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The month in review: Gold Coast
By Herron Todd White
October, 2009
Most of the Gold Coast residential property market has
been spared the pain of a significant downturn in 2009.
Some sectors however continue to underperform,
undermined by supply of stock, mortgagee activity
(stigma) and the current economic climate.
Over the last 9 months, it would be of no surprise that the
new apartment market has been one of the hardest hit.
Scanning the Surfers Paradise and Broadbeach skyline,
it would be fair to say that there is currently limited
activity on the building front, with a lack of crane activity.
Developers are still holding apartment stock from developments (predominantly medium and high rise
projects) completed in 2008, purely because the resale
market (of near new apartments) is too competitive on
price. A large proportion of new apartment product on
the Gold Coast is sold to interstate and to a lessor extent,
overseas investors at price levels which are considered
to be in excess of local market values. The premium paid
for new apartments is often not sustainable on resale,
especially within a short holding term.
The sustained softening in values of new apartment
product is not limited to Surfers Paradise and Broadbeach,
but is also apparent in the northern and southern parts of
the Gold Coast. The new and near new apartment market
in Coolangatta has been underperforming for some 18
months now. The completion of a number of medium and
high rise projects towards the end of 2007 and early 2008,
in conjunction with the increase in supply of near new
apartments coming back to the market at that time, has
had a signficant negative effect on market values. Market
conditions are in such a state at the moment, that a new
apartment project nearing completion is likely to see a
signficant settlement risk (ie. purchasers may forego their
deposits and not settle because of the significant drop in
market values). In this development, of the 43 contracts
signed “off the plan”, 41 were signed in 2007, in much
better market conditions.
From Southport to Hollywell, the new medium and high
rise apartment market is also soft with similar prevailing
factors as to those experienced in the central and
southern parts of the Gold Coast. Stock levels are high
and sales rates are low. The resale apartment market
is considered an impediment to these stocks levels
reducing. Developers however are utilising innovative
marketing techniques, in conjunction with professional
marketeers which entice potential buyers to purchase.
Rental guarantees, cash backs, and fitout incentives are
just some of these. These incentives are generally built
into the price.
Hope Island, which is considered an established good to
prestige quality residential house location, is really yet
to prove itself for medium to high density apartment
living. Over the past 5 years there have been a number
of large apartment projects built in this area, achieving
only modest sales performance with most projects
retaining considerable developer stock, some in the
hands of receivers. There is currently approximately 300
apartments (in new projects) for sale in the Hope Island
locality. Furthermore a major issue which is impacting on
value levels for apartments in Hope Island, is the current
receiver instigated sales campaign of the balance stock in
the Illanah Aqua project, with recent auction sale prices
being well down on the original pricing structure of this
development. The recent market activity and sale prices
(in terms of discounts) in the Illanah Aqua project has
been extensively published, and is broadly known across
the market, and potential purchasers are well aware that
further bulk releases of apartments are to be auctioned in
this development in the short term.
Apart from the apartment sector on the Gold Coast, one
other sector which has continued to underperform is the
prestige, or the market in excess of $2,000,000. Whilst
we are all aware that the financial crisis had a significant
effect on the share market, which in turn affected the
prestige residential market, this correction has continued
to be felt in 2009. The general erosion of wealth has seen
vendors having to discount their properties accordingly
to achieve a sale. The general redistribution of wealth
has now seen a drop in buyers who can afford a home in
excess of $2,000,000.
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