Rainbow Beach Property Report

The property market (and economics in general), operates under a basic system of supply and demand. It’s not complicated; however, it does tend to fluctuate on a reliably irregular basis, particularly in geographic areas outside of the metropolitan centres (and even more so in coastal zones where discretionary assets such as holiday homes are vulnerable to the demand and supply phenomenon).

Residential real estate has been a strong asset performer over centuries and it is in times like these, when the local property market is relatively quiet and somewhat lackluster, that there are some serious opportunities to take advantage of. Head of property research at RPData, Tim Lawless, recently stated that “popular coastal markets are still much more affordable than they once were”.

Without being overly pessimistic, we do need to present the facts as they are – and be warned – its’ not all pretty. From a regional perspective, the Fraser Coast has not sailed through the economic downturn unscathed and many developers have been left ‘high and dry’ with stock still available from projects completed in 2007 and 2008. As they say, “it’s only when the tide goes out that you get to see who’s been swimming naked”.

Herron Todd White (the largest independent property valuation and advisory group in Australia) recently reported on the state of the market for Bundaberg and Hervey Bay (most relevant to Rainbow Beach and surrounds: “Coastal units in the town of Bargara have been the most affected. Market values for units rose significantly and peaked in and around early 2008. Since then, values have fallen steadily to current levels. This has been compounded by a couple of factors, namely a current oversupply combined with low demand. There are in excess of 100 units currently listed for sale, with isolated receiver and mortgagee sales. Most unit sales recorded in 2009 have been below original purchase prices, some up to 15-20% below. It is considered a buyers market at present….”

The report goes on to discuss Hervey Bay specifically: “Current demand appears to be static with only limited sales occurring at a slow/sporadic pace. …. Another large apartment complex positioned along the Esplanade also completed in 2007, has struggled to offload stock to date. …. Statistics reveal only 18 have sold from a total of 40 units (45%) since completion two years ago, with only one of these sales occurring in 2008 and none to date this year. Older unit developments are also bearing the brunt of slower sales activity and are competing with new stock, forcing vendors to reduce asking prices to achieve a sale.”

Given the grim facts from our nearby neighbours, we can hardly expect that our local property market could “buck the trend” and avoid the fallout of the global financial crisis by maintaining values with such a significant reduction in demand from buyers. Our stunning surrounds and unique location provide us with a small a safety net in terms of value (ie. Buyers will always see the long term benefits of purchasing in such a pristine and exclusive area) however, with the recent announcement that Rainbow Shores Stage II will not proceed – the consequences present a double edged sword.

Ultimately, if there is to be no substantial future development in Rainbow Beach – this makes the existing properties more unique and arguably more valuable. But – and it’s a pretty big BUT – well researched and discerning investors recognise that ‘no future development’ = no future. No additional infrastructure, jobs or economic growth = no scope for significant capital growth.

Overall, the factors required to return us to a steady property market are: buyer confidence and less stock for sale. The number of properties listed for sale in Rainbow Beach is still at an historical high and without the buyers to absorb that level of stock, the current level of sales volumes are likely to continue as buyers sit back and wait for the bottom of the market (which, quite frankly, no one can ever accurately pick ….. :-))

The worst does appear to be behind us with a number of recent sales and genuine buyer enquiries increasing since mid-September. Generally, buyers are recognising that there are many properties listed for sale that represent good value in the current market. Properties that are listed at a realistic price have been receiving legitimate interest and offers to purchase by well-researched home-hunters who are acutely aware that this ‘buyer’s market’ will not continue indefinitely.