The Future For Growth

“While we stop to think, we often miss our opportunity.”
Publilius Syrus (~100BC)

In recent times the capital city residential property markets have been recording strong levels of property value growth, but this hasn’t necessarily been reflected in those regions outside of the capitals. The performance of some of the major coastal markets has not been as impressive as markets such as Melbourne or Sydney over the past 12 – 18 months.

According to the RP Data-Rismark Home Value Index results for June 2010 capital city property values increased by a total of 10.5% over the year. House values increased by 10.3% and unit values were up 11.4%. That Index release also highlighted that the performance of the housing market outside of the capital cities was significantly different with house values in regional areas increasing by just 5.1% over the 12 months. Generally speaking, property prices in metropolitan areas tend to edge up steadily whilst coastal and regional areas have more of a pattern of ‘spikes’ and ‘troughs’. This ‘concertina effect’ means coastal property prices appear more volatile; however, increases in property values over time are very similar in terms of percentage gains when comparing metropolitan areas to coastal regions.

Over the last 10 years house prices in coastal markets have typically seen strong levels of growth; however, over the last 12 months the performance has been much less impressive. In the majority of instances house prices within these regions have recorded annual growth of less than 10% over the last year. The largest falls have been recorded in: Cairns (-2.7%), Whitsunday (-2.5%) and Fraser Coast (-1.6%) all of which are in Queensland and heavily reliant on tourism and retirees and/or sea changers. Anecdotal reports from areas such as Airlie Beach indicate that buyer demand has significantly dropped back since the relative boom of 2008.

Coastal markets are typically heavily reliant upon tourism and retirees/sea changers to boost their prospects and to create demand and upwards pressure on property prices. The current strong Australian dollar (at a 27 year high) is making it difficult for these regions as holidaying in Australia becomes more expensive for those from overseas and for Australian’s the strong exchange rate makes holidaying abroad significantly more appealing and affordable. The weakness in the tourism sector has the added affect of higher unemployment and fewer tourism related jobs.

Federal and State Government initiatives, in conjunction with local Commerce and Tourism bodies are working hard to promote destinations such as Rainbow Beach and the Fraser Coast in order to increase visitor numbers and improve the bottom line for tourism-reliant business communities. These initiatives include marketing campaigns targeted at domestic and international visitors; highlighting the unique natural attractions of our region.

It is clear that many tourism-reliant towns will continue to struggle as a result of the current economic climate therefore; investing in the promotion of these areas will assist in maintaining and creating jobs within the local tourism industry.

The market for sea changers/retirees has eased since the GFC struck. Many people who were looking to make the move have seen the value of their equity investments as well as their superannuation balances decline and have become more cautious about making the move as a result.

Looking forward, most coastal markets appear to have reached their lows and are now on the improve (Source: RP Data Oct 10). The softness in the tourism sector will temporarily hinder the prospects of significant improvements in most of these markets; however, those coastal markets with more diversified economies or linked with the resources sector are likely to have the strongest capital growth prospects going forward.

Areas such as Rainbow Beach will benefit from mining projects in regions such as Gladstone. Also, many ‘fly-in-fly-out’ mine workers have begun looking further afield for lifestyle investments with property prices in Rainbow Beach representing good value in many cases compared to similar style properties in Noosa, Coolum or Peregian etc.

Property market experts, realestate.com.au, recently released a Consumer Insights Report which showed a huge swing in buyer sentiment compared to this time last year.

Highlights of the report included the following statistics:

• 25% of investors were searching for properties to buy in the $500,000+ price range (up from 16% in April 2009)
• 1 in 2 property seekers now believe the market is rising (a result not observed for more than two years)
• The perceived reasons for growth included a shortage of properties (54% of respondents) and a growing economy (40% of respondents)

The future for coastal property markets such as Rainbow Beach is bright in terms of capital growth. Strategically, the nearby town of Gympie with a current population of approximately 50,000 is geared to grow to 80,000 over the next 20 years (Source: Gympie Times July 10, reference State Treasurer Andrew Fraser). Gympie’s population growth will have positive flow on effects to townships such as Rainbow with an increase in employment opportunities for those wishing to reside here. In addition, there will be increased visitor numbers with many people living in and around Gympie, looking to Rainbow Beach as a weekend destination.