How will the Commonwealth Games impact the Gold Coast real estate markets?
A university study suggests the 2018 Gold Coast Commonwealth Games, which are costing around $2 billion to stage, will deliver Queensland a $4 billion economic windfall.
The question is how much impact the Games will have on Gold Coast real estate markets. We can sure the industry will talk up the benefits and the prodigious Gold Coast publicity machine will be working overtime to lure investors – but I believe the outcomes for real estate will be over-stated.
A Griffith University report says the Games will result in billions of dollars in new public and private infrastructure and 670,000 extra tourists. It will help create 30,000 jobs and stimulate benefits for business years after the Games end.
The Griffith Institute For Tourism-led report predicts the Games will be “an economic supercharger” for the Gold Coast and Queensland.
The 68-page report - by five academics specialising in tourism, accounting and finance – says “the state and the country will benefit for years to come”.
“The Games will bring more international visitors to the state, create business opportunities, and further facilitate multi-faceted cultural exchange,” it says. “The potential impacts ... are multifaceted and include not only economic but social and environmental aspects.”
A $2 billion boost to the state’s gross domestic product is a key forecast in the report, which also tips $2.6 billion in public and private sector investment.
The Games are deemed to have been a catalyst for projects such as the $420 million second stage of the Gold Coast light-rail linking to the heavy rail line at Helensvale, as well as upgrades to Pacific Far ($670 million), The Star hotel casino ($345 million), the Gold Coast Airport ($300 million) and various transport infrastructure improvements.
Then there’s specific Games infrastructure, including the $550 million athletes village, the $110 million Gold Coast Sport and Leisure Centre, the $40 million Gold Coast Aquatic Centre and the $40 million Coomera Indoor Sports Centre.
Around 16,000 full-time equivalent jobs are forecast to be generated before, during and after the Games, plus another 14,000 temporary positions.
So, while the economic and infrastructure benefits appear clear, less certain are the impacts on the real estate market.
The Commonwealth Games promise to provide a short-term sugar hit for the real estate market – and we’ve seen much of that impact already.
The benefits for housing demand relate to the jobs created by the event and related construction work. There have been thousands of workers drawn to the Gold Coast for the construction jobs in the lead-up to the event. But most of those jobs disappear once projects are completed prior to the Games.
This explains why the Gold Coast was a leading growth market in 2015 and 2016 – but has started to level out in terms of sales activity in 2017.
The other factor – and this is the big one – is the degree to which developers over-react to the Games impact and over-build.
The Gold Coast is a notorious boom-bust market even in “normal” times. It lurches from peak to trough periodically – and often takes years to recover from a bout of major oversupply.
This helps to explain why the median price for an apartment in Surfers Paradise is lower today than it was a decade ago. It’s similar for other coastal suburbs like Main Beach and Broadbeach.
Over-supply is the biggest killer of property markets across Australia and the Gold Coast is a leading example of this phenomenon.
Developers, partly in response to the Games euphoria, are building more high-rise unit projects, and larger projects, than ever before.
I fear that this will snuff out any chance of the Gold Coast market experiencing a sustainable boom from the Commonwealth Games.
Any investors tempted by the euphoria should steer clear of the high-rise markets and concentrate on the genuine housing markets inland.
Terry Ryder is the founder of hotspotting.com.au