The Gold Coast property market is enjoying a resurgent outlook, propelled by economic growth, infrastructure spending and relative affordability. It is not a market, however, for the faint-hearted. There are still many property owners licking their wounds from the last downturn, and potential owner occupiers and property investors need to have a thorough understanding of the city: its demographics, economy and property market, if they want to successfully invest here.
WHAT’S DRIVING GROWTH IN THE GOLD COAST PROPERTY MARKET?
The Gold Coast has rebounded strongly from its post-GFC hangover. It is creating more jobs than Brisbane, and is forecast to create another 35,000 jobs in the next 5 years. Tourism and construction – two important but cyclical industries for the coast, are surging again. While I always expect a level of volatility in the economy here, there are reasons to be optimistic for more stability in the future, for both owner occupying and property investment. These include:
Critical Mass - The Gold Coast has now reached sufficient size to offer the economic diversity, services, connectivity and cultural activities of a major city. This includes high-level health and business services, a major international airport, shopping and restaurants and sporting teams in Australia’s football codes. Having achieved this threshold, I expect growth on the Gold Coast to accelerate, as more people see the city as a viable alternative to Australia’s capital cities. As workplace trends continue evolving, and more knowledge based jobs and businesses can operate outside of traditional CBDs, the lifestyle, connectivity and relative affordability of the Gold Coast should continue to attract growth.
Relative Affordability - Compared to Greater Sydney and Greater Melbourne, the Gold Coast has a significant affordability advantage. The Gold Coast’s median price to household income ratio for houses is 5.13 and only 3.4 for units, compared to Melbourne’s 7.22 and 4.91, and Sydney’s staggering 8.6 and 5.84.
But these factors alone won’t ensure the success of those investing in property here. To make an informed decision, we need to fully understand the city’s unique nature and peculiarities.
UNDERSTANDING THE CITY
From sand dunes in the 1950s, the Gold Coast has developed into Australia’s sixth largest city, with a population over 550,000 and a growth rate well above the country’s average. It is an upstart city – newer, brasher and trashier, and it is different from our capital cities in a number of important ways:
As a percentage the Gold Coast has more people over the age of 50, and commensurately less people under the age of 40? Why? Obviously it’s a great place to retire, but it’s also because many of the main industry sectors here – retail, food and beverages, accommodation, health & aged care – tend to create more casual, flexible employment, which is less suited to families and more to singles and couples living without children. There are also less high-paying professional jobs, due to the limited number of public sector jobs and large private-sector employers. As a result, household sizes are lower, and renting and sharing of housing more prevalent.
The Gold Coast is also not a traditional city in its layout. It has two ‘CBDs’, Southport and Robina, neither of which serve as the kind of CBD you’d expect in Sydney, Melbourne or Brisbane. The population is decentralized and spread along a 60km north-south axis. While the Light Rail is a welcome addition, the Gold Coast is in no sense a public transport city – indeed it is the most car-dependent city in Australia.
Understanding these differences is important if you're going to make a successful property investment on the Gold Coast, as they substantially shape the current and future demand for property.
WHAT DOES IT MEAN FOR THE GOLD COAST PROPERTY MARKET?
What’s Happening Now?
We are seeing strong demand for traditional detached housing in established suburbs on the coast, along the M1 spine and in vicinity of Southport and the new Parkwood medical precinct. Demand is mainly in the 400-600K price point – the most competitive given the lower family incomes on the coast. Houses with multiple living areas and bathrooms are renting at very attractive yields, and the market outlook for property investment in this asset class remains strong.
Demand for units – particularly 3 Bed 2 Bath Townhouses, is intense, especially on the southern end of the coast and in established suburbs with low supply, such as Ashmore and Cararra. Again, properties that have the capacity to share are in demand – there is much lower demand for 1 bedroom apartments for example, as they are too expensive on a single income.
The Gold Coast city plan is focused on releasing new land in the northern growth corridor (Coomera-Ormeau), and on increasing density around the major centres (Southport, Robina), along the beachfront from Surfers Paradise to Burleigh Heads, and along major transport routes, particularly the light rail. This will lead to a lot of new medium to high density supply in these areas. The remaining areas are zoned to retain their lower density, suburban feel.
I’d make the following general recommendations for those considering a long-term property acquisition on the Gold Coast:
Stay close to the suburb’s median price. This is, by definition, where the majority of transactions are occurring, and if you go too far above it, you can get caught in the event of a market downturn. This is particularly true of the Gold Coast, which doesn’t have the public service incomes to prop it up in bad economic times.
Don’t buy in property investment-heavy areas or ‘lifestyle’ precincts. This includes the best known beachside suburbs of the coast - Surfers Paradise and Broadbeach – both of which have low levels of owner-occupier demand and are frequently oversupplied with rental stock. Expensive lifestyle properties catering to wealthy retirees have also seen big losses for investors; this market is simply too fickle for a sensible investor.
Stick to flexible properties in established, more suburban areas. This is where the real owner-occupier and long-term rental demand is, and according to the city plan, where the future supply (and competition to your investment) isn’t.
So don’t be seduced by the idea of buying a holiday rental investment or an exotic property type catering to a niche market. The Gold Coast’s promising market outlook should deliver solid capital growth and strong rental returns for investors in the future, but it will only be for those prepared to do their research and buy the right kind of property in the right area.
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(Banner Image Courtesy of the Gold Coast Tourism Corporation)