More than $570 million worth of units sold at Surfers Paradise in 2013, making it the No. 1 region in Australia by gross value.
On Monday, another 100 properties go to auction through Ray White at its annual auction showcase.
But before you join the ranks of those investors colloquially described as the FOMOs (fear of missing outs), it is worth taking a closer look at exactly what a Gold Coast real estate investment is and where you should buy.
Colliers International’s Tony Holland has an honest take on residential investments in the area.
“The Gold Coast is not purely about yield and capital growth – it’s about a lifestyle choice,” he says.
“You compensate the lack of yield with the lifestyle benefit.”
Most agents, valuers and marketers accept that chasing yield on the Gold Coast is probably lower on the checklist than chasing capital growth and lifestyle.
At the brand-new apartment tower Synergy at Broadbeach, CBRE’s Chris Litfin estimates that a two-bedroom, two-bathroom apartment could deliver its investor a net yield of as much as 4.4 per cent.
Harmony, an apartment development in Runaway Bay, which is being sold on behalf of a mortgagee in possession, could bring in a 3.7 per cent net yield.
“Many apartments in brand-new projects on the Gold Coast offer rental returns that are higher than some of the fixed-interest products being offered by banks,” Litfin says.
THE PITFALLS: VALUATIONS, PROPERTY MANAGEMENT
However, there can be pitfalls in getting trustworthy property managers to handle the holiday bookings, and there are also a few issues regarding accurate, realistic valuations.
Peter Cooper of Cooper Financial Connections, who advises on responsible borrowing for everything from businesses to property investments, warns about getting the right valuation before signing a contract.
“It is probably not a bad time to buy on the Gold Coast, but I think the bigger issue is the valuers,” he says.
“It is a bit of a lottery on what the bank is going to value it at, so if you have signed a contract for $400,000 and the bank values it at $380,000 (and is only lending 80 per cent), then you suddenly have to find more equity.”
He advises spending money on a valuation before the bank does its own, so you know where you stand.
Gold Coast director of national valuation firm Herron Todd White, Todd Gillespie, explains how the discrepancy occurs.
“Think about the commission the marketers get on selling the apartment. It’s often about $10,000, but it can be as much as $30,000,” he says.
“So people out in the marketplace think valuers just take off the marketing cost from the price to get a real valuation, but we don’t. We actually looking at what the value is for other similar established housing, including adding back any depreciation.
“This is how we value them and people have to double-check this.”
The problem is not as big an issue when the market is on the way up. But where exactly are values on the Gold Coast, and where are they heading?
‘I THINK THE CYCLE IS DEFINITELY TURNING’
According to RP Data-Rismark’s Home Value Index, Gold Coast home values followed the lead of Brisbane – increasing by 2.2 per cent throughout 2013.
But this increase was driven by a 2.2 per cent rise in house values, as opposed to a 0.1 per cent annual fall in unit values.
RP Data’s senior research analyst, Cameron Kusher, has run the numbers and estimates that house values on the Gold Coast are still 14.1 per cent lower than their previous peak, while units are 16.4 per cent lower.
“With home values having fallen by so far and underperforming for so long, it’s no wonder that conditions across the Gold Coast are slowly beginning to improve,” Kusher says.
Gold Coast veteran Gordon Douglas has been assessing the market for 30 years and says prices, especially for houses, are still very attractive in what is a cyclical market.
“You can still buy a waterfront home for under $1 million and beachfront property is still down 40 per cent from its highs. I think the cycle is definitely turning and I think it will be a long steady haul back.”
He says apartments are still good value, but not as good as a few years ago.
The Soul and Oracle projects at Surfers Paradise and Broadbeach respectively have cleared through most of the distressed stock – the two projects are in receivership and strong campaigns have been run.
CBRE’s Litfin says the Gold Coast is also still a value market for southern buyers.
“The Gold Coast property market offers property that is in reach for interstate buyers struggling with their own local market entry price and who are nervous about entering their local market at what they feel is late in the cycle.”
But some say apartments on the Gold Coast do not share the same growth potential as houses.
Investor Philippe Bache says he only buys houses there and “won’t touch apartments”.
“The apartments went at crazy prices,” he says. “Buying houses and townhouses means you are actually catering for the people who live there . . . the apartments are more reliant on tourism.”
By Jayden Vecchio Google+