Has the shine disappeared from the Gold Coast?

The Gold Coast is the most over-rated property market in Australia.

While many investors are seduced by its reputation as a tourist destination and its history of high population growth, the reality is that it continues to deliver poor outcomes for property buyers.

More pertinently, there is no prospect in the short term of the situation improving. This is why the Gold Coast continues to feature in the ‘No Go Zones’ report on my hotspotting.com.au website.

The problems can be summarised in one word: surplus. The Gold Coast has an over-supply of everything that matters in real estate: houses, apartments, offices and warehouses. The problem is so widespread that there is little hope of improvement any time soon.

Latest data from the Real Estate Institute of Queensland (REIQ) confirm the poor performance of the region’s residential market.

The Gold Coast is the second worst market in Queensland for capital growth over the past five years. Only Hervey Bay has a worse record.

The median house price has grown by just 17 per cent in the past five years – an average annual growth rate of just 3.2 per cent. Apartments have fared worse, the median price growing by only 14 per cent in five years.

To put that in perspective, in the same period, Brisbane has risen by 42 per cent, Ipswich by 35 per cent, Gladstone by 67 per cent, Rockhampton by 46 per cent and Roma – Queensland’s star performer – by 126 per cent.

In the past year, the Gold Coast’s median house price has dropped by 4 per cent and the median apartment price by 3 per cent.

Behind those median figures there are Gold Coast locations where prices are lower today than they were five years ago, including Surfers Paradise apartments. This explains why I get so many emails from investors who have lost money on the re-sale of units they have bought in the past five years.

Surfers Paradise, Runaway Bay and Sovereign Islands are locations where house prices are lower than five years ago. This is true also of apartments in Coolangatta, Currumbin, Hope Island, Runaway Bay and Surfers Paradise.

The median unit price for Runaway Bay has dropped by 22 per cent since 2006, according to the REIQ figures.

There have also been double digit decreases in median prices for apartments in Main Beach, Miami, Biggera Waters, Pacific Pines, Paradise Waters, Runaway Bay and Tugun.

A number of house markets have delivered similarly poor results.

The real estate industry is in denial – publicly at least – but the facts are inescapable.

Earlier this year, a Surfers Paradise agency managed to get an article published that claimed investors need to move now to buy high rise apartments or “risk being shut out of the market for the next five years”.

There was, the article claimed, a looming shortage.

This defied the fact that there is over- supply and that three very large developments were still being built.

The comic element of the situation was increased a few days later when an independent researcher, Bill Morris, published a report that concluded the Gold Coast had a high rise apartment over-supply which would take five years to absorb at current sales rates.

This over-supply problem extends to the commercial market, where the office vacancy rate is well above 20 per cent, and to industrial property, where there are widespread vacancies in the warehouse market.

Tourism and construction are the twin columns that hold up the Gold Coast economy, but tourist numbers have been hit by the GFC, by recent disasters in New Zealand and Japan – two of the biggest sources of overseas visitors – and the rise of the Australian dollar, which has not helped inbound tourism.

Meanwhile, the building surpluses mean no one is constructing much anymore, so that industry is suffering.

The Gold Coast has also lost its long-time mantle as our No 1 population hotspot. Bernard Salt, demographer and columnist for The Australian, says Melbourne’s west is now the population king.

The bottom line is that even when the Gold Coast has soaked up its surplus apartments, developers will once again flock to the region and another cycle will begin, which will lead to the next over-supply.

The region has a long history of surpluses.

Another area of concern is vacancy rates. The Surfers Paradise postcode has a vacancy rate of around 7 per cent, according to sqmresearch.com.au, another indicator of over-supply of dwellings, particularly high rise apartments.

These are not recent developments and they do not indicate a national real estate malaise. The situation is a localised one with a history of at least five years and caused primarily by the over-supply of houses and apartments.

There’s little prospect for improvement in the short term.

Terry Ryder is the founder of hotspotting.com.au
[email protected]