By Ian Neubauer
The credit crunch has impacted significantly on Queensland’s hotel property market, with sales this year estimated to be down 75 per cent compared to 2007, according to industry sources.
Hotel sales in Queensland hit $717.6 million in 2006, the highest year on record, and decreased to $355.5 million for the first 10 months of 2007, according to a MarketView report by realtor CB Richard Ellis.
But sales for the first nine months of 2008 sit at a paltry $82 million, according to Ray White manager of hotels and leisure – Queensland, Brad Lipp, who arrived at the figure following extensive consultations with hoteliers, financiers and valuers across the state.
“It’s in a slump,” Lipp said. “What the market has basically been doing since April or May this year is that the whole enquiry level has gone down. Loan rations are tighter than what they were and it’s getting a lot harder for people to get finance. This is causing downward pressure on sale prices.”
A number of Queensland commercial properties have recently changed hands for prices below their valuations, including a Maroochydore hotel that had been valued at $7.25 million but sold for only $5.5 million.
And a single-story building fronted by a Liquor King outlet in the Brisbane suburb of Bulimba changed hand this week for $2.075 million — well below the reserve price of $2.5 million.
However, high-yield pubs are still punching above their weight, like a prominent Bundaberg hotel valued at around $4 million that recently changed hands for $4.75 million.
“High price, good hotels that are showing growth are still selling, but [the owners] have to prove the yields are there and sustainable,” Lipp said. “The big players like Woolies and Coles have gone from purchasing hotels with eight to 10 per cent returns to looking at [hotels averaging] nothing less than 12 per cent net yield returns.”
CB Richard Ellis director of hotels – Queensland, Theo Clark, concurred, saying demand and expected yield ratios for quality properties has seen significant movement this year.
“Some properties are unique and will still sell at lower yields as there are people very keen to act if a particular pub suits their requirements. But there are also pubs that are not as well located or desirable, and you will see large increases [in the yields they need to attract buyers],” he said.
Clark said he thought the word ‘slump’ was “a bit harsh” to describe the sate of play in the market, saying developments reflected cyclical change.
“Private investors have prepared for the cycle. They anticipated the change in yields and are taking advantage of the turmoil. There’s still a lot of people looking but sitting on their hands,” he said. “What the issue has been I think is that there has not been a meeting of minds [between buyers and sellers].”
Lipp, however, was less optimistic, saying the situation would deteriorate in the short and medium term.
“In the future the market will be very tough. Sellers really have to come to terms that 06 and 07 prices are not there any longer.”
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