Gold Coast property market a tale of two cities: Terry Ryder

The Gold Coast market is a tale of two cities, one representing the best of times and the other the worst of times.

The best is the housing market, which is responding to population growth, infrastructure spending and other stimulus to produce rising sales activity and price growth across the region. The worst is the likely outcome in the coastal suburbs dominated by high-rise apartments.

I’ve made my views about the unit market pretty clear. I wrote about it in this column in September, when I started by saying  “It’s danger time for investors tempted to buy high-rise apartments on the Gold Coast” and ended with “For investors who are susceptible to a strong marketing pitch, it’s time to be afraid, be very afraid”.

Gold Coast high-rise units are a prime candidate for the title of worst capital growth performers in Australian real estate, constantly undermined by a boom-bust history characterised by periods of massive oversupply. 

But the Gold Coast is a big city, with a population currently estimated at 550,000 and projected to top 620,000 in five years. It’s in a similar position to both Melbourne and Brisbane – the downtown unit markets should be avoided because of looming oversupply, but suburban housing markets look strong. 

There is more momentum in the Gold Coast suburban market – what I call the genuine residential market of the Gold Coast – than anywhere else in Australia right now.

The Gold Coast is the clear national leader among the Local Government Areas of Australia, including both capital cities and regional areas. It has the most growth suburbs, by a wide margin.

When we examine the sales volumes suburb by suburb, the momentum is exceptional. And this is key information for real estate consumers, because when sales activity rises strongly, price growth is inevitable.

I have mentioned one of the rising Gold Coast precincts as one of my five markets to watch in 2016 – the northern growth corridor stretching up the Pacific Motorway towards Brisbane.

Oxenford stands out in this precinct, with sales rates lifting from 80-90 per quarter last year to 130-135 in the past two quarters. Other growth suburbs in this area include Coomera, Upper Coomera, Pimpama and Ormeau.

But there are growth markets right throughout the residential suburbs of the Gold Coast. Others include Burleigh Waters, where sales in the past five consecutive quarters have been 85, 92, 100, 131 and 144. The pattern there is undeniable and the suburb’s median price is now growing at an annual rate above 10%.

Mermaid Waters is also a growth market, with sales rates up from around 80 per quarter last year to about 120 per quarter now, which means sales activity has increased 50% in 12 months. And, as in Burleigh Waters, the median price is starting to head north.

This rising trajectory of sales is producing price growth in many of the residential suburbs. The annual change in median house prices is in double digits for some of them, including Helensvale, Merrimac, Pimpama, Robina and Worongary, in addition to Burleigh Waters and Mermaid Waters. 

But more common, to date, is growth of 5%, 6% or 7%. I expect the rate of growth to rise in 2016.

It’s also significant that many of the apartment markets have recorded median price decline in the past 12 months or have had zero growth. And most have long-term growth averages that are negative, zero or just 1-2% per year.

It’s very much a tale of two cities – the city of houses and the city of high-rise apartments. As investors, consider the former but avoid the latter.

Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter.