The five most overrated Queensland markets to buy in

The greatest contradiction in real estate is the gap between perception and reality on the best places to buy.  

It's extraordinary how many people cling to cherished beliefs about the superior qualities of  locations that don't deserve it.  

A good deal of evidence on this is contained within the latest edition of the REIQ's quarterly report.  

Based partly on this evidence but also on other research, here are the top five Queensland places that don't deserve their reputation as good places to buy.  

1) Noosa

This is Australian real estate's biggest lemon. Somehow Noosa gained a reputation as a great place to invest in holiday homes. The people who believe this clearly don't trouble themselves with research. The typical Noosa apartment is today worth 37% less than it was five years ago.

Despite agency rhetoric last year about market recovery, the median unit price is still falling – it dropped 8.5% in 2013. Houses aren’t much better, with a similar delcine in 2013 and values are currently 15% lower than five years ago.

If anyone knows about a worse performing market anywhere in Australia, please let me know.  

2) Surfers Paradise 

Investors should never go anywhere near this market. Surfers is about speculators and tourists, never a great foundation for a property market.

The average Surfers unit is today worth 12% less than five years ago. And despite all the bullish rhetoric spewing forth from the nation’s propaganda capital, values are still falling. The median price for Surfers Paradise apartments dropped 12% in the December quarter.  

3) The Gold Coast generally

Take a look at where values currently sit, relative to five years ago. Main Beach units: down 19%. Hope Island units: down 21%. Southport units: down 22%. Hope Island houses: down 38%. Broadbeach Waters houses: down 15%. Runaway Bay houses: down 15%.

There are now signs of improvement on the Gold Coast and inland housing suburbs in particular are starting to return to price growth. But there is every indication the Gold Coast will fall into the same trap that has hindered it in the past: a chronic oversupply of highrise apartments, which drags down the whole city market.

Now that developers have discovered their version of heaven on a stick – poorly-informed Asian investors – we're going to see another development frenzy. If insanity is repeating the same mistakes again and again, the Gold Coast is the nuttiest place in the nation.  

4) Brisbane CBD apartments 

Marketing agents are hyping up the rising sales of inner city units in Brisbane, but I would urge investors to approach with caution. Vacancies in the CBD are above 6% and rising, and most of the near-city suburbs have vacancy rates above 4%.

High vacancies cause rents to drop and propery values inevitably follow. It’s not yet as bad as Melbourne’s insane surplus, but it’s heading in that direction. Brisbane developers are chasing the same Field of Dreams as their Melbourne buddies: build it and the Chinese will come.  

5) Port Douglas 

Back in the 1980s when the Japanese were invading tropical north Queensland and Christopher Skase was trying to redefine luxury in hotels, Port Douglas became the next big thing. It never delivered on the hype but it somehow retains its status (with some, at least) as an exciting place to pour your life savings.

People still ask me whether “it’s still a good place to buy”. In reality, it never was – and it certainly hasn’t been lately, despite the lovely environment and proximity to the reef and the rainforest.

Here’s some raw data on the Port Douglas market: the median unit price has fallen an average 6% per year over the past five years and the median is now down to $220,000; the house market has dropped 6% per year over the past three years; the typical Port Douglas house today is worth 26% less than five years ago; and a Port Douglas house typically spends over a year on the market before selling, according to Australian Property Monitor.

But none of that will stop people continuing to buy in these places, especially if they read that everyone else is.

Terry Ryder is the founder of hotspotting.com.au.

You can contact Terry via email or on Twitter.