out Flourish Oasis in booming Palm Beach

Urban Property Group's <a href="https://www.apartments.com.au/new-apartments/la-vera-macquarie-park-94-talavera-road-macquarie-park-nsw-2113">La Vera</a> is leading the next phase of Macquarie Park's residential evolution, with the new apartment development set to become the first of several new apartment projects in the precinct to complete.

The 169-apartment building has now topped out ahead of its scheduled completion in the third quarter of 2026, as new residential investment continues to reshape one of Sydney's largest employment hubs into a true mixed-use precinct.

[smartcode_project:default project_id=134951 project_image_fid=368645]

Cox Architecture has designed La Vera to capture the best of its unique positioning on Talavera Road, orienting the building towards Lane Cove National Park.&nbsp;The building features a sculpted northern façade with flowing curves inspired by the surrounding landscape, while its city-facing elevation adopts a more structured architectural expression to maximise skyline views.

"The vision for the project was to conceive a building that adopted an organic and curvilinear form to the northern portion that faces the Lane Cove National Park," <a href="https://www.apartments.com.au/architects/cox-architecture">Cox Architecture</a> Director Felipe Miranda said.

"The residents that reside in the northern portion of the building benefit by having beautifully crafted curved balconies that speak to the natural context and heighten the relationship of their internal living spaces to the external balconies."

[smartcode_project:default project_id=134951 project_image_fid=358802]

La Vera offers a diverse mix of one, two, three, and four-bedroom configurations, with prices currently starting from $740,000. Buyers so far have been a mix of Sydney-based investors,&nbsp;metro commuters, owner-occupiers and downsizers from surrounding North Shore suburbs.

Both investors and owner-occupiers have been drawn to La Vera's proximity to Macquarie University, Macquarie University Hospital, Macquarie Centre and the Sydney Metro, infrastructure that supports both strong rental demand and a convenient lifestyle for residents.

The apartments feature full-height glazing, timber flooring throughout living areas, stone kitchen benchtops, SMEG appliances, floor-to-ceiling bathroom tiling and ducted air conditioning.

Residents will have access to a rooftop recreation level featuring a swimming pool, sauna, barbecue facilities and landscaped relaxation areas, complemented by additional communal space at ground level. Many apartments enjoy uninterrupted views across Lane Cove National Park, reinforcing the project's connection to its natural setting.

[smartcode_project:default project_id=134951 project_image_fid=364551]

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a>, a family-owned developer and builder with nearly four decades of experience, holds a 4.5-star iCIRT rating and was Australia's first developer to introduce 10-Year Latent Defects Insurance (LDI). La Vera is the first apartment development in <a href="https://www.apartments.com.au/developments/macquarie-park-nsw-2113">Macquarie Park</a> approved to offer the additional insurance protection, alongside a five-year warranty on SMEG appliances.

Urban Property Group CEO Patrick Elias said the additional protection reflects changing buyer expectations in the off the plan market.

"Consumers are a lot more weary and a lot more concerned in buying off the plan than they ever have been. Having LDI is a tool to portray the confidence that we have in our product, and a confidence we want buyers to share," Elias said.

Following completion of the building later this year, buyers will move into their apartments well before Christmas.

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La Vera closes in on completion as Macquarie Park continues residential transformation

Brisbane developer Red &amp; Co's decision to include dual key apartments in its debut Gold Coast apartment development, <a href="https://www.apartments.com.au/new-apartments/como-varsity-lakes-22-lake-street-varsity-lakes-qld-4227">COMO Varsity Lakes</a>, is proving to be one of the project's biggest drawcards, with buyers quickly snapping up the flexible residences.

More than half of the project's 36 dual key apartments have already sold, helping drive COMO beyond the 50 per cent sold mark within the first month of launch.

The strong response highlights growing demand for apartment designs that can adapt to changing lifestyles, with buyers increasingly looking for homes that accommodate multi-generational living, provide rental income opportunities or simply offer greater flexibility over time.

Located on the shores of Lake Orr, COMO will deliver 156 apartments across 16 levels, with the dual-key residences forming a limited release within the broader development.

Each combines a primary two-bedroom apartment with a fully self-contained studio on a single title, connected by a shared foyer and lockable internal door. The design allows owners to house ageing parents, adult children or guests while maintaining privacy, or lease the secondary residence to generate additional income.

Just 17 of the original 36 dual key apartments remain available.

[smartcode_project:default project_id=135546 project_image_fid=367096]

The innovative configuration combines two fully self-contained residences on a single title, typically comprising a primary two-bedroom apartment alongside a separate studio residence, connected via a shared foyer and lockable internal door.&nbsp;

The model is proving particularly attractive to owner occupiers navigating changing family dynamics and the realities of the current housing crisis.&nbsp;

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<a href="https://www.apartments.com.au/project-marketer/npa">NPA</a>&nbsp;CEO Andrew Erwin said dual key living was resonating strongly with modern buyers because it delivered both financial flexibility and practical lifestyle benefits.&nbsp;

“The housing crisis and rising cost of living are fundamentally changing how Australians think about home ownership,” Erwin said.&nbsp;

“Dual key apartments provide a genuine solution for families who want to stay connected while maintaining independence. Parents can help adult children save for a future home, ageing parents can remain nearby without moving into aged care, and owners still retain privacy and flexibility.

“Importantly, buyers are also recognising the financial advantages. It creates the opportunity to generate additional income from part of the home without the holding costs associated with owning a separate investment property.”&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363509]

Unlike traditional dual occupancy arrangements, the residences operate under a single title, meaning owners only incur one set of body corporate fees, council rates and holding costs.&nbsp;

The secondary residence can also evolve over time - functioning as guest accommodation, a home office, creative studio or private retreat before later becoming an income-producing asset.

<a href="https://www.apartments.com.au/developers/red-co">Red &amp; Co</a>&nbsp;Director and Co-Founder David Laverty said the strong early sales reflected growing buyer urgency and changing priorities within the market.&nbsp;

“Securing more than half of COMO’s residences within such a short timeframe is an outstanding result and a clear endorsement of both the design and location,” Laverty said.&nbsp;

“Buyers are responding to the combination of location, connectivity and amenity, but ultimately it’s value relative to other East Coast markets that is driving enquiry.”&nbsp;

“We’re also seeing strong interest from owner occupiers looking for homes that can adapt with them over time. Flexibility has become one of the most important considerations for buyers in today’s market.”&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363515]

Designed by <a href="https://www.apartments.com.au/architects/bda-architecture">BDA Architecture</a>, COMO features a mix of one-, two- and three-bedroom residences with 2.7-metre ceilings and larger-format floorplans aimed at owner occupiers, downsizers and lifestyle-focused buyers.&nbsp;

The development will feature an extensive rooftop recreation and wellness offering including a 25-metre lap pool, sundeck, barbecue and dining areas, gym, sauna, plunge baths, landscaped gardens, wellness spaces and rooftop pickleball and paddleball courts.

The remaining dual key apartments range from 137 sqm to 167 sqm and include generous three-bedroom layouts with separate self-contained studio accommodation and dual parking.&nbsp;

Erwin said the dual key concept represented a broader shift in how Australians would live in the future.

“People want homes that can evolve with their lives,” he said.&nbsp;

“A dual key apartment can suit a family today, support an ageing parent tomorrow, and potentially generate income later on. That adaptability is becoming incredibly valuable in the current environment.”

Prices currently range from $2,115,750 to $2,583,000.&nbsp;

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Inter-generational living drives demand for COMO’s dual key apartments as housing pressures reshape buyer priorities 

Builder-developer&nbsp;<a href="https://www.apartments.com.au/developers/ceerose">Ceerose</a> has doubled down on its Leichhardt ambitions, lodging its second State Significant Development Application (SSDA) in the suburb in the last six months.

Their newest proposal seeks to transform a former industrial precinct into a new residential community centred around the adaptive reuse of one of the site's heritage warehouse buildings.

The new project, on a 6,930 sqm block at&nbsp;<a href="https://www.apartments.com.au/new-apartments/40-76-william-street-leichhardt-nsw-2040">40–76 William Street</a>, will bring more than 200 apartments to a suburb that has seen little to no new supply in recent years. It follows Ceerose's late 2025 SSDA for a mixed-use apartment project on nearby Parramatta Road, signalling the developer's growing investment in Sydney's Inner West.

Ceerose Founder Edward Doueihi told Apartments.com.au the developer’s long-standing presence in Leichhardt and the Inner West had given it a strong understanding of how the area has evolved and where its future opportunities lie.

“Ceerose has had a long-standing presence in Leichhardt and the Inner West, giving us a unique understanding of the area’s evolution and future potential,” Doueihi said.

“Having delivered projects throughout the region, we have witnessed the suburb’s transformation first-hand and understand the opportunities for its continued growth.”

Doueihi said that understanding also informed the planning process, with a comprehensive Stakeholder Engagement Outcomes Report prepared before the application was lodged.

The report identified the key issues and concerns raised by neighbouring residents and other stakeholders, allowing those matters to be considered and incorporated into the design where appropriate.

He said the delivery of additional housing would also play an important role in supporting the revitalisation of Norton Street and the Italian Forum.

“By increasing the local residential population, the development is expected to strengthen demand for local businesses, encourage further investment, and help restore the vibrancy that made the precinct a thriving destination in the early 2000s.”

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="7258c54c-8167-479e-8361-2d5fca9915b4" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010B%20-%20CGI%20-%20View%202.jpg?VersionId=S9DQfxu_jpcB5LrAEYFUbyMzg5odW6i5" />

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a>, the redevelopment would involve the demolition of four existing industrial buildings while retaining and adaptively reusing the site's most significant warehouse. The retained structure would anchor a new residential precinct comprising five interconnected buildings arranged around a large central landscaped courtyard, with heights stepping from five storeys along the surrounding residential streets to 11 storeys at the William Street corner.

According to the Architecture Design Report by Woods Bagot, the proposal "seeks to create a residential village centred around a generous green heart while celebrating the site's industrial heritage through the adaptive reuse of the existing warehouse building."

The development would comprise 203 apartments, with 188 proposed as build-to-sell residences, alongside 15 affordable housing apartments.

Rather than treating the retained warehouse as a standalone heritage object, Woods Bagot has sought to weave the site's industrial history throughout the masterplan. The proposal retains the north and west facades of the landmark corner warehouse, while new buildings reinterpret the site's brick-and-steel industrial language through their material palette and architectural expression.

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="9e8c64c2-881b-49e1-8c90-6b6acaaa45b6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010C%20-%20CGI%20-%20View%203.jpg?VersionId=Qm8_8H_Xrg_sc4Mdjc59vlAcKF_5wRTb" />

The design is organised around what Woods Bagot describes as a "green heart", a landscaped communal open space that reinstates the leafy character removed when the site became an industrial storage facility. A new pedestrian laneway running through the site would improve permeability between William, North and Francis streets, linking residents through landscaped public spaces while activating the ground plane.

Residents would have access to communal gardens and shared recreation areas distributed throughout the development. Sustainability has also been prioritised, with the project targeting an average 7.9-star NatHERS rating. Proposed initiatives include rooftop solar generation, rainwater harvesting, passive solar design, naturally ventilated lobbies, extensive cross-ventilation and the reuse of existing building fabric to reduce embodied carbon.

The adaptive reuse strategy became a defining feature of the application after heritage investigations found only one of the site's industrial buildings could feasibly be retained. The Heritage Impact Statement concludes that preserving the key warehouse façades while referencing the site's industrial character throughout the new development provides an appropriate balance between renewal and conservation.

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="efffafdb-594f-4e2b-a067-921fd51c05e1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010D%20-%20CGI%20-%20View%204.jpg?VersionId=DPmE4.k16YRt0i27hEZVtJAffarpvUfx" />

"Retention and adaptation of the site buildings has been explored but found not to be feasible except for the tallest building, whose street facades will be retained," the heritage report states.

"The proposed building will interpret the brick and steel character of the subject site, including reuse of some components and construction of a large 'sawtooth' structure in the proposed open space."

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="3bfef2b5-83f5-40cd-9cab-767092f34266" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010E%20-%20CGI%20-%20View%205.jpg?VersionId=7asb3i_ql4ybbuJOUb5UHBEIy0Q9t.DF" />

The William Street site is located around 300 metres from Leichhardt North Light Rail station and a short walk to Norton Street's retail, dining and hospitality precinct. The surrounding area has increasingly become a focus for urban renewal given its proximity to public transport and the Parramatta Road corridor.

Doueihi founded Ceerose in 1998 and has grown the business to become one of Sydney's more active apartment developers in recent years, with completed projects including The Alex Collective in Alexandria, Abbie's Lane in Annandale, and the award-winning Munro House in Elizabeth Bay. They are currently delivering Belgravia, 17 luxury apartments in Potts Point.

Mark Armstrong

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