After sitting on the sidelines for two years watching home prices plummet, Rina Poke bought her ninth investment property in Australia’s Gold Coast for A$121,000 ($110,388), beating another buyer after a frantic round of bidding.
“This is definitely the time to buy,” Poke, a 44-year-old sales manager at World Gym in the Gold Coast suburb of Ashmore, said after the auction on Aug. 8 at which 16 properties were offered. “Interest rates are at an all-time low, it’s the bottom of the market and prices are on their way up.”
Buyers are finding bargains along Gold Coast’s 43-mile, high-rise-dominated resort strip, where home values have plunged as much as 50 percent in some parts since 2010 and the median price is a third below Sydney’s. Prices in the area known for its surfing beaches rose 0.8 percent in the 12 months through June, compared with 3.8 percent across Australia’s biggest cities, according to researcher RP Data.
“This has been a property crash in its truest sense, but we’ve been seeing some signals that the market is finally bottoming out,” said Louis Christopher, managing director of Sydney-based data firm SQM Research Pty. “But it’s early days.”
The Reserve Bank of Australia’s 2.25 percentage points of interest rate cuts since November 2011 pushed variable home-loan rates to the lowest since September 2009. The record-low 2.5 percent benchmark rate contributed to a 7 percent jump in home prices in the biggest cities in August since a May 2012 bottom, according to Brisbane-based RP Data.
Helping Gold Coast home prices is the city’s tourism-driven economy, which is recovering as a 16 percent drop in the Australian dollar between April and August encourages more people to vacation at home. The number of local visitors rose 10 percent in the year to March 31, according to Queensland state’s tourism agency.
That’s driving a recovery in jobs, with the unemployment rate in Gold Coast falling to 5.7 percent as of June 30 from 6.6 percent 18 months earlier, state government data show.
Home prices could rise by as much as 10 percent in the next two years as demand increases, according to forecasts from Sydney-based researcher Australian Property Monitors and realtors Ray White Surfers Paradise and Crown Realty International.
Prices in Australia’s major cities are climbing, rising 7 percent in Sydney, 4.3 percent in Melbourne and 2.5 percent in Brisbane, the Queensland capital about 100 kilometers (62 miles) north of Gold Coast, in August from a year earlier, according to RP Data.
Housing affordability in Australia has improved over the past two years with the proportion of Australians’ income required to meet mortgage repayments at 28.7 percent, the lowest level in a decade, the Real Estate Institute of Australia said in a statement on its website yesterday.
Buyers from other parts of the country are drawn by the area’s cheaper prices, said John Newlands, Gold Coast spokesman for the Real Estate Institute of Queensland and principal at Professionals Newlands Real Estate.
“Earlier last year there was no one at open houses,” Newlands said. “Now we’re getting a bit more traction, with three to five groups showing up. And at auctions, we’re seeing multiple bidders, and even price duels,” particularly for lower-priced apartments, he said.
Gold Coast’s A$370,000 median apartment price as of June 30 compares with A$491,845 in Sydney and A$411,714 in Melbourne, according to Australian Property Monitors.
“My husband and I are always looking for a good buy in terms of location and price,” Poke said, adding that similar properties to the one she bought, in the complex where she lives, sold for almost A$200,000 in 2009. “It’s all about pre-empting booms.”
Gold Coast, proclaimed a city in 1959, benefited from Australia’s rapid post-World War II economic expansion, with domestic and international tourists and migrants flocking to its beaches and warm climate. It’s now the nation’s sixth-largest city, with a population of 538,300, according to the Australian Bureau of Statistics.
The city has ridden real estate booms and busts since the 1940s. Apartment developments surged in the 1950s and the first high-rise residential building, the 10-story Kinkabool, was constructed in 1959. With its cracked-tile stairwells and graffiti in the suburb of Surfers Paradise, it has been overshadowed by gleaming towers that have sprouted since the 1970s.
The boom continued into the 1980s driven by Japanese investment, the upgrade of the city’s airport and the advent of theme parks. Property values grew virtually unabated from March 1987, when RP Data began keeping records, until the slump that followed the collapse of Lehman Brothers Holdings Inc. in 2008, the researcher said. The decline was more drastic and prolonged than the rest of the country as the fallout from the strong local currency and an oversupply of high-end homes planned during boom times ravaged property values.
One of the biggest casualties of that crash was the 77-floor opulent beachfront apartment tower Soul. Receivers PricewaterhouseCoopers last year took over the building, the second-tallest on the Gold Coast, from closely held developer Juniper Group after buyers who had pre-committed to purchase apartments backed out as property values plunged.
“Developers had an increasing focus on high-end, owner-occupier units,” Cameron Kusher, senior research analyst at RP Data, wrote in an e-mailed response to questions. “The stock overhang was much larger in the Gold Coast than in most other areas of the country.”
While prices across Australia also fell, shortages of homes in Sydney and strong demand in Perth, driven by Australia’s mining investment boom, kept declines in check.
Prices in the nation’s biggest cities slipped about 7 percent from a peak about three years ago to a trough in September, according to SQM. In Gold Coast, they slumped an average 25 percent from the height of the market in January 2010, SQM figures show. Some areas had declines of as much as 50 percent and are still falling, SQM’s Christopher said.
Now, a lack of new supply will support a recovery in prices, said Tony Holland, director of residential project marketing at broker Colliers International.
“We haven’t seen any significant new construction or project activity for over three years,” Holland said in a telephone interview. “In the last 12 years, we’ve not had fewer places for sale or fewer apartments on the market than we do now.”
Fewer apartments on the market hasn’t kept sales from climbing. Unit sales rose for a fifth consecutive quarter in the first three months of 2013 to the highest level in three years, jumping 26 percent from the previous quarter and 78 percent from a year earlier, figures from Colliers show.
Gold Coast’s city council is considering a proposal to remove height restrictions for new towers in some of its most central areas, news.com.au website reported yesterday.
The number of inquiries have tripled from a year ago, driven by low interest rates and bargain-seeking inter-state buyers, Andrew Bell, principal at the Ray White Group realtors in Surfers Paradise, said in an interview before the auction held by the broker.
Heimo Eberhardt, 66, has been on the hunt for properties on the Gold Coast for the past six months and said demand has quickly strengthened for those priced below A$500,000. So he’s moved on to more expensive ones.
“People are desperate to get into the lower end of the market, and that’s where the competition is now,” Eberhardt, who already owns two apartments on the Gold Coast, said at the auction.
At Q1, the world’s tallest residential tower until it was overtaken by the Torch in Dubai in 2011, one-bedroom apartments that were priced in the high A$200,000 range late last year are now selling for more than A$300,000, said Luke Vaughan, managing partner at Crown Realty, who markets most of the building’s apartments.
Inquiries have jumped 50 percent from a year ago and sales are up to about three transactions a month from an average of one a month in the past three years.
Some of the most expensive three-bedroom homes on the 60th floor and above, with sweeping views of the Pacific Ocean from all windows, are still offered at about 25 percent less than their previous prices, he said.
A full recovery is still some time away, and while “strong, single-digit growth” is possible, it’s unlikely in the next year, Vaughan said. “We’re finding the bottom and there are some great deals to be had, but not all areas of the market have experienced the bottom.”
To contact the reporter on this story: Nichola Saminather in Sydney at firstname.lastname@example.org