Gold Coast August 2017

The month in review: Gold Coast

By Herron Todd White
August 2017

Central

Investor activity in beachside locations remains steady to subdued with current tightening of lending policy. Local investors appear more active in the second hand unit market with body corporate fees a factor in the buying decision.

Non local investors continue to be the main drivers of new product high rise units paying premiums in excess of local market levels for similar existing stock.

Away from the beach there has been significant new construction in both medium rise developments and medium density cluster unit townhouse style developments.

Local investors have been more active in the modern townhouse style developments which provide two level 3-bedroom, 2-bathroom accommodation. Prices for new product are now in the low to mid $500,000s, with resale evidence of product selling off the plan in 2014/15 for $530,000 to $550,000 reselling this year for the same or slightly more.

Modern medium rise developments are marketing 1-bedroom plus study units for over $400,000. In general, non-local investors are purchasing these units.

Rental levels are still currently strong with no sign to date of any softening however with the large number currently under construction or nearing completion, an increase in supply should lead to a lowering in the rental levels achievable.

The investor is considered good for positive capital value growth whilst market conditions are strong. Any change in market forces such as quickly rising interest rates will have a negative impact on buyer demand in general and is more likely to have a stronger effect on the investor market with a compounding effect and softening in property values.

Coastal north

Investor activity within the coastal northern suburbs of the Gold Coast remains steady, seemingly trailing off approaching the end of this financial year. Interstate investors are more prominent than local investors which could be a reflection of the state of the New South Wales and Victorian central markets.

Interstate buyers have mostly been active in new, modern style developments. Suburbs that stretch along the Broadwater such as Southport, Labrador, Biggera Waters and Runaway Bay are offering investors 1- and 2-bedroom, modern style low, medium and high rise units with strong rental returns and low vacancies due to their proximity to amenities. Original or partly renovated units within these higher demand suburbs are usually purchased by owner-occupiers, with investors not looking for properties that require any renovation works to achieve good rentals.

If this investor market was to slow, the impact would be most notable within this property segment (new developer product).

Inland suburbs such as Western Labrador, Parkwood, Arundel, Coombabah and Helensvale are attracting local investors with more affordable 2- and 3-bedroom duplex, villa or townhouse type products. These can range from $280,000 to $400,000 with local investors willing to purchase in an original or run down condition and complete some renovation works before putting them up for rent. These properties are also attracting strong returns from family renters due to their proximity to schools.

Agents are reporting that most interstate investors are generally seeking strong yields over capital gains, with the boost in infrastructure and the nearing Commonwealth Games seen as the two major drivers for rental demand.

Agents for national companies such as Ray White have also reported investors simply giving basic parameters such as certain age, yield percentages, proximity to the light rail and proximity to a university as the only determining factors in the search for an investment property on the Gold Coast – sometimes not even wishing to inspect or see the property.

North-west

Investors in this region are still red hot for entry level, mid 1980s original housing in the Beenleigh area. Sydney and Melbourne buyers can buy three of these properties and still have change left over compared to the median house prices in their local markets, with most entry level product offering a 3-bedroom, 1-bathroom original house for a sub $300,000 purchase price.

Our local investors appear to be favouring the modern houses which are not new but less than ten years old. This way they avoid paying the premium for new housing and maintenance is minimal in the short term.

The price range for these properties is $360,000 to $400,000 in the north-western corridor.

In this region, investors are taking the lion’s share of the market and if there was to be an increase in interest rates, further changes to investment lending or any other factor that would significantly slow this sector, then the upward momentum would stop and even experience a downward correction.

North-east

Investors in the north-eastern growth suburbs such as Pimpama and Coomera are predominantly interstate with this locality being dominated in recent years by construction of dwellings for the investment housing market. Property in this area is underpinned by strong investor buying activity with the majority of new land and house and land packages being sold to investors. The price points for these properties are $450,000 to $500,000.

Investors seem to be seeking yields and tax benefits with new products and we normally see the investment product being resold after four to five years. We have seen a decline in volume during 2017 with borrowing conditions for investors softening, however property values in the area have not been impacted with no sign of decline in value. There is a higher than usual proportion of investment properties compared to owner-occupied houses in the area and in the event of interest rate increases and borrowing conditions softening further, the value of properties in a strongly underpinned investment market will be impacted more than the broader market.

There are currently a large number of properties available for rent in Coomera and Pimpama with some property managers offering rent free periods and other forms of incentives to attract tenants. The ongoing supply of new investment properties on the market may result in added pressure causing increased vacancy periods and reduced rental incomes for investors in the area.

We note that there has recently been a significant increase in activity in Eagleby by interstate investors. Investors are also becoming more prominent in the market as the low interest rates and strengthening rents on the back of low vacancy levels have improved the yield potentials of properties. This is very evident in the lower end housing, townhouse and unit market where there has been a significant increase in sales volumes in the under $300,000 price bracket.

What would be your best advice for any investors thinking about buying in your market? Purchase new product in predominantly owner-occupied estates.

Tweed

Investor activity in the beachside locations of the southern Gold Coast and Tweed region remains steady at present. Local and non-local investors generally target similar product such as the established housing and unit market where rental returns are strong.

The price point at which we generally see local and non-local investors active is under $1 million.

Non local investors continue to be the main drivers of new product in low rise and medium rise developments and pay premiums, in particular in Varsity Lakes.

The investor market has been steady over the past two years. If the investor market was to slow, the impact would be most notable on new product (development stock).

Investor activity in any market is generally seen as a positive. Investors generally provide capital growth value in the property market, however any change in market conditions such as interest rates rising or firmer lending policies for investors will have a negative impact on buyer demand, resulting in a softening of property values.

Note: With regard to the Property Clocks, these are general and vary between locations and property types. 

Share on:

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.