Rapid levels of capital growth in Gold Coast unlikely but market in recovery: CBRE

The Gold Coast market is showing signs of recovery with improved levels of stability and capital values less volatile, says CBRE.

“The past five years have been an extremely difficult period for the Gold Coast residential market, with a high level of receivership activity during the downturn driving property prices down considerably,” says CBRE senior research manager Sam Reilly.

“The luxury market – an area of major oversupply – was the hardest hit.

“While this had a negative impact on the market, a substantial proportion of this stock has been absorbed into the market, which has created more certainty about realistic price levels and in turn provided more confidence to buyers about what represents fair market value,” says Reilly.

Although the unit market is still trading at low levels, turnover is gradually improving as a result of reduced priced expectations and improved tourism and construction employment levels over the past 12 months.

Construction related employment recorded a 6.4% growth in the year to June 2013 and the tourism and retail sector experienced a lift in employment of 3.5% during the same period.

Reilly says Gold Coast’s relatively shallow employment base, which is largely reliant on tourism and construction, coupled with a high Australian dollar was responsible for the rapid change in business confidence at the onset of the Global Financial Crisis.

“The Gold Coast, which has traditionally relied upon high discretionary spending, was exposed to a substantial downturn in growth prospects, which quickly translated to negative growth for the residential market,” says Reilly.

Although the market is in recovery mode, rapid levels of capital growth in the Gold Coast are unlikely.

“Prolonged levels of stability will continue to gradually build confidence, which is a far healthier outcome than the boom and bust cyclical scenario historically seen on the Gold Coast.

“The lower Australian dollar is also a factor improving the market, with foreign tourists – particularly Asian tourists – attracted by cheaper prices on the Gold Coast.”

Reilly says the rise in tourism levels is helping improve the job market, and in turn, the residential market, but a much stronger domestic and global economy would be required before household discretionary spending was boosted to trigger substantial capital value growth in the Gold Coast.