Challenging Conditions

The Gold Coast is often a very good barometer of how the residential market is travelling in South East Queensland.  It holds many people’s dreams and the lustre of living and working in one of the nation’s more popular playgrounds holds a lot of appeal.  It has also attracted a significant proportion of southern investment money as owners pre-planned their holidays, retirement or simply enjoyed the opportunities of geographically diversifying their portfolio.

However, in 2010 the wheels fell off the residential market.  Certainly not in price which remained relatively stable, but in volumes.  When agents claimed that last year was one of the toughest they have encountered, the record shows that land sales were the worst in two decades.  And whilst many have short memories and only think of the good times from the last decade, the following years need to be taken into consideration;

• 1991 – Paul Keating’s recession we had to have;

• 1997 – The Asian financial crisis;

• 2000 – The Tech wreck combined with the introduction of the GST;

• 2008 – The GFC.

So with all those events behind us, 2010 comes along and produces a year where one would think that the GFC had only just begun.  The reality is that the stimulus that was added to the market in 2009 was so effective that the pull forward in buyers did impact the following year.  Combined with this looming perfect storm was the decline in interstate migration.  The Gold Coast has always been a healthy recipient of interstate migration and when this starts to fall, so do the number of sales.  The other contributing factor that any retailer will unhappily bemoan is the high Australian Dollar.  Tourism and construction represent two of the largest employers for the Gold Coast and both have been severely battered for two of the last three years.

In 1991, the Aussie Dollar was worth $0.78 USD, in 1997 it was $0.74 USD, in 2000 it was $0.58 USD and in 2008 it was $0.85 USD.  For much of 2010 and 2011, the Australian dollar has been hovering around parity, despite various world economic shocks.  So when you compare the major economic events of the past, the Aussie Dollar has somewhat insulated the Gold Coast market.  The GFC being on such a wide scale has meant that many international travellers (those residing in other parts of the world that can afford to travel) are looking to cheaper destinations…and that applies to our own countrymen as well.  Australians are travelling overseas in record numbers as a result of the strength of our currency and generally settled employment conditions.

So whilst the land market has been badly interrupted, the sale of $1m plus house properties has only fallen back to levels somewhere between 2004-2005.  This was a market that did not benefit from any government stimulation measures, suffered at the hands of margin calls and was effectively devalued to the point where the market recognised what fair value was/is.  It is hard to imagine the top end declining much more given that the pain has been more evenly spread over the past three years.  It would be remiss of me not to state the obvious, but 2007 does highlight what happens when money is easily borrowed and confidence runs at all time highs.  In real terms this a bubble that popped, particularly in terms of volumes.  Ask any agent that made their living in this market segment.

The point to all of the above is that the Gold Coast is one of the most diversified residential markets in Queensland.  It appeals to the first home buyer right through to the retiree with their 50 foot boat moored to the pontoon at the back of their house.  There is quite literally something for everyone…and it is for this reason that the Gold Coast will be an important indicator as to the strength of the rebound in residential property in Queensland.