Rainbow Realty Deal - August 2012

“As you walk down the fairway of life you must smell the roses, for you only get to play one round.” Ben Hogan


We are hoping it is the beginning of a trend - since writing our last article, we have had another three properties go ‘under contract’. We have seen a noticeable increase in buyer enquiry over the past 2-3 months and although there is still an underlying sense of caution from prospective purchasers, there are some investors who believe that now is the time to buy. The Mortgagee in Possession Auctions on Saturday the 7th of July for both Unit 2/7 Ocean View Parade and Unit 10/5 Ocean View Parade (Rainbow Sea Resort) were attended by over 50 people. There were two registered bidders at both of these Auctions and after a slow start and a Vendor bid, both properties were passed in. The Bank has subsequently listed the properties at $840,000 and $775,000 respectively.


These prices represent unbelievable value given that Unit 2/7 Ocean View Parade originally sold for $1.95 million (in 2008) and Unit 10 Rainbow Sea Resort sold for $1.1 million (in 2006). Unfortunately, the theory that a property is worth what it’s “replacement value” is (ie. what it would cost to purchase the land and rebuild the property) is fundamentally flawed. Property values all across the nation have been decreasing in value since 2008 – and in some areas up to 30% or 40% in the past three years alone. Meanwhile, the cost of labor and construction materials have increased dramatically due to increased global demand for timber, steel and concrete. It would be great if there were a direct correlation between replacement cost and market value as that theory alone would’ve held property prices firm over the past four years. There is generally much better value in purchasing an existing property with its entire infrastructure; (eg. swimming pools, fencing, driveways, etc) rather than buying a vacant block of land and building a house or unit/s from ground zero.


The two Auctions scheduled for Units 12 and 14 in the Ocean Palms Resort did not go ahead as there were no registered bidders. The Vendor for both of these units is keen to meet the market and is open to offers on his gorgeous properties with panoramic ocean views. The high end of the market is not necessarily dead in Rainbow Beach with an executive home on the ocean side of Cooloola Drive going ‘under contract’ in July. The property has been marketed by a Noosa-based agent for over two years and was listed by us at Cooloola Coast Realty in April this year. There are certainly some buyers in the market that are ‘cashed up’ and ready to make a purchase. There is also emerging evidence that Rainbow Beach is considered as reasonable value in comparison to areas further south on the Sunshine Coast; particularly in Noosa and Sunshine Beach etc. Generally speaking; a modern, four bedroom home with ocean views and a pool in Noosa would sell for in excess of $3 – 4 million. The same property in Rainbow Beach is unlikely to break the $2 million mark in the current market. Property is certainly looking like the lesser of two evils at the moment if you are looking for an investment.

An increasing number of Australian investors are regarding residential property as a relatively stable investment option in light of ongoing turbulence across local and global equity markets. Over the first six months of this year, the Australian share market has experienced some extreme fluctuations driven in part by instability in Europe, softening growth in China's economy and lingering negative consumer sentiment. Whilst the Australian property market as a whole has seen stagnant or depressed growth this year, values have not fluctuated to the extremes or lows that many shareholders of listed companies have endured, and as such, many investors may now be looking closely at buying opportunities in the property market. With high stock levels, generally depressed value growth and many buyers reluctant to commit to a purchase - market conditions continue to favour purchasers. Whilst many investors may be seeking out property opportunities in this market, it is important to remember that property should be viewed as a long term investment.


Also, it is worth noting that despite the softening of property values; buyers should not necessarily expect that a vendor is ‘desperate’ to sell. There are some absolute bargains to be had out there – but don’t assume that every seller is willing to accept a rock bottom price. Our best advice is to research the local property market yourself: speak to the experts (ie. local Real estate agents, Property managers, Solicitors and Valuers); take note of past sales (often available from websites such as realestate.com); make your own assessment of a property’s current market value; and make an offer accordingly. The last thing you want to do as a purchaser is to offend the vendor as this can make any negotiation more difficult and you may miss out on a great opportunity. Our last piece of advice for prospective buyers is to make sure you have spoken with your Lender/Bank regarding your investment intentions before you get into a price negotiation to ensure they are happy to give you the green light when it comes to a property purchase.


In general news, we were absolutely shocked last month when two of our holiday properties were broken into and TVs stolen. We became aware of the first incident whilst doing a spot check of one of the properties and noticed that the large, flat screen TV was missing. We checked with the property owners to make sure they hadn’t removed the TV for any reason (hoping they’d taken it to their permanent residence to watch Qld beat the blues in the State of Origin for example ); but – alas – they had no idea where the TV was. We reported the theft to our local police and they investigated. Less than a week later, another property was found minus a TV! By this stage, we were devastated. We have lived in Rainbow for over 4 years and have never been concerned about petty theft or crime of any kind. Anyway, the great news is – our local police have since found the culprit and the TVs have been returned to their rightful place. A massive thank you to our local ‘boys in blue’ for their excellent police work!! It is very much appreciated. And….. let that be a lesson to anyone who thinks it is ok to steal other people’s stuff! You will get caught. A small town like ours should pride itself on its low crime rate.