What happens when property values correct

This is an extract from an RP Data newsletter article, titled "What Happens When Australian Property Values Correct":

"... Another more recent example is Brisbane where values have been consolidating since the start of the GFC. Prior to the GFC the market peaked during Feb-08 and between this time and Jan-11 property values in the city have fallen by a total of -0.8%. The market recorded a slight rally during 2009 and early 2010 however, this is likely the result of aggressive interest rate cuts and the First Home Owner’s Grant Boost. Since Apr-10 property values in Brisbane have fallen by -4.7%. (See chart)

...

The proponents of a massive property price crash will potentially point to the Noosa Heads market in Queensland. Much like Sydney, Brisbane and Perth, Noosa Heads in recent years has recorded periods of capital growth well in excess of national averages. Also the market is almost entirely reliant on retirees, ‘sea changers’ and the tourism sector, none of these sectors are currently particularly active. Median house prices in Noosa Heads as at Dec-10 were -16.2% below their peak recorded in Aug-08. The unit market has fared even worse, median prices as at Dec-10 were -24.4% below their Feb-07 peak.

Whether you believe property prices will continue to grow, tank or flat-line, it is clear that you must be cautious when buying into markets which have had periods of surging property values and have yet to see a period of subdued growth or price falls (a correction).

Due to factors such as an ongoing demand/supply imbalances, a strong banking sector, low unemployment and improving economic conditions we don’t anticipate collapsing prices., However it is clear, based on the above examples that growth phases are often followed by a consolidation in values. Over time the combination of inflation, rising wages, rental increases and little or no value growth is likely to result in the property market once again becoming an appealing purchasing prospect. As the examples highlight, in some instances this may take a number of years as wages and rental yields catch up with the surge in home values and confidence in the market gradually returns."

Noosa

Story from this weekend's Courier Mail: Noosa Mansions Going Cheap

Extract: "AS FAR as top-end real estate goes, these are rich pickings - Noosa's property market is brimming with luxury bargains due to an oversupply of stock and undersupply of buyers.

As pressure mounts on sellers some under siege from banks prices of homes in the iconic playground for the rich and famous have dropped.

Prominent agent Tom Offermann said that for "those with confidence" this was a defining moment. "You can buy well and reap the rewards," he said. "Stock is up 20 per cent on normal levels, buyers are down about 30 per cent and there's good value."

Mr Offermann said the reason behind the downward shift was that Noosa had a high concentration of "discretionary properties" holiday and investment homes that people looked to dispose of in uncertain times. However, he said the area coped better than other hotspots and would bounce back faster.

Mr Offermann's agency recently sold a duplex apartment at 2/11 Mitti St, Little Cove, for $2.015 million for sellers who had acquired it in 2006 for $2.43 million a reduction of 17 per cent.

A stunning waterfront unit in Las Rias on Noosa Sound is listed at $1.95 million 22 per cent below the 2008 value of $2.5 million."

Receivers Move into Outrigger Noosa apartment development

Another Noosa property development has collapsed. This time, it is the Viridian Noosa Resort & Spa. This is a resort, in the hills behind Noosa, that had 198 apartments. Less than 40 were sold in four years -- leaving a massive 160 unsold.

This is not a surprise. The development was not in a great location, a walk up the hill from Hastings Street. The pool area is unimpressive. Most of the rooms look at an internal driveway, or scrublands. No ocean views here. See this review. The price was about $550,000 to $700,000 for a one bedroom apartment with no view.

Viridian is managed by Outrigger, and was developed by Leighton and Macquarie.

Other recently failed Noosa projects include: Elysium Noosa, Noosa Sanctury, Noosa Northshore, Noosa Beach Road (selling well below list price) and Noosa Firstlight. See SmartCompany.

Ice Cream Lickers Are Back

"THEY are usually like a thorn in the flesh of real estate agents but this summer the "ice-cream lickers" are responsible for the early stages of a recovery in the holiday home market.

Real estate agents describe holidaymakers who inspect properties after looking at the advertisements in the windows of real estate agencies, yet rarely follow through with a purchase, as "ice-cream lickers".

Agents are reporting that it is these interested parties who are snapping up the bargain-priced homes in beach locations along the east coast. ...

Exclusive destinations such as Palm Beach, in Sydney's north, and Noosa, north of Brisbane, had also reported more interest.

Real estate agent Marcus Bengtsson at Tom Offermann Real Estate in Noosa said there were "absolutely" more inquiries this year compared with last year. "People come up here and fall in love with it," he said.

"It might be on their first visit or the second (that they decide to buy a property). They look at the local property magazines while lying by the pool."

Joe Buchanan of Firstlight International -- the offshoot of private equity player Blue Sky Capital -- said he now had 30 names on a reserve list for those wishing to acquire a share of the company's yet-to-be-developed luxury beachfront apartments on Noosa's Hastings Street.

Up to eight of the 20 units will be priced between $12m and $16m for individual ownership, while the remainder will be co-owned. "Over the Christmas holiday period, we have maybe had eight to 10 inquiries," he said.

While property prices in some holiday destinations have recently staged a recovery, they have fallen in price by about 10 per cent since the start of the global financial crisis, defying the trend of a stronger housing recovery in state capitals.

APM economist Matthew Bell said that in Queensland and NSW during December, prices were still not back to the levels they were during the boom more than two years ago, despite rising between 1 and 3.5 percentage points during the past six months.

Hotel and resorts analyst Dean Dransfield of Dransfield Hotels & Resorts said securing sales from holidaymakers could be challenging. "You have to call in bankers (and such people) and that type of work people don't want to do on holiday," Mr Dransfield said." Source: The Australian

Noosa Luxury Development

Firstlight Noosa, on Hastings Street.

• 20 apartments
• oceanfront
• priced between $12M and $16M
• timeshares start at $1.5M for six weeks.
• Seahaven Resort to be demonished.
  

The Australian

Blue Sky Capital

Project Website

Top End Not Looking Good

"Discounting by more than 20 per cent is commonplace for some top Gold Coast addresses and many houses and apartments are yet to sell. A property owned by the bankrupt entrepreneur Matthew Perrin sold on Albatross Avenue, in Mermaid Beach, in May for $2.75m after it was purchased for $4.375m in October 2005.

Former Sydney Swans footballer and founder of tourism group Breakfree, Tony Smith, sold his Hedges Avenue house at Mermaid Beach for $28m to IT entrepreneur Daniel Tzvetkoff - less than half the expected $60m. Now the half-finished mansion Mr Tzvetkoff purchased is to be sold after his company BT Projects was placed in administration.

Other prestige properties around the country are set to sell at sharp discounts, with many vendors shaving millions of dollars off the asking price."

See The Australian, photos and chart
The chart shows that people lost money in New Farm, Coronation Drive, Paddington, Hamilton, Hastings Street in Noosa and the Gold Coast.

"The sort of prices that were being paid were not sustainable and now we are back at 2001 and 2002 prices," Mr Fatouros said. He estimated prestige home prices have fallen about 25 per cent from their peak, with another a decrease of 10 per cent to go.

"I don't think we have seen the bottom yet," he said.

But one Gold Coast agent, who declined to be named, said there were more mortgagee sales to come. "The banks don't want to flood the market with pressured sales and are hoping for some recovery in prices," he said.

"They are drip-feeding properties on to the market."

The Australian

Noosa

Terry Ryder, a real estate commentator, had an interesting article in The Australian on Thursday about investing in Noosa.

"The apartment market has done even worse, delivering growth averaging less than 2 per cent a year. The median unit price for the Noosa region today is lower than four years ago. This kind of subnormal performance is common among popular seachange locations -- contrary to the widely held belief that the Gold Coast and Byron Bay are great places to invest in real estate. They may be lovely places to live but that's a different matter. Investors want an affordable entry price, good income returns and high capital growth -- and they're unlikely to find any of the above in these markets."

Housing Prices Hold Up

"Of course it's not good news at the top of the market, but despite all the attention given to Mosman, Toorak, Peppermint Grove and Noosa, that's only a small fraction of total Australian housing and doesn't matter very much in the overall economic scheme of things."

The Age

Resort Corp

Resort Corp, which is developing the Quay West Noosa Resort, has gone bust.

The Australian

Coastal Apartment or Working Class House?

"There are few more iconic sea-change destinations than the Gold Coast, which has earned a reputation as the king of population growth in Australia.

But it's a long way short of being the king of capital growth.

Capital growth on the Gold Coast over the past five years has been half that achieved next door in downmarket Logan City, according to Real Estate Institute of Queensland figures.

The Moreton Bay region, a municipality that encompasses cheap mortgage-belt suburbs in Brisbane's north, has achieved considerably higher capital growth than the Sunshine Coast next door.

Within the Sunshine Coast municipality, the market leaders on capital growth are the railway towns in the hinterland (such as Beerwah and Landsborough), not the sexy coastal locations Noosa and Mooloolaba."

See Terry Ryder

From India to Noosa

See this article in The Statemen of India.