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What to expect Before and After the 2018 Commonwealth Games
Excitement is building around the 2018 Commonwealth Games on the Gold Coast next month, however, with it comes uncertainty about the housing market.
Many property pundits are taking a ‘wait and see’ approach, putting their buying and selling decisions on hold until after the April 4-15 Games
RiskWise Property Research has assessed the Gold Coast property market to determine the key factors that could impact investors both before and after the huge event.
The good news is that house price growth is likely to remain strong due to the growing demand for affordable dwelling options and the desire to live in established coastal areas.
This is driven by ongoing population growth from high levels of interstate buyers, high migration levels to coastal areas (particularly among Baby Boomers), a growing economy and a relatively buoyant labour market in Brisbane and the Gold Coast.
Market overview – before the Games
The Gold Coast is often the brunt of bad publicity, mainly centred around regular violent incidences in Surfers Paradise. However, RiskWise CEO Doron Peleg says, in fact, the Gold Coast is one of the most popular destinations for both owner-occupiers and investors in southeast Queensland.
“It has beautiful beachside and waterside suburbs, an unrivalled lifestyle, good infrastructure, a large number of well-off residents and locals who describe the Gold Coast as ‘heaven for children’,” Mr Peleg said.
“The Gold Coast has a stable property market that offers both affordability and excellent access to superb beach and coastal areas, and that is very appealing to buyers.”
The research house’s analysis shows the region has delivered solid property price growth over the past five years at 36 per cent for houses and 23 per cent for units. In addition, in the past 12 months, houses and units delivered capital growth of 7.6 per cent and 5.8 per cent respectively (Source: CoreLogic).
CoreLogic’s regional market update to December 2017 places the median house price at $634,423, while the median unit price is $411, 229.
The number of days on the market is also relatively low at 36 for houses and 41 for units.
Strong Population Growth Across the Gold Coast
RiskWise research shows the region’s strong capital growth has been driven particularly by ongoing population growth (with high levels of interstate migration), high migration levels to coastal areas (particularly among Baby Boomers) and the growing economy and labour market in Brisbane and the Gold Coast.
“Looking back over the past six years, the Gold Coast has demonstrated consistent population growth ranging from 1.28 per cent to 2.25 per cent and this means higher numbers of intra-state homebuyers, investors and renters are set to drive demand in these suburbs,” Mr Peleg said.
“With many affluent migrants moving to the Gold Coast in search of an improved lifestyle, demand for suburbs in prime localities is likely to grow.
“The ageing population across Queensland is set to drive this demand, as greater numbers of wealthy retirees move from urban centres in search of luxury properties in prominent coastal areas.”
Even high-crime areas deliver strong growth
Due to great demand for houses – and that popular suburbs on the Gold Coast have become less affordable – even high-crime suburbs enjoy strong demand and good capital growth.
In fact, the Gold Coast’s Top 10 high-crime areas delivered solid five-year growth of 38 per cent for houses and 25 per cent for units, largely beating the city’s median price growth benchmark of 36 per cent and 23 per cent respectively.
Strong rental returns
The area boasts a high median rental return of 4.9 per cent for houses and 5.7 for units. These numbers surpass both the Greater Brisbane and Australian medians.
The Commonwealth Games
The 2018 Commonwealth Games will focus 1.5 billion pairs of eyes around the world on the Gold Coast with more than 6600 athletes and team officials from 70 nations and territories expected to attend the 11-day sporting and cultural event.
Agents report there is not much new stock coming on to the property market as vendors mark time before committing to sell. Many are waiting for the Games to finish before they make their move.
The flow-on effect of the Games, however, will have a major boost to local infrastructure as the eyes of the world turn to the Gold Coast.
Organiser, GOLDOC, lists on its website information about its Embracing 2018 legacy program stating: “The city will shine on the world sporting stage and the promotional exposure for business, trade, investment, tourism and events will herald a new era in the region’s growth and maturity”.
As an adjunct to the Games, Trade 2018 is designed to strengthen trade and investment ties across the Commonwealth. It has visited India, Malaysia and Singapore to target priority international buyers and investors. In other words, the Games has allowed the Gold Coast to be marketed to the world and this has also meant it has stimulated major projects in the region such as the transformation of the athletes’ village and parklands to a Health and Knowledge precinct, in partnership with Griffith University and the Gold Coast University Hospital, alongside other significant development projects and transport solutions such as the Light Rail.
However, it must be remembered that the Gold Coast has a transient population with a large number of temporary employees, both locals and Fly-In-Fly-Outs, and this along with the uncertainty prior to the Games could impact the market, and particularly on units that are either located in areas that are less popular among families or small units that are not suitable for families.
Market overview – after the Games
Mr Peleg said while it is projected that there will be some reduction in the economic activity on the Gold Coast, post the Games, most residents would not be impacted.
He said there were good economic prospects for the area with billions of dollars of investments and investment proposals in major developments such as the $1.2 billion Spirit Tower, which was on track to become the southern hemisphere’s tallest building, and the Empire Estate, a $1 billion industrial estate at Yatala, positioned to become a major hub of activity in the city’s north.
He said it was important to also make a clear distinction between houses and units, as detailed below.
Over the medium to long-term, house price growth is likely to remain strong due to the growing demand for affordable dwelling options and the desire to live in established coastal areas.
“The high level of owner-occupier ratio of 75 per cent and the average holding period of 11 years indicate that, besides a small number of potential sellers that are currently holding their selling decisions, it is unlikely that the local owners will significantly increase the supply of properties,” he said.
“Also, property investors who enjoy strong capital growth and receive high rental returns from local families, are also unlikely to significantly increase the supply.
“In any case, any additional supply of houses is projected to be easily absorbed by the market, due to the strong demand.”
“Overall, units carry a higher level of risk than houses and particularly properties that are sold off-the-plan. These carry three types of major risks being Equity Risk, Cash-flow Risk and Settlement Risk,” Mr Peleg said.
“Our research shows that 10,614 new units will be added to the Gold Coast property market over the next 24 months. This represents a small increase and is unlikely to have any significant impact on the market.
“However, Broadbeach, Surfers Paradise, Hope Island and Southport have a larger number of units in the pipeline, and these areas carry a high level of risk.”
Broadbeach, for example, has 1125 units in the pipeline which is an addition of 18 per cent to the existing stock.
Also, small units that are not suited for families carry a higher level of risk, due to the reliance on property investors, as opposed to owner-occupiers (who typically drive demand and prices up).