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Has the Gold Coast poperty market gone Bust?

Written on the 25 April 2011 by James Cagney

Is the Gold Coast property market bust? Read this article below to gain valuable insight into the Gold Coast market like never before!

Much depends on which expert you listen to!  It also depends on which wheel barrow the experts happens to be pushing!  If the expert is a Property Spruiker then the market is "definitely going on the up". If the expert is a Journalist it depends what sells more newspapers on the day - the more sensational the better ( I have witnessed one journalist in a major newspaper give two conflicting reports inside of one week).  If the expert is a Property Developer, they have huge money tied up in their developments, they need to say  "the market is buoyant"  or at very least say "sales are looking strikingly positive". If the expert is a Share Broker the best strategy is to manipulate the property market as best they can to push the share market up or down (whatever served their purposes). If the expert is an Educationalist or a Publicist of a specialised magazine they need to appear wise so they can direct people on the right path (which is of course vested in their own investment program or publication).

One of the problems is that we have a plethora of property research these days and it is as easy to justify one's point of view. So there is  'truth', "mistruths' and 'statistics'.  I have spent the past two months trying to make up my mind on which expert is right and I have come to the conclusion that most of them do not have the foggiest idea where the property market is right now, nor where it is going! Now I am not saying that all the experts are devious in their positioning - many of them are simply confused. The best way to depict this is to use the analogy that Kris Sayce of Money Morning used in his article "Learning Economics from a Pencil" - The Inflatable Man. (source:flickre.com). The experts' opinions (just like The Inflatable Man) depends upon which way the wind is blowing at that particular moment in time. Most of them are flapping aimlessly in the wind as they vigorously defend their position and use statistics to justify them. It is hilarious!

Australians have for decades had a love affair with Property. What is the great Australian dream? To own our own homes -  is it not?  So everyone who has purchased a property, or knows someone who has purchased a property, or who has rented a property, or has ever lived in a property is now an expert on the property market - amazing but true! I have been selling Australian investment properties for ten years and this is what I encounter every day - EVERYONE is an EXPERT!  So much talent - we truly are the lucky country!

So I am going to put my hand up and give you my opinion on the current Gold Coast property market (an opinion from a "non-expert" - just to protect my image in case I have described myself above). I will also only comment on the Gold Coast property market because that is where I have invested in a number of properties over the years and  therefore keep a keen eye on the market. The property market is principally based on "supply and demand" and "property cycles" and I will be concentrating on the Drivers of the market. There has been furious debate on how the shortage of dwellings in Australia is calculated and I concur that the published shortage is grossly over exaggerated (no time to cover that here but email me and I will point you to the article regarding this).  Gold Coast has suffered from the Global Financial Crises (GFC) and the strong Aussie Dollar. The tourist numbers are only 5% up on last year*. Travel agents report that it is often  cheaper to holiday overseas than on the Gold Coast. The Theme Parks are our saving grace so the Gold Coast is still better off than many other holiday destinations. Of course, the over-enthusiastic media did us no favors with the extensive coverage of the floods and even though the Gold Coast was not affected by the floods many international and interstate visitors stayed away.

The Gold Coast has been the fastest growing region in Australia for the last four decades. However the credit squeeze has forced many developers to abandon their projects and in particular high-rise developments. Development approvals are the lowest in 10 years. High rise stock has fallen by 44%* during that period. These projects also provided a huge source of  of labour which has now dried and the result is the Gold Coast has a higher unemployment rate than the national average. A wise investor once said "You do not need to follow the news to know when the economy is booming. Just look at the skyline for the number of cranes". Unfortunately there a few cranes lighting up the Gold Coast skyline these days as the banks have starved developers of the funds to build them.

As a result of this downturn many of the workers who live on the Gold Coast are now working in Brisbane and others in the mines around Australia. Most of their families are still living on the Gold Coast (as they fly in and fly out) because parents do not want to move their children from Kindies and Schools. People like living on the Gold Coast and most residents believe that the economy on the Gold Coast will improve so they will once again find employment here - which it will and they can all enjoy life once again.  As a result of this the workers on the mines -who earn far more than they did on the Gold Coast- will be saving for either their first home or saving so they can upgrade of their homes over the next few years. This will be definitely be one of the drivers of the Gold Coast property market.

Another driver will be the population growth in Queensland and the change in demographics within the State. SEQ will account for 67% of the population growth over the next 25 years. The population of Queensland is also getting older each year. The over 65 age group is the fastest growth sector over the next four decades. By the year 2036 there will be over 360 000 people over the age of 65 in Queensland. This will change the purchasing trends of property buyers as they downsize as they get older creating a huge demand for one and two bedroom apartments in locations that provide shops, transport, medical facilities, recreation etc.  For more information on the published population projections throughout Queensland click>>> here.

Another driver is the huge money is being spent by the Federal, State Government and Strategic Private Partnerships in SEQ over the next few years which will create thousands of jobs. The State has set aside AUD18.7 billion for infrastructure in SEQ this year and this will give the Gold Coast economy the kick start it needs. We have funds for the new Gold Coast Hospital which is a 700 bed public hospital and a 300 bed private hospital alongside is being build which is due to open in 2012 / 2013. These two hospitals will employ around 5000 staff once completed.  This is going to be a training hospital and the adjacent Griffith University expect their student numbers to swell to around 20 0000 students. Property values and rents in the surrounding area will increase with the surge  in administration and academic staff the university will need to cope with these numbers.

Another Driver is the ambitious Light Rail Project which was started this year. The first stage of the Light Rail will run from Broadbeach to the new Gold Coast Hospital and the Griffith University. The 2nd stage will run from the new hospital to the Helensvale Railway Station. Tourist will be able to embark on the train from the Brisbane Airport get off at Helensvale Station and catch the Light Rail to their holiday resort. The Light Rail will boost tourism through an efficient transport system as well as alleviate traffic congestion due to population growth and major events staged on the Gold Coast. This ambitious project will fold out over the next four years. For more information and to view the route of the Light Rail click >>> here , and >>>here.  Another Driver is the heavy railway line from Brisbane which will be extended from Varsity Lakes all the way to the Gold Coast Airport at Coolangatta (this project is shown in the info on the Light Rail supplied above). In addition to this the existing Pacific Motorway (M1) is being widened to six lanes from Nerang all the way to thee NSW border at present.  The irony is that the Queensland State Government pulled up the heavy railway line to build the Pacific Motorway (M1) and now they are forced into putting having to put the railway back.

One of the most important drivers of the Gold Coast property market will be the Coomera Town Centre Precinct and the commercial and residential developments around it in the booming Northern Growth Corridor.  The land adjacent to the Coomera railway station and the M1 motorway is jointly owned by the Queensland Treasury and Westfield. The population for this area is predicted to grow from 20 000 to 100 000 people over the next few years. A Hospital, University, TAFE and transit centre  will provide the biggest residential property growth the Gold Coast has seen for decades.  Imagine putting another Robina into the northern Gold Coast - that is what is going to happen!

The State Government  has once again put out for tender for a five hectare development on the Gold Coast's Spit, between Seaworld and the Palazzo Versace* to be the moorings location for the Super Yachts of the world's rich and famous. A final decision on the consortium awarded the contract is expected mid 2011. This will be a multi billion dollar development and a great asset, tourist attraction and employment provider on the Gold Coast.

The local Gold Coast councils's $30 million redevelopment of the Surfers Paradise foreshore is to be completed in June 2011. Later this year the $9 million redevelopment of Surfers Cavil Mall is designed  to attract international as well as inter and intra state tourists to the Gold Coast. This will be a major boost to the restaurant and retail businesses on the Gold Coast.

What all the above activity means is happy days for the Gold Coast as supply and demand now comes into play bringing about a phenomenal affect on the property cycles. Property is a long term investment and over the last five decades property prices have doubled on the Gold Coast every 7 to 10 years. The GFC did change the normal property cycle so you can add another 2 years to the peaks and troughs. However, this is not a smooth curve as many experts claim. The property cycle typically follows 4 distinct Phases i.e. Stabilisation (where prices rise marginally over the inflation rate over 5 to 7 years), Rapid Growth Phase ( usually lasting 1 to 2 years where 10% to 15% growth is not uncommon), Correction Phase (lasting 6 months to a year when property prices can fall by 5 to 15%) ,and then the Stabilisation Phase, once again, for 5 to 7 years as the cycle repeats itself. See illustration of these four phases in the Property life Cycle >>> here.  So the best time to buy property is - at the end of the Stabilisation Phase and that is where the Gold Coast is right now.  The billionaire John Paul Getty III said 'When the economy is bad and property values are falling, and everyone wants to be a seller, buy well-located real estate and hold onto it. Don't sell, whatever the critics and losers might say. That way you will end up very wealthy."

The growth in the median house price  on the Gold Coast in 2010 was 5%*.  When you compare this to the Melbourne housing market which had increase of around 15% and 12% over the past 2 years it is not good (Stabilisation Phase). Therefore, Melbourne has been in the Rapid Growth Phase but now going into the Correction Phase. There is a surplus of 25 000 homes in Melbourne** because developers and builders get caught up in the euphoria of the market and do not follow the trend. As the market in Melbourne is in the Correction Phase investors will have to wait another 5 to 7 years for the Rapid Growth Phase. My advice is to buy NOW on the Gold Coast and you will make money over the next few years no matter what the experts say. This is a no-brainer!

The Gold Coast Statistical District has a population of 651 500* making it the sixth largest city in Australia. Michael Matusik, a reputable expert on the Queensland property market,  argued with another out of state expert (who stated incorrectly that the Gold Coast was a no-go zone),  that you can not take the Gold Coast as one median price or for growth over the past year. Just like any other major city in Australia, you need to look at the Gold Coast suburb by suburb.There will be suburbs on the Gold Coast that will profit more than others in the coming boom. This is where an investment property agent like myself,  who has no bias to a particular suburb on the Gold Coast, will help you buy the right property, in the right location and at the right price. Unlike other real estate agents found on numerous websites, who have a shop front in a particular suburb on the Gold Coast and a self-interest in protecting themselves. They are dictated to by a Franchisor who allows them to sell property in their area / location. It's about that wheelbarrow these agents are pushing again - theirs' so they are not looking after your best interest. How can you get the best advice from these real estate agents?  You need investment in properties that will give you exponential growth and sustainable rentals?  Not properties that line the pockets of local agents. You also need to structure the property purchase correctly. We are associated with  licensed financial consultants and mortgage brokers who will show you how to structure the investment property. Remember the potential to make money through real estate is when you buy and when you sell - so make sure you buy well and get good advice. Contact James Cagney on 0416 137 645 or email jfc@jamescagney.com.au for an unbiased opinion of the best suburb to buy on the Gold Coast .   For more information please view our website www.jamescagney.com.au . We look forward to hearing from you.

* Midwood Report Feb 2011 ** Residex March 2011

Please note:
The information featured in this article is general in nature and therefore should not be solely relied upon as a solution to your personal situation.Before making any investment, insurance or financial planning decision, you should contact and consult a licensed professional who can advise whether your decision is appropriate to you.


Author: James Cagney
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