Gold Coast Not Golden

I am always surprised to read commentary about Gold Coast apartments which is so positive -- when the market is very dead, nothing is selling, and prices are falling for what is selling. For apartments that are holiday rentals, most owners will receive low returns, not enough to cover outgoings. Yet, agents still talk the market up. Here is a more realistic story:

"December 3rd, 2008

GOLD Coast real estate may fall a further 20 per cent over the next year, according to one of the city's leading property forecasters. Author of the Midwood Report Bill Morris said while the Gold Coast's median house price fell by only 3.7 per cent in the September quarter, it marked the start of a long and consistent drop in property values that could last 18 months.

Mr Morris last night told a group of property watchers at a seminar unveiling his November-quarter Queensland Investment report his gloomy projection was based on the skewed correlation between house prices and rental returns.

Mr Morris said that while rental returns languished around 4 per cent, house prices would continue their downward slide. "Because of the increase in house prices over the past five years, which has been about 100 per cent, despite declining demand, it has meant rental returns have gone down significantly and are now unacceptably low," said Mr Morris. "They are currently about 4 per cent gross which is stifling the investment market. Really, 5 per cent is acceptable and to do that you can either increase rents by 20 per cent or have a decrease in house prices by 20 per cent."

Investors would only return to the market once rental returns became more attractive, he said.

Mr Morris's analysis came on the same day that AMP chief economist Shane Oliver also predicted a rough ride for Gold Coast property. Mr Oliver yesterday told The Gold Coast Bulletin he expected property nationwide to fall an average of 10 to 15 per cent, but predicted the Coast may fare worse. "I see coastal locations where people had a holiday home coming under pressure," said Mr Oliver.

Mr Morris expected a market recovery would take 12 to 18 months."

Gold Coast Bulletin