Oh dear, I seem to have upset Gold Coast and Sunshine Coast real estate agents with comments in our 2012 investment predictions. In those predictions we warned to avoid the property ‘catastrophes’ of the Gold and Sunshine Coast markets. It didn’t go down very well.

The local real estate agents took to the Sunshine Coast Daily and Gold Coast Bulletin

to ‘correct us’ with some stern comments about our views (see below for a snapshot of what they said). They told me I should do a little more homework before making statements like this.

Well let me assure you I had already done my homework and have the necessary fodder to back up my statements.

In any survey of trustworthiness real estate agents and journalists always appear at the

bottom of the list. So dear reader you haven’t got much to choose from. But please note that I have no reason whatsoever to be making inaccurate statements. I have no issue with this area, but it’s my job to tell it how it is. And the bottom line is that property investments in these two locations are historically volatile, and right now in pretty bad shape.

Here are the facts:

-       Gold Coast house prices are down 15.1% from their peak in March 2010, falling from $568 000 to $482 500

-       Home units also peaked in March 2010 at $400 000, and have since fallen 15% to $340 000 in the December 2011 quarter

-       On the Sunshine Coast house prices are down 13.9 % from their peak in December 2009 falling from $505 000 to $435 000

-       Home units peaked in June 2010 at $367 500 and have dropped 16% to $309 000 at December 2011.

-       SQM Research (an independent property research firm) is predicting another 7-9% across the board fall in value in the region in 2012

-       There are still massive amounts of stock on the market and it’s not going down.

First the replies from the Coasts’ newspapers got defensive and started rattling off figures showing building approvals on the Gold Coast up 18% and 25% on the Sunshine Coast. That’s all well and good but the region is already suffering a major oversupply, and having building approvals is no proof of a healthy market. It just means more supply in a low-demand area. Places are being built, but they’re not being bought.

Property is always about demand and supply. If there’s a lot of supply and weak demand then pressure is on prices to fall to attract buyer interest.

They real estate agents even say in the article that these latest building approval figures “could indicate a turnaround”. Doesn’t exactly fill you with confidence does it?

On the question of supply I am indebted to the gang at SQM Research for their data. SQM are, in my view, the best of the independent property research analysts. Here are the facts when it comes to stock supply in the region.

First a good chart of the central Gold Coast. It shows listings are just as high as back in 2008. Though there has been a slight down trend in recent months.

http://www.sqmresearch.com.au/graph_stock_on_market.php?region=qld%3A%3AGold+Coast+Main&t=1

Now to the Gold Coast hinterland where stock levels are clearly higher than 2008 and no real sign yet that they are falling.

http://www.sqmresearch.com.au/graph_stock_on_market.php?region=qld%3A%3AGold+Coast+Hinterland&t=1

Now take a look at this! It's for the Post Code of Surfers Paradise itself. There are now over 2000 properties on the market there. This is just for one post code!

http://www.sqmresearch.com.au/graph_stock_on_market.php?postcode=4217&t=1

As far as the Sunshine Coast is concerned stock levels still clearly rising.

http://www.sqmresearch.com.au/graph_stock_on_market.php?region=qld%3A%3ASunshine+Coast&t=1

The post Code of Noosa Heads has been trending down a little of late but still elevated compared to 2009.

http://www.sqmresearch.com.au/graph_stock_on_market.php?postcode=Noosa+heads&t=1

In short, I like to follow stock levels on market as it is a good supply measurement. In markets where there is growing demand, stock listings fall. And when demand falls away, stock listings rise.

Next they accused me of bundling the Gold Coast and Sunshine Coast into one, when they actually are very distinct markets.

Well let me then take a look at them individually.

The Sunshine coast is a beautiful holiday spot that’s for sure. It encompasses some of the best beachside towns we have to offer. But property success has been mixed over the years.

Oversupply of residential units is rampant. What’s worse is that the area is experiencing a softer economy due to poor tourism numbers. This probably won’t improve until the Aussie dollar drops, and therefore we won’t see a bottom in the market until that happens. An increase in unemployment has not helped the situation.

The Gold Coast has a similar story. Huge population growth which has not been supported by income growth. Income growth rates have fallen behind the national average, and according the SQM Research this normally translates into underperformance.

Both areas had a great run between 2000 and 2007, with Gold Coast prices doubling over the period. However this in many cases left property overvalued and oversupplied, and since 2007 prices have been falling (as you can see in the graphs below). As 2008 rolled around the tides turned and in the next 2 years the Gold Coast’s prices fell 8%. Some people are even blaming local councils for a lack of vision, leading to a fall in their respective demographics and increased crime rates.

Both areas are seen as volatile and risky markets.

Still not convinced? Here’s some real life proof.

Take a look at this property - http://www.domain.com.au/Property/For-Sale/Apartment-Unit-Flat/QLD/Robina/?adid=2008542623 - it started at $599 000. That’s a drop of $199 000, and it’s been there for 505 days. There are many more like this, it tops the long list of the Gold Coast’s most discounted properties, many of which state “desperate vendor must sell".

WHAT THE REAL ESTATE AGENTS SAID

Sunshine Coast Daily 21/1/12

Locals Say Property Advice is Half Koched

…“Coast homebuilding approvals up 18 per cent while the Sunshine Coast Council’s official figures were even better – up 25 per cent.”

…Coast Real Estate Institute of Queensland chief Lloyd Williams said the Koches were wrong.

Mr Edwards said they misread the data anyway. He said the Coast’s latest home building figures for November could indicate a turnaround.

“These are hard facts, reality – not just an opinion,” he said.

…Mr Edwards said the Koches had also made the mistake of lumping the Sunshine Coast in with the Gold Coast.

Weekend Gold Coast Bulletin 21/1/12

Stock Falling Short As Sales Increase

…He (David Koch, Channel Seven’s money mouthpiece) described the city’s housing market as a property catastrophe.

…But property industry professionals have slammed the description as outdated.

…Colliers Gold Coast boss Stewart Gilchrist said David Koch’s comments that the Gold Coast property market was a catastrophe was not reality.

..The Gold Coast market has, we believe, now bottomed and activity is returning, said KordaMentha’s head of property Berrick Wilson

Comments  

 

0 #17 Sunshine Coast land 2013-01-03 17:13

The Coasts (both Sunshine and Gold Coast) have always, always, always been bloated markets propped up by city-dwelling and interstate investors. It's not fair to correlate the salaries of locals with the house prices, because it's not a realistic view of the market. The truth it coastal property will always be bloated, because it's the location that non-locals will always continue to aspire to.

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+1 #16 Georgia 2012-08-31 14:07

I agree with #6- This "downturn" was a correction of a market place that was over inflated and getting unrealistic. Prices cant keep going up forever. How are the next generation meant to be able to afford to own their own home when house prices were doubling in a few years and wages were staying the same? The market is neither good nor bad, it is the market and its a combination of circumstances, buyers and sellers that determine the market. A property, like anything, is only worth what someone is prepared to pay for it and the market place clearly dont want to pay the over inflated prices that were of 2007 anymore. Of course agents are going to have a positive outlook, would you prefer your agent to have a negative attitude when selling your biggest asset? Buying and selling in the same market makes it all irrelevant. This cycle happens every 40 yrs or so and thank god it does, as "median" prices would be around 10.5 million by now. That would give us something to complain about.

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0 #15 Iggy Damiani 2012-02-06 22:25

Dear, #5 Geoff Glover,
Here are some more facts for you. Facts that YOU may not be aware of.....
Around 85% of all businesses employ less than five people, many of which are home based businesses.
A reliance on a small number of businesses to provide employment. The top 100 companies represent 1% of all businesses but represent 44% of turnover and 24% of the workforce.

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-1 #14 Do Not Buy Into It 2012-02-05 16:19

Sad falls ahead...

Agents are overdosing on high octane motivational literature and tunes in their own bubble

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-1 #13 sendil 2012-02-04 19:56

it was nice and useful article.. i m noticing a Business Listing Directory webbeez.com this web site is Free Business site Promotion ..easy way submit our business for free..... it is very useful …. thanku...

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0 #12 Solution 2012-02-04 14:24

To say the Gold and Sunshine Coast are a catastrophe is a bold statement that needs clarification. Mega Mansions that were purchased for several million dollars and luxury units puchased by investors do not represent main stream Gold Coast and Sunshine Coast. Houses that are well located to beaches, transport and shopping are maybe down 10%...hardly a catastrophe in this current climate. Lived through the 90's in Sydney, sat it out and will just have to sit this one out too !

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0 #11 Rental rater 2012-02-02 10:36

Kochie - is there any advice on the strength of the rental market in the Gold and Sunshine coast i.e. is there any point in investing there at all, or is it just a locals' buyers market if you want to live there?

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-2 #10 Denise 2012-02-01 11:32

True, I've been trying to sell mine for ages. I blame the council for allowing massive oversupply and the Qld government for "changing" the way land is valued a couple of years ago. Nightmare

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+4 #9 Nexus789 2012-02-01 08:43

Why even believe what they say in the mainstream press - they are all influenced by vested interests. Anecdotal evidence from people suggests that the whole bubble driven illusion is starting to collapse and all the 'imaginary value' will vaporise like it has done so elsewhere in the world.

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+8 #8 James 2012-02-01 06:15

What is happening on the ground here on the Sunshine Coast is about 3-6 months behind the news. Recently Ive been going to auctions just to see what the mood and bidding is like. Places are being passed in at 380-400. I know for a fact that these same properties where bought for well over mid 500's. The looks on the venders faces are just shock. Im 200% with you on this. I wouldn't touch the coast. The amount of older demographic that have moved here and bought up PPR and Investment properties at the same time is staggering. I almost believe that 80% of Peregian Springs and the likes are Investment rentals....The wages just aren't on the Coast to support a 350+ mortgage otherwise...

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