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CoreLogic NSW housing Update April 2017
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Gold Coast April 2017
The month in review: Gold Coast
By Herron Todd White
Southern Gold Coast
As is well documented, the residential market on the southern Gold Coast is currently very strong and seems to be stronger than the last peak in 2007 to 2008.
Without the benefit of statistical data, the strongest performers in terms of suburbs are Burleigh Heads, Burleigh Waters, Palm Beach and Tugun. In these suburbs, the strongest market segments are housing in the under-$850,000 price bracket closest to the beach or on waterfront.
The second strongest market segment is duplex units in the under-$500,000 price bracket, which are in high demand with limited supply. These duplex units are generally selling within a very short time, and often above asking price.
The main factors driving the market include record-low interest rates and an overall strong local economy with high levels of construction as we head towards the Commonwealth Games. The rental market is also very strong and there has been a strong increase in rental prices, often making it cheaper to buy than to rent.
The majority of sales in these markets seems to be to owner-occupiers. There is a perception that housing and unit prices will continue to rise in the short term, therefore creating urgency to buy. Most agents are reporting that there are no indications of the market weakening in the short term.
Northern Gold Coast
Buyers in northern Gold Coast localities are purchasing within new estates, with the majority of sales to owner- occupiers for new dwellings, house and land packages and vacant lots.
The new housing market is being driven by first home buyers who want to benefit from the elimination of stamp duty and increased incentive programs offered for new product. This first homeowner market is also driven by low interest rates with some new dwellings in this area being more affordable than the rental market.
Anything within these new and near-new estates under $500,000 is tracking well with the market improving over the past 12 to 18 months. There are currently low stock levels of new product, and sale prices have shown steady growth over this period. The majority of homes comprise low-set, 4-bedroom, 2-bathroom dwellings with double garages of a standard project-style construction.
Whilst the good market conditions prevail for vacant lots and housing priced below $500,000, this market should continue to grow steadily. If the new estates were to continually raise the sale price and interest rates were to rise, or if economic conditions were to soften, this could result in less demand and a downward correction in sale price levels.
A townhouse unit’s value is primarily considered to be affected by investor demand and activity in the northern growth corridor. There is steady buyer activity for townhouse units; however, they need to be competitively priced in order to sell to local buyers. Also body corporate fees reduce the return to the investor and are still having a negative impact on price levels.
In the northern Gold Coast corridor, contemporary-style homes are more desirable with mostly newer modern designs and latest trends incorporated with clean, simple, open-floor plans with indoor/outdoor living spaces. These offer worry-free living for the next five to seven years (near-new and new) with the most sought after homes being those with open plan living, indoor/outdoor living spaces and a swimming pool.
After looking at both sectors, housing priced below $500,000 is definitely the stronger market in the northern growth corridor and is being driven by both first home buyers and low interest rates.
If prices were to increase in the new housing market and the established market, first home buyers would be priced out and an increasing demand for duplex and townhouse units would occur. If interest rates were to rise or an oversupply of stock was available and economic conditions changed, the market would no longer keep improving and be sustainable.
Central Gold Coast
Central locations within two kilometres of the beach are currently seeing high demand with shorter marketing periods and limited available stock for sale.
In the outer, less-expensive suburbs such as Merrimac demand is strong, with price levels rising steadily over the previous 12 months.
76 Merridown Circuit, Carrara sold in January 2017 for $557,000, providing 4 bedroom, 2 bathroom, a car garage and pool on 768 square metres of land.
A modern-style two-level townhouse at 2/23 Bourton Road sold in February for $400,000 to an owner-occupier. It comprises 3 bedrooms, 2 bathrooms and a single garage. The previous sale was in April 2013 for $310,000 with only minor cosmetic improvements made since.
Closer in, 15 Dame Patti Avenue, Mermaid Waters sold in December 2016 for $791,500 providing 3 bedrooms, 2 bathrooms, a double garage and pool in renovated condition.
17/172 Barrier Reef Drive, Mermaid Waters sold in December 2016 for $310,450. This is an older circa 1987, 2 bedroom, 2 bathroom two-level townhouse with single garage in dated condition. The agent reported it sold prior to auction in less than two weeks.
With interest rates currently at historically low levels and rental levels strong and on the rise, we are seeing a trend where existing tenants appear to be making the leap to home ownership.
Short of another global event such as the global financial crisis of 2007 and 2008, current price levels and demand appear sustainable for some time, with the Gold Coast having a construction boom and plenty of associated jobs and money flowing through the local economy.
The strongest activity is still the under-$500,000 mark where both investors and owner-occupiers are competing. Over $500,000 appears mainly driven by owner-occupiers.
This confidence of locals and investors in the property market is resulting in premiums being paid to secure more well-located properties with a higher underlying land value component that may be in need of renovation works.
Sustainability of the current strong market conditions on the Gold Coast is linked to both interest rates and construction activity, (i.e., jobs). With interest rates on hold and the amount of building projects in progress and projected, there appears to be no reason for conditions to worsen for some time.
The central north-western suburbs of Carrara, Nerang, Highland Park and Pacific Pines provide demand for low-entry to mid-priced segments of the market. Agents report strong demand from investors (local and interstate) and first home buyers with short marketing periods and lack of stock. The low interest rate environment and affordable price points are driving this demand. This can be seen for dwellings priced between $450,000 and $650,000, and townhouse, villa and duplex units priced between $300,000 and $450,000.
Two typical dwelling neighbouring properties at Pacific Pines show improvements in value. 14 Austral Crescent, Pacific Pines, a semi-modern, part-renovated, 3 bedroom, 2 bathroom, dwelling with a 2 car garage sold in January 2016 for $453,000. It is currently under contract for $515,000, which shows an increase of 13.7% in value over the last year. 16 Austral Crescent, Pacific Pines, a semi-modern, 4 bedroom, 2 bathroom dwelling with a 2 car garage and inground pool sold in January 2017 for $552,000. This property previously sold in August 2016 for $528,000, which shows a 4.6% increase in value over a five-month period.
Land values within these suburbs have improved. The Valuer-General’s 2017 property market movement report shows a 20.4% increase in the median land value (October 2015 at $270,000 to October 2016 at $325,000) for Carrara and 10.3% for Nerang (October 2015 at $217,500 to October 2016 at $240,000).
Conventional detached dwellings are the most keenly sought after accommodation type within these suburbs with duplex, townhouse and villa units close behind. Properties with renovation potential are being sold in suburbs such as Nerang and Carrara. For example, 4 Mariposa Court, Nerang, a semi-modern 4 bedroom, 2 bathroom, 2 car garage dwelling with pool sold in January 2015 for $405,000. Some renovation works were completed and the property sold in January 2017 for $520,000, showing a 28% increase in value.
The level of activity for the low-entry to mid-priced segment in these suburbs is currently strong with no signs of slowing down. These suburbs are also very close to the 2018 Commonwealth Games venues, with some of the centres for events in Carrara. The low interest rate environment continues to attract investors and first home buyers; however, if interest rates were to dramatically rise, levels of activity will decline.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.