SQM Research more positive on Gold Coast and Sunshine Coast property markets

The outlook for property markets closely linked to tourism has brightened, with prices set to rise by between 3% and 6% in 2013, according to SQM Research’s Boom and Bust report.

The extent of the recovery is heavily dependent on the Australian dollar and further rate cuts.

The outlook is also brighter for the beleaguered tourism-dependent Gold Coast and Sunshine Coast property markets with both areas “showing signs of bottoming out”.

Under a base case scenario, property prices in holiday locations are expected to rise by between 3% and 6% – a brighter outlook than Canberra (1% to 4% rise), Hobart (2% to 5%) and Melbourne (2% to 5%) and almost on a par with Brisbane (3% to 7%).

This scenario is based on terms of trade falling and then stabilising, the cash rate being cut by 50 basis points and the Australian dollar hovering at parity to the US dollar.

According to SQM, the best case scenario for holiday locations would be a crash in the terms of trade, a 100-basis-point cut in the cash rate and the Australian dollar falling below 90 US cents.

If this were to occur, SQM forecasts holiday location property markets to rise by between 7% and 13% – outperforming all capital city markets.

In line with these healthier outlooks, SQM says its previous pessimistic opinion of Queensland’s Gold Coast and Sunshine Coast has begun to shift somewhat in recent months.

“Emerging from extended periods of oversupply and severe price corrections, these regions are now looked upon less negatively, and potentially the worst could be over for these localities.

“Nevertheless, there are still risks going forward, one of the main risks being that the Australian dollar could appreciate in value compared to the US dollar, which would have serious additional ramifications for the local economy.”

 


 

SQM Research managing director Louis Christopher says while he has been “very bearish” on the Gold Coast and Sunshine Coast, there is now evidence of a pick-up, with stock-on-market levels coming down.

In February this year Christopher said he agreed with financial analyst and TV presenter David Koch's dire assessment of the Gold and Sunshine coast markets, pointing out at the time that three of the top four most discounted homes in Australia are in Queensland.

Kochie came under fire from local estate agents and media for his gloomy assessment of the Queensland market last year.

Kochie refused to back down from his assessment that the Sunshine and Gold coasts are “catastrophes” and says investors should not trust the views of local estate agents and journalists.

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Christopher says a falling Australian dollar would help these markets as fewer Aussies would take their holidays overseas, while the weaker dollar would attract more international tourists.

Further rate cuts would also help.

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But he warns that these holiday markets are not for the "novice investor", who should stick with properties in the suburbs and avoid holiday apartments.

The report also notes that a “gradual rebalancing away from mining and resources back to tourism and manufacturing would be very beneficial over the long term for this country”.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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