In the lead-up to the Commonwealth Games, high-rise apartment development on the Gold Coast is ramping up again, fuelling concerns about another crash in values, as happened between 2010 and 2012.
Apartment values fell about 25 percent during the two-year period – a combination of oversupply, overpricing and a drop in tourism – with high-rise projects like Soul ending up in the hands of receivers.
This time around, The Australian Financial Review counted more than 1400 apartments across a dozen projects about to flood the glitzy strips of Surfers Paradise, Southport and Broadbeach over coming months, with a potential end value of about $1.5 billion.
Major projects include developer Citi marks $200 million Markwell Residences, a 46-storey tower with 210 units on Surfers Paradise Boulevard, the $220 million Signature Broadbeach, a 264-unit project by Little Projects, the $250 million Chevron One development on Chevron Island with 247 units and Sunland’s $200 million Hedges Avenue high-rise.
With rental vacancy rates at record lows – just 0.9 percent, according to SQM Research – rents rising and values starting to rise as well, developers have sensed the opportunity to make money again on the Gold Coast.
Local municipalities have supported their endeavours, approving more than 11,000 new apartments in the past three years, compared with fewer than 5000 in the previous three years.
But investment adviser Terry Ryder believes history is about to repeat itself in a market notorious for its booms and busts, labelling the Gold Coast high-rise apartment market a “no-go zone” for investors in 2018.
“Once Gold Coast construction projects for the Games are completed, demand will undergo a readjustment, as construction workers leave the area,” said Mr Ryder, founder of hotspotting.com.au.
“Couple this with new restrictions on the capital flow out of China and the 3 percent stamp duty surcharge which now applies to foreign investors in Queensland, and demand is likely to fall short of developer expectations.”
Not everyone agrees with Mr Ryder’s assessment of the Gold Coast’s prospects, with property valuer and analyst Anna Porter listing the location as one of her six investment hotspots in 2018 due to the infrastructure projects underway.
SQM Research managing director Louis Christopher is also bullish on the Gold Coast market, writing in his November 2017 Boom and Bust Report that it has a more diversified economy than the Sunshine Coast and was benefiting from the lead-up to the Commonwealth Games, efforts to reduce crime and “just a tad better” road infrastructure. He expects the Gold Coast and the Sunshine Coast to outperform the Brisbane market in 2018.
Buyers have also bought into the Gold Coast rebound story, with a CoreLogic suburb report for Surfers Paradise showing that apartment sales have risen 60 percent in the past three years, averaging around 1600 a year.
However, the median price for a Gold Coast apartment was $422,000 in September, according to CoreLogic, almost unchanged from five-years ago when the Prodap Report put the median unit price at $419,000.
Ray White Surfers Paradise CEO Andrew Bell said he did not see any sign of the roadblocks that had derailed the Gold Coast’s property market so spectacularly in the past, with strong sales figures recorded recently.
“We’re not seeing rampantly rising interest rates, high unemployment or recession,” he said.
“None of these things is happening and all indications are that interest rates are likely to remain stable for most of 2018.
“There is tremendous confidence in the city due to its economic stability, the quantity and quality of local jobs on offer and steady population growth.”
Originally Published: www.afr.com