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Gold Coast June 2017
The month in review: Gold Coast
By Herron Todd White
As the central areas of the Gold Coast age, we are seeing suburbs such as Labrador, Southport and Arundel going through a resurgence with a lot more properties being purchased for renovations. The semi-modern but established areas of Helensvale, Hope Island and Runaway Bay are a mixed bag with less renovation projects, however this may be due to the higher price point within these precincts.
While the renovation market is reasonably popular across the Gold Coast it is far from being an obsession of home buyers. A number of suburbs are mostly owner-occupied and rather than moving from an area they love, owners are opting to renovate.
Investors are prominent in the central areas of Labrador, Southport and Biggera Waters. When you start going out of the CBD a little bit, buyers are mainly owner-occupiers.
The further out from the central areas (Gold Coast CBD), you will find a higher proportion of owneroccupiers. Investors in these localities generally choose new product for the tax benefits, rental returns and hassle free ownership. Owner-occupiers tend to do a lot more research and generally have a good idea of what a fair price for the property may be. These suburbs are usually under 25 years old or newly developed estates. However the older suburbs are generating interest for renovation projects, typically undertaken by owner-occupiers.
Hotly contested areas are typically Labrador, Southport, Ashmore, Nerang, Helensvale, Labrador, Coombabah, Runaway Bay, Miami, Mermaid Waters, Burleigh Heads, Robina and so on…., where the housing is 20 or so years old and warranting a few dollars spending on them.
Renovators generally sit at the cheaper end of the market in each area with $500,000 to $700,000 in most suburbs for a house and $300,000 plus for units or villas.
Purchasers have the idea of buying a property, undertaking a quick renovation that will give good capital growth and the ability to re-enter the property market in a higher bracket and start the process again.
Renovation budgets vary according to the locality and what is happening with surrounding properties. In a centrally located area it can be anything from a kitchen or bathroom makeover to the full Monty inside and out, depending on the budget of the individual and the state of repair of the dwelling.
In some of the older suburbs, original dwellings are being demolished with a full new construction being undertaken.
As you move to the more outer lying areas, the focus is on the kitchen and bathrooms and often, new flooring. The biggest factor in the equation is buying well and sticking to a budget.
Highrise unit development is predominantly within established localities, with owner-occupiers opting to renovate rather than relocate. Specifically, there hasn’t been an influx of purchasers in the past three months specifically buying units to renovate. These buyers are typically purchasing for investment and then re-entry straight into the rental market for an ongoing income stream.
Townhouses and villas are seeing some buyers who are renovating, however these are typically on an as needs basis and the property is then rented or owner-occupied. A few of the closer in areas are seeing renovating for profit, but again this is typically owners buying to renovate and occupy.
Labrador is an example of an area with good potential for renovation. Buyers can purchase a 2- to 3-bedroom townhouse in a small complex with low body corporate for around the $250,000 to $275,000 mark, spend around $20,000 on basic renovations and then list the property back on the market at around $320,000. This is an appealing entry price point for a first home buyer who gets a renovated property without the hassle of going through the process.
A couple of success stories:
3/259 Christine Avenue, Varsity Lakes, was purchased in December 2015 for $295,000 with $15,000 spent on cosmetic renovations. The property was then back on the market and sold in May 2017 for $435,000. This represents over a 40% gain in less than 18 months and also underpins the strength of the central and southern Gold Coast market.
Another example is a bit further out in the lower Logan area at Marion Road, Cedar Grove. This property was purchased in September 2016 for $400,000 and a full internal renovation plus site works was undertaken (kitchen, bathrooms, laundry, internal repaint, new carpet, site clearance). This dwelling had some defects that were also rectified as part of the renovation. The property has just recently sold for $500,000.
A renovation project will work in all areas of the Gold Coast, lower Logan and Scenic Rim as long as the property is purchased at the right price and the renovation is relevant to the area and not over capitalised.
Over capitalising properties can be an issue in some of the more modest suburbs such as Nerang, Merrimac and Coombabah which are not new and not yet ready for renovation as the building has been well looked after and not considered outdated.
The biggest mistake owners seem to make is not looking at the bigger picture and doing research on what the property will sell for post renovation. They also might undertake the renovation to their taste and not the general market’s which may lead to resistance when offered for sale.
Potential renovators should focus on purchasing at the right price, only completing renovations to a market acceptable standard and not going overboard with fixtures and fittings. They should ensure that the renovation is not overly taste specific and that if offered for sale would have good wide marketability.
Sometimes all that is needed is a basic upgrade to the finishes as the building may have a good floor plan that appeals to the wider market. Any changes would then be costly and not realisable.
Renovating for profit can sometimes be a dangerous road for owners but even worse for investors. Many people underestimate the cost of renovation work, underestimate the time it will take and overestimate the profit they will make. During recent property booms, owners and investors think they have made money by renovating houses but the profit they make from flipping houses has actually come from the general increase in the market. That is to say, they could have made the same or more profit by just holding the property and reselling after the market has increased. This can lead to a false sense of confidence in their renovating prowess. Try flipping houses in a flat or falling market and see how much money there is to be made! Only the very skilled, both financially and practically, can really profit from renovation. Otherwise, just do it for lifestyle reasons and enjoy your new kitchen and colour scheme.
On the other side, we do see people who over spend on the renovation and the full cost is not recoverable based on the sales evidence.
Our recommendation to people thinking about the renovation market in the Gold Coast area would be to buy well, work within a reasonable budget and be realistic with profit expectations.
Please note when reading the Property Cycle Clocks, these relate to the broad Gold Coast, Scenic Rim and Lower Logan localities. The market within the coastal strip from Paradise Point to Coolangatta and out to the M1 remains strong.
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.