The month in review: Gold Coast
By Herron Todd White
September, 2009
The overall residential real estate market on the Gold
Coast softened noticeably through the course of 2008
and the first half of 2009, following the relatively buoyant
market conditions which prevailed in the previous two
years, peaking in late 2007.
The world economic and financial markets are currently
facing an unprecedented crisis, including a catastrophic
fall in the share market, and as a result the Australian
economy has eased significantly over the past 12 to
18 months. The current period has seen a significant
softening in both business and consumer confidence and
real estate investors (and financial institutions for that
matter) have genuine concerns about job security, rental
returns, future capital growth prospects and ultimately
the ability to service mortgage debt.
In an effort to stabilise the economy, promote growth
and avoid a recession, the Federal Government and the
Reserve Bank of Australia instigated various economic
stimulus measures during late 2008 and early 2009,
including successive reductions in official interest rates
by a combined 4.25%.
It appears that a combination of record low interest rates
and falling property values, together with the increased
Federal Government provided First Home Owners
Grant, has resulted in increased activity for lower priced
residential property on the Gold Coast during the first
six months of 2009. This firming in market conditions
typically relates to houses and units below a $400,000
price point.
However there is concern that this market segment is
being somewhat artificially inflated at present, in an
otherwise soft economic and real estate climate. With
unemployment on the rise and with the overall economy
continuing to ease, sale prices and sale volumes in the
lower priced bracket may not be sustainable at present
levels, particularly if interest rates were to rise and/or
once the Federal Government scales back the increased
First Home Owners Grant during the second half of 2009.
As the graphic indicates, sales volumes have decreased
in the last 3 years, with some sectors of the market
performing poorly. The worst performing sector of the
market, particularly in the last 12-15 months has been
the prestige end of the property market which typically
represents properties with a market value in excess of
$1,000,000.
The budget end of the market, say below $500,000
,has also seen a reduction in sales volumes, however
the reduction in the last 12-15 months has not been as
severe as the reduction between the first quarter of 2007
and the first quarter of 2008. This sector of the property
market on the Gold Coast has been underpinned by the
low interest rate environment and also the government
stimulus injected into the economy late in 2008.
The middle market, say between $500,000 and $1,000,000
has also softened, not just in market value but also in
sales volumes. There appears to have been an influx of
new buyers into this sector of the market since the start of
this year. These buyers are generally second home buyers
who have taken advantage of the performance of the sub
$500,000 price segment.
It is unlikely that current figures would indicate an
improvement in sales volumes over the second quarter of
2009. Selling agents are indicating a decrease in listings,
however this is generally constrained to properties with
a market value less than $400,000. Generally, the higher
the list price, the greater supply exceeds demand. It is
also possible that the small “bubble” at the budget level
of the property market, created by low interest rates and
government stimulus, may be burst by any future rises in
interest rates and unemployment.
|
