The month in review: Gold Coast
By Herron Todd White
The market for attached townhouse/villa and apartment product on the Gold Coast has steadily improved over the past two to three years. While initially, this improvement was focused on established, resale stock as these market segments improved, we have also seen improved demand shown for new unit product, particularly for new townhouses and apartments priced below $500,000.
Furthermore, while new home unit product on the Gold Coast continues to be mostly purchased by investors at price levels which are considered to be high based on local comparable market resale evidence, the firming in the established markets, has to some degree, started to bridge the gap between new and second hand dwellings. This has had a resultant positive impact on the settlement risk for ‘off the plan’ sales, with most project marketing agents reporting of reduced ‘fall over’ rate for presale contracts over the 2014 and first half of 2015 period.
Local real estate agents confirm that prevailing conditions in most market segments on the Gold Coast are buoyant, reflecting improved levels of demand, increased sale volumes, shorter selling periods, reduced stock availability and upward pressure on sale price levels.
As a reflection of the favorable market conditions, there are a number of new medium and highrise apartment projects currently being marketed on the coast, and most specialist marketing agents are reporting of good sale volumes for product priced below $500,000 and that there has been price growth in recent releases over the past six to 12 months. The concern now lies as to the number of projects which are proposed and as to whether the demand will continue to sustain the potential future supply of new product.
In the established market segments, potential opportunities still appear for resale residential apartments in central beachside locations between Burleigh Heads and Main Beach, particularly for highrise stock in large yield buildings. The reality being that the sheer volume of resale stock that can be on the market at any one time in these high density suburbs, or in a particular building, can keep a ceiling on price levels, despite the surging detached housing market in the same areas.
These areas all benefit from excellent location attributes and amenity and typically provide resale units with good size floor areas and at a lower price point (both quantum and on a rate per square meter), when compared to the price levels for smaller new apartments in buildings currently being marketed for sale ‘off the plan’.
Over the past two to three years, there has been a large focus on medium rise apartment buildings in the Southport CBD following the release of the streamlined Southport PDA approval process. This has led to a larger volume of approvals being issued for Southport, some of which are for very large yield highrise buildings. While development to date has focused on smaller projects, where demand appears to be adequately absorbing supply, there is a degree of concern to the overall volume of approved stock that potentially could be brought to the market if a number of the approvals were acted on. Hence, future supply levels and sale volumes for new apartments in Southport could be an area to keep an eye on.
We note, however, that there are a large number of 100 plus apartment highrise projects approved within the Southport PDA area and that a proportion of these have been obtained by ‘speculators’, with the intent to on sell the approved site, likely to overseas interests. To date, we have seen only limited local developers or lending institutions show an appetite for these larger scale developments in Southport, and the reality is that while a larger potential supply of apartments is approved for Southport, a number of the proposals, may in fact, not be acted on in the current development cycle.
In the improved market, there has been a noticeable increase in the number of proposed fringe residential apartment projects in areas which are traditionally regarded as more suburban low density housing locations. These projects are predominantly being developed in multiple low and medium rise apartment buildings where construction can be staged in 12 month construction phases, and produce new units at lower prices. These projects have generally met with good sale results, particularly for the central periphery areas of Varsity Lakes, Robina, Bundall and Harbour Quays, which benefit from significant existing amenities, shopping facilities and transport infrastructure.
We comment that a large portion of new apartment projects on the Gold Coast are progressively providing smaller apartment product when compared to historical standards, in an effort to suit changing market preferences with a greater focus on lower price points.
Interestingly, while we have seen a significant recent increase in the emergence of new apartment projects released on the Gold Coast over the past 12 months, there has been limited new medium density projects appear in the market. However, the absence of new released townhouse/villa development is not considered to be an indication of a slowing market. Rather, the market for new medium density dwellings has been strong over the past few years, however the now very limited supply of townhouse development sites, coupled with the increased appetite for new apartment product in established residential areas, has resulted in a limited pipeline of new projects.
Of those projects which have been released in the market, most are situated in Robina, Carrara and Hope Island and provides new units priced greater than $450,000 and mostly, in excess of $500,000. In the very low interest rate environment, this product appeals to both investors attracted to the good rental returns and also, to owner-occupiers who have been increasingly priced out of the detached housing market. Furthermore, a number of new releases within these projects have sold out ‘off the plan’, prior to construction being completed.