Rainbow Beach Real Estate

Rainbow Beach Real Estate Newsletter December 2011

2011-12-01T22:33:00.000-08:00

"The Supreme Court has ruled that they cannot have a nativity scene in Washington, D.C. This wasn't for any religious reasons. They couldn't find three wise men and a virgin."
Jay Leno.

The team at Cooloola Coast Realty takes great pleasure in welcoming Rieke Doell to the newly established full time position of Holiday Letting Manager. Rieke has been living in Rainbow Beach for the past three years and has a wealth of experience from previously working in Event Management and the Tourism Industry – both in Australia and in Europe.

We wish Kerry Leyland all the best and thank her for her tireless efforts over the past 2+ years in the role of Holiday Letting Manager. We are sure that she will enjoy spending more time with her young son, Kye (who will be off to School before we know it) and her husband, Grant.

Not many more sleeps now until the much anticipated wait is over for Santa to deliver his cheer! Christmas came early for us at Cooloola Coast Realty having enjoyed a fantastic Staff Christmas Party at Arco on the 25th of November. ‘Secret Santa’ gave out some wonderful presents and everyone had a great evening.

Whilst 2011 has proved to be another very challenging year in real estate, Cooloola Coast Realty is in an enviable position to ride out the lows as we have a sizable rent roll including permanent rentals, holiday properties as well as secure storage and parking. With three full-time staff and two owner-operators, we are well positioned to provide unrivalled, professional and experienced property management and real estate sales services to Rainbow Beach.

Over the past three years, Rainbow Beach has gone from having four separate real estate offices to just two. Given that we are a town of only 1,200 permanent residents; two real estate offices is realistically all that is sustainable over the long term.

The volume of residential sales in Rainbow Beach over the past three years has been well below average and coupled with a reduction in property values; this has meant that sales commissions have been down approximately 65% over the past two-three years (compared to the 20 year average).

Essentially, the current state of the economy is putting immense pressure on small (and large business), particularly those that have no association or derive no benefit from the mining boom. We just spent a couple of days in Brisbane and were quite surprised to find that the real estate market there is quite depressed also. Real estate colleagues of ours are reporting significant reductions in sales volumes and there has been a notable increase in Receiver Sales and Mortgagee in Possession sales as well.

Fingers crossed that we get further reductions in interest rates over the next few months and that should relieve some pressure on families and businesses alike.
Now, before you head off out of town for your Christmas break (not that you would want to be anywhere else other than Rainbow! J), just remember – we have a very safe, quiet and low crime rate town BUT you are better to be safe than sorry. So, although Christmas is a time to rejoice, let your hair down and enjoy the company of family and friends; if you are planning to be away from your home over this period we would like to remind you of some holiday security tips:

Keep Christmas trees and presents hidden from outside view

Remove all ladders and climbing objects from around the house

Notify neighbours that you are going away and have them keep an eye on your place whilst you are not there

Leave a light on inside (connecting it to a timer is even better)

Hide all money, jewellery and valuables

Don’t hide a key outside your property or leave notes!
To all past, present and future clients, we would like to take the time to wish everyone a very Merry Christmas and hope that all of you and your loved ones remain safe throughout the Christmas period.

One of the real joys of the festive season is the opportunity to say thank you and wish you the very best for the New Year.

Rainbow Beach Real Estate News November 2011

2011-12-01T22:32:00.001-08:00

"It's just as unpleasant to get more than you bargain for as to get less”
George Bernard Shaw

We weren’t sure whether we should give this article the title “A Dose of Reality” or “The Cracks Are Beginning To Show”…. In the end we decided just to provide some commentary on the current state of the local property market. There has been a significant reduction in sales volumes over the past three years and residential property sales have been extremely difficult to achieve since the slow since the GFC hit in the latter half of 2008.

However, in the past few months there have been a number of sales locally including: Unit 14 at Rainbow Shores Resort, which has been on the market for well over a year and reduced in price several times, has just settled at $155,000. (Settlement date was 3/10/11). Unit 14 is an older style unit (within Baden North) and features high ceilings with exposed beams and included the standard furniture package.

24 Naiad Court, a vacant block of land (1,003m2) within Rainbow Shores Estate is currently Under Contract at $495,000. A comparable block of land on Ibis Court sold for $720,000 at the end of 2008. This is a price difference of -31%.

Unit 49 Rainbow Shores Resort is currently listed at $215,000 including all furniture and chattels. We can report that this unit is now Under Contract at an agreed price of $202,000. In addition, Unit 7 Rainbow Shores Resort has a current list price of $220,000 including all furniture and chattels. These particular units would’ve been appraised at (and similar units sold for) in excess of $250,000 - $290,000 back in 2008.

Comparatively, the Getaway Resort currently has a three bedroom, two bathroom unit with single lock up garage on the market for $220,000. Similar units within the same complex have sold for up to $299,000 even in the past two years.

With regard to units within Resort complexes, most are presented with similar furniture/fittings and have similar (if not identical) floor plans and layouts (within the same complex). The units also have similar overhead/holding costs (ie. Body Corporate Fees and Council Rates) and if holiday let or permanently rented, would be yielding similar rental returns.

Even at the drastically reduced prices to which some properties have fallen, in the current market and tenuous economic climate, potential buyers are few and sales are difficult to achieve. Based on the current information, we have been recommending Vendors either consider reducing the list price of their property or remove the property from sale until the market shows sign of improvement and it becomes viable to achieve their current listed price. ‘

When properties such as 20 Belle Court in Rainbow Shores, (3 storey home with 3 bedrooms, 3 bathrooms, 4 car accommodation) boasting a pool, ocean glimpses, 120 metres walk to the beach on a huge 1,136m2 block) are reduced to $750,000 – that is a pretty clear indication that the market has taken a significant step backwards in terms of value. The same property would’ve easily been appraised in excess of $1million back in late 2008 and even at $750,000 – it may not find a buyer.

Property transactions may well be few and far between in the current climate however, there has been more than required to indicate a trend (as opposed to a succession of ‘anomalies’). Current vendor discounting is at unprecedented levels and even with significantly reduced list prices, some properties simply refuse to be sold.

On a national and international level, new data shows that inflation, rising labor costs and government debt are adding to the slowdown of economic growth (particularly in China which Australia is heavily dependent upon in terms of exports). Several economists in China have recently lowered their growth forecasts for this year and next year to about 8.5 percent, down from earlier forecasts of 9 to 10 percent, while also warning about the possibility of a sharp rise in nonperforming loans at the nation’s big state-owned banks.

Data recently released by the Chinese central bank showed that credit in China had expanded at “alarming levels,” far more than previous government estimates suggested. Credit Suisse downgraded its profit forecasts for Chinese companies and state-owned banks, as it warned of slowing growth for the overall economy. The reports come at a time of heightened concern about slower growth in other parts of the world, including the United States, Europe and Japan.

Back in July, we reported that there were approximately 150 residential properties for sale in Rainbow Beach (this includes houses, units and land). Currently, there are just over 170 residential properties for sale in Rainbow Beach. Based on the average time on the market in Rainbow Beach being well over 12 months now and the number of sales recorded annually over the past three years, it will take more than 15 years for the amount of stock on the market to return to ‘normal’ levels (ie. pre GFC).

The current economic climate has seen a huge increase in the amount of stock on the property market and buyers simply have way too much choice for sellers to avoid having to reduce their asking price in most circumstances. Even when a property presents a unique opportunity/proposition, for example, ocean views or close proximity to the beach; buyers are not necessarily enticed to pay a premium (or what would be considered a premium in today’s market) as there is almost invariably a vendor more motivated to sell at a discounted price in order to secure a sale. Ie. Unless a buyer is completely motivated by emotion in their purchase, they will tend to opt for the ‘cheaper option’ and perhaps compromise on their ‘wants and needs’ in a house when making a decision to purchase a property.

Rainbow Beach Real Estate News October 2011

2011-12-01T22:31:00.001-08:00

"I once wanted to become an atheist, but I gave up - they have no holidays”
Henny Youngman

There has been a minor increase in buyer enquiry over the past 2 – 3 weeks, which has coincided with the warmer weather. However, generally speaking, prospective buyers remain somewhat cautious and have are still adopting the “we’ll just wait and see what happens” approach which is somewhat frustrating.

The media is doing its best to scare the pants off people and if you didn’t believe that the “sky was falling” just spend about 30 minutes watching something like ABC News 24 on any given night and you’ll find yourself worrying about all sorts of possible financial disasters. Both the US and the UK have run out of ideas on how to stimulate their economies and with ridiculously low interest rates, there is very little room for movement in terms of trying to instill confidence in consumers and business.

Our feeling is that although the Australian property market is currently experiencing slow sales and vendors are having to discount their price in order to meet the market – we cannot foresee a full scale price crash. Whilst in overseas property markets (eg across Europe and parts of the US) there have been sharp price falls (over 20%) since the GFC, national property prices in Australia have remained relatively steady.

Being out of step with other housing markets across the world is causing some prospective buyers to be quite nervous. The pessimists among us believe it is only a matter of time before house values plummet here in Australia. But there are a myriad of reasons why they won’t fall significantly any time soon:

Population growth - Whilst it has slowed in recent years, we maintain strong population growth. Our domestic population is aging, but our migrant intake is largely in the 20s to late-30s cohort, which means increasing household formation and greater demand for dwellings down the line. (Source: Micheal Matusik, July 2011)

Prudent lending practices - Our interest rates have room to move downwards and as previously mentioned in this article, many countries do not have this buffer. We also have full recourse loans in Australia, allowing lenders the right to take any assets of the borrowers if repayment is not made. Many overseas markets which experienced a housing crash have non-recourse loans, which essentially allow borrowers to walk away from debt if things get too tough. Quite literally in the US during the latter part of 2008 and early 2009, there was a well-known practice of sending “jingle mail” – which was when the mortgagor would post their house keys to their mortgagee and simply leave their house empty. The bank would then have an asset on their hands which had lost close to half of its value; no one wanted to buy and the person/s who had taken out the loan to buy the property in the first place simply moved out and got on with their lives.

Relatively high equity - Current loan-to-value ratios in Australia are around 53%, reflecting our conservative position towards debt. The long-term average is around 65%. According to the latest official statistics, Australia’s housing debt to housing assets is 29%, and our debt to overall assets is just 19%. So in other words, we, as a nation, own around 70% of our homes – a far cry from the “jingle” loans that typified the US housing market collapse. (Often, mortgages on houses in the US were up to 90% or even 100% of the value of the property).

In addition, household balance sheets are being strengthened by additional savings. We are currently saving 10% of our disposable income, which amounted to a staggering $74 billion last year alone. This improved state of our personal finances further reduces the risk of house prices collapsing as there will be less “fire sales” occurring.

Under supply – Not necessarily for every dwelling type and in every geographic area – but certainly at the bottom third of the market. This helps place a buffer under property values. Due to a range of reasons, mostly political, (ie. cost of new development etc) there is an under supply of basic, affordable housing across our capital cities and now in our major regional centres too.

Economy growth - Whilst many of us would like to earn more money, and some feel poorer today than a few years back, nearly all of us can find work. Housing markets usually crash in conjunction with significant falls in employment levels.

Low unemployment - As long as our unemployment rate stays below 8%, then wholesale falls in property values are very unlikely. It is currently 5.3%. (Source: Australian Bureau of Statistics Aug 11)

Few mortgage defaults - Whilst recent headlines in the media screamed, “Rising mortgage arrears”, the latest figures show just 1.37% of home loans across Australia are 30-days in arrears and 0.54% are three months behind in mortgage payments. The trend is upward, from 1.30% and 0.48% respectively on the previous quarter, but the number of home loans technically in default across Australia is very low.

It certainly pays to take a long-term view. Residential property values – when looking at resale performance rather than simplistic medians – have risen across Queensland by just over 10% each year over the last decade. Over the last five years this has dropped to about a 6% annual gain and during the last 12 months, values have declined slightly by about 1%.

There is little doubt that values are now falling. How far they will continue to fall is unknown but we don’t think it will be anywhere near as far as most property pessimists believe.

Rainbow Beach Real Estate News

2011-08-30T20:13:00.000-07:00

"Genius is one per cent inspiration, ninety-nine per cent perspiration.”
Thomas A. Edison

Well, it is probably stating the obvious that the local property market is quiet at the moment, having seen an average 60% reduction in sales activity over the past 12 months (compared to the previous FY 09/10). There have been a number of local real estate agents close down over the past year and Rainbow Beach itself has gone from four real estate agencies in 2008 to only two today.

LJ Hooker at Cooloola Cove has shut their doors, as has Cooloola Realty at Tin Can Bay. Real estate agents in Gympie are reporting a significant drop in sales enquiry across all price ranges (including the lower range of properties under $350,000). Local retail stores are also doing it tough with shops such as ‘Inferno Pizza’, ‘Tin Can Bay Shoes’, ‘Cooloola Home Video’ closing their doors over the past couple of years.

Generally speaking, our take on the current economic climate is that people are simply holding onto their money and not making any major financial decisions in light of global economic uncertainty. This is despite the fact that as a nation, Australia boasts an extremely robust economy which flies in the face of the generally negative media commentary, consumer uncertainty and volatile share market conditions.

It appears that the negative issues are overwhelming the positive fundamental base of the national economy. We have to remind ourselves that we have a fundamentally strong economy based on solid employment figures and an abundance of natural resources. With our low unemployment, healthy gross domestic product (GDP) growth, relatively low inflation and historically low interest rates, we have a lot to be happy about in terms of our nation’s economic health.

Still, Australian consumers remain uncertain and they are choosing to increase their savings rather than spend up on luxury items including everything from a new TV or fridge up to a new car, boat or house. At a time of global volatility, people are worried that things will get worse before they get better so they are holding onto every spare dollar “just in case”.

Over the last two years, we’ve watched events pan out on the other side of the world that reinforce the importance of managing our own personal debt carefully. Unrest in Greece, tough economic measures in Ireland, and now a so-called austerity budget in Italy are all legacies of the irresponsible use of debt. These issues may involve governments rather than households but the key message remains the same – don’t take on more debt than you can comfortably manage.

It can be hard to comprehend how an entire nation ends up going broke. Yet, that is what some of Europe’s smaller nations have done and they have had to source additional credit to get them through. Thankfully, here in Australia our national debt is at quite manageable levels. Nonetheless the latest Consumer Credit Expectations Survey by credit agency Dun & Bradstreet shows that many households may be facing a debt crisis of their own. (Source: Paul Clitheroe, July 2011)

According to the survey, almost one third of Australians (30%) will struggle to meet their debt repayments over the next three months.
Worryingly, 37% of respondents say they’ll use their credit card to buy something they couldn’t otherwise afford. And 21% expect their household debt will increase over the coming quarter.

The news isn’t all bad though. On the plus side, we’re putting the brakes on new debt. Only 19 per cent of Australians intend to apply for a new home loan, personal loan or credit card over the next three months, down from 33 per cent in June 2009. Among those of us who hold a credit card, only 8 per cent intend to apply for a credit limit increase over the coming quarter.

Mortgage sales fell 3.7 per cent in July, on the back of fears of an interest rate rise and the new carbon tax (which looks certain to become law within the next few months). The Australian Finance Group (AFG) Mortgage Index showed the greatest fall was in Victoria (7.4 per cent), with losses also recorded in NSW (5.9 per cent), Western Australia (5.0 per cent) and Queensland (0.5 per cent).

AFG general manager of sales and operations Mark Hewitt says home borrowers have gone into their shells since the most recent cash rate rise in November 2010. He says the figures show Australians are still worried about their financial future. "Domestic financial news is dominated by talk of rate rises and the carbon tax," Mr Hewitt said in a statement accompanying the index's release on Thursday. "Gloomy international financial news has seen stock markets slump. We're all looking for strong economic leadership to provide the market with some much needed confidence."

The data shows refinancing remains the most active part of the mortgage market, making up 39.1 per cent of loans in July. The proportion of owner-occupiers arranging mortgages to move or upgrade their homes was 11.7 per cent of all mortgages in the month.

We have certainly seen an increase in local property owners looking to sell their home or unit in Rainbow Beach with a view to moving closer to either: Brisbane, the Sunshine Coast, or even Gympie. Many older residents are looking to move closer to medical facilities whilst younger families with teenagers often move out of town to be closer to the children’s high school.

With Year 7 moving to high school in 2013, our local Rainbow Beach State School will only cater for Prep-Year 6 students – which may also have an impact on the longevity of younger families within the town.

The construction of the new Town Hall and Aquatic Centre in Rainbow certainly adds to the level of infrastructure we have access to in our local community however it would be fantastic to see more job opportunities within Rainbow Beach in order for the population to grow and reach the ‘critical mass’ so needed for the town to be sustainable over the long term.

Our natural attractions are what bring visitors to the area and our tourism industry is very much based on our beautiful surroundings (Carlo Sandblow, Carlo Point, Searys Creek, Fraser Island, Sandy Straits, Double Island Point, etc). Ultimately though, there is a need for a static population to sustain businesses such as the grocery stores, cafes/restaurants, real estate, clothing shops, bakeries etc. The town needs growth in order to survive as small businesses cannot continue to struggle from peak period to peak period indefinitely.

Rainbow Beach Real Estate News July 2011

2011-07-08T20:10:00.000-07:00

"Credit should be compared to alcohol whereof constant consumption (usage) on a frequent and regular basis is classified as abuse rather than responsible utilization.”
Rohan Lamprecht

Currently, there are just over 150 residential properties for sale in Rainbow Beach (this includes houses, units and land). You would be forgiven for thinking there is many more than 150 as the popular website: www.realestate.com.au displays over
230 residential listings in Rainbow Beach.

Why is there such a discrepancy you may ask? Well – the main reason is that some individual properties appear on the website 2, 3 or even 4 times; listed with separate real estate agencies. This practice is not uncommon and results from sellers ‘open listing’ their property for sale. Unfortunately, the net result is that Rainbow Beach looks like it has a massive amount of property for sale. (Arguably 150 residential properties is a lot, however, the marketing makes it look like there is almost 50% more than that for sale).

Generally speaking, properties are listed ‘Exclusively’ with an agent in more urban areas and in capital cities. This means that one agency is responsible for the marketing and sale of a property. A property can only remain ‘Exclusive’ with an agency for a maximum period of 60 days before the seller has to resign their ‘Exclusive’ agreement with the agency.

When a seller decides to list their property with more than one agency, they effectively make it more difficult for a buyer to find their property (as their house/unit/land appears to get lost in amongst so many other listings). Issues also arise with the accuracy and consistency of information relating to the properties attributes and in some cases the list price for a property may be different according to different agencies. No single agent is accountable to the seller for marketing or inspection feedback etc and in many cases; buyers perceive that a seller must be “desperate” if they have listed their property with multiple agencies. (Unfortunately, it does not increase the chances of securing a sale by having 4 or 5 ‘For Sale’ signs erected in the front yard).

Traditionally, the local real estate agent/agency is who a prospective buyer will contact if they are looking at purchasing a property in a particular area. Over the past decade, over 90% of local properties have been sold by a local agent. Generally speaking, if a prospective buyer is looking for information regarding properties for sale in town, they do not head to Gympie or Noosa or elsewhere. They contact a local agent to discuss local information which many out of area agents do not have access to or simply do not understand the dynamics of the town.

Anecdotally, we recently visited Cairns and travelled north to Port Douglas (approximately a one hour drive north of Cairns city). We spent the day in Port Douglas and saw a lot of property on the market whilst we were there. There was a nice looking unit just back from the beach and we called the agent off the ‘For Sale’ sign to ask for some more details regarding the property. The agent answered our questions but indicated that he wouldn’t be able to show us through the unit that day as it was a long drive for him from Cairns (2 hour round trip). Unfortunately we have heard the same story from prospective buyers more than once here in Rainbow Beach when they have contacted ‘out of area’ agents who are based in either Gympie or Noosa – or even Brisbane.

Despite the commonly held perception that the property market in Rainbow Beach is DEAD (or at least on life support), there have actually been a few sales over the past month or so. There has been minor movement in the market with properties in the $350,000 - $700,000 bracket going “Under Contract” in recent weeks. Our observation is that the market may see some sales over the next 6 – 12 months however there is no evidence of a recovery in terms of property values/prices.

Recent media coverage showing that there are currently record high numbers of individuals and businesses with money owing to the Australian Taxation Office indicates that the health of the national economy is not great at the moment. It is almost as if there are two separate economies running side by side at present with the mining and resource sector going “great guns” and the rest of us struggling with the increased costs of living including groceries, fuel and electricity. Unfortunately the Gillard Government appears intent on dragging Australia out of deficit by relying on the 10% of the nation who is actually making some money by taxing the heck out of them and their businesses.

So called “luxury items” such as boats, motorbikes, jet skis, horses, etc have plummeted in value over the past couple of years as people look to tighten their belts and chop some expenses out of their budget. Unfortunately, the beach house or unit often comes under the heading “luxury item” and hence, sales have significantly reduced over the past 2 – 3 years since the dreaded GFC hit.

The current economic climate has seen a huge increase in the amount of stock on the property market and buyers simply have way too much choice for sellers to avoid having to reduce their asking price in most circumstances. There will have to be a major take up of excess stock on the market, not just in Rainbow Beach, but across Queensland in order for market conditions to improve significantly.

The Realty Deal June 2011

2011-06-08T22:27:00.001-07:00

“Isn't it interesting that the same people who laugh at science fiction listen to weather forecasts and economists?”
Kelvin Throop III

Capital city home prices have posted their biggest quarterly fall in at least 12 years, as more stock in the housing market allows prospective buyers to wait for bargains, a recent survey by RP Data shows. Capital city dwelling values fell by a seasonally adjusted 2.1 per cent in the first quarter of the year, according to the latest RP Data-Rismark Home Value Index. The quarterly change was the steepest since the index series began in June 1999, (Source: RP Data Research Director Tim Lawless).

Part of the reason for the fall in property values is simply the lack of property transactions over the past 12 – 18 months. (Ie. In many suburbs, ‘higher end’ houses and units have been turning over less often since the GFC hit whilst properties under $400,000 have continued to sell).

Prices were flat in the month of March and down 0.6 per cent over the past 12 months, with the national city dwelling value median price at $455,000. The numbers were being dragged down by a recent rapid build-up of housing stock into the market, Mr Lawless indicated. "The amount of properties being advertised for sale is about 30 per cent higher than what it was last year," Mr Lawless said. With more dwellings available for sale, prospective buyers are negotiating for lower prices much more than they used to. Mr Lawless also explained: "The simple fact that there's so much stock to choose from for prospective buyers is resulting in more negotiation in the markets and sellers are having to sell at lower than what their expectations were”.

Sellers were now selling properties about 6.5 per cent lower than the original asking price on average, compared with about 5.2 per cent the same time last year. (Source: RP Data May 2011). Recent extreme weather events, including the flooding in Queensland, may also be impacting on the lower numbers, Mr Lawless said. "Also, you have the fact that interest rate speculation seems to be building that they're going to be going up sooner rather than later, particularly with the CPI figures out just recently."

We may have managed to get a temporary reprieve on an interest rate rise with recent employment figures not looking as good as hoped (or predicted). Nationally, the tourism industry is suffering from the high Aussie dollar and very poor weather conditions over the summer of 2010/2011. Large scale natural disasters such as the earthquake/s in New Zealand and the earthquake/tsunami in Japan have also impacted on people’s spending habits – both practically and psychologically. (ie. people are generally feeling somewhat nervous and are more likely to hold onto/save their money in times of uncertainty and upheaval).

On a local level, house prices in Rainbow Beach have dropped by up to 20 per cent since the peak of the market in 2007/2008 whilst Tin Can Bay property prices are down approximately 10 per cent. It has also been revealed that Gympie and the Mary Valley haven’t been immune from the slight weakening of the housing sector either. John Logan and Associates Valuer, Blair Fuller, recently indicated that the number of house sales in Gympie had slowed during 2010 and this had led to a slight dip in real estate values, of approximately 10 per cent.

Mr Fuller also indicated that in Gympie, the lower end of the market had been hit harder by the drop in prices while high end executive homes had held their value, “there are a lot of homes under $250,000 on the market at the moment and a lack of buyers. - It is a buyer’s market – no doubt about it.” He also believes that if home owners wanted to sell their properties they would have to meet the market and that unfortunately meant some property owners would have to reduce the price of their properties or risk not selling them.

Many local real estate agents agree with this sentiment and believe that right now is a great time to grab a bargain in the Rainbow Beach/Gympie area and surrounds. Essentially, buyers in this market are price driven and it is a matter of owners meeting that market. If they get an offer, they have to decide whether to act on it or risk maybe having to wait another six to twelve months to sell.

The major banks appear to have reviewed their lending practices and criteria as a result of the Global Financial Crisis and this has also impacted on some prospective buyers’ ability to purchase (particularly for an investment property). Despite evidence to suggest that not everyone is doing great financially in the current economic climate, the resources boom continues to go ‘gangbusters’ and there are plenty of people out there with money – they just don’t appear to be spending it on coastal properties right now!

Locally, the Developers of the Plantation Resort Apartments are looking to liquidate some of their assets within the complex with four of the top quality apartments going to Auction on the Queen’s Birthday long weekend in June (Auction scheduled for Saturday the 11th of June at this stage). With very few property transactions in excess of $500,000 occurring over the past three years; the Auction will provide a good gauge of current buyer sentiment and the level of demand for ‘high end’ units. The Auction will certainly provide an investor a great opportunity to snap up a bargain with the price point expected to be almost half of that which the apartments where originally marketed at off the plan.

Most local property owners recently received their land valuation notices in the mail and generally speaking, most property owners are a bit perplexed as to how the Queensland Valuer-General, Neil Bray, worked out his figures. Most regional land values had increased (on paper) since the last assessment in 2008 yet property owners are not seeing any evidence of an increase in sale prices in the current market. In fact, arguably it is very difficult to justify increases or decreases in current land values based on the lack of sales data from the past two years.

Overall, the first six months of 2011 have seen very little property sales activity on a local level and reduced property transactions across the state. Various events and sentiments have influenced the market during that time; probably most significantly, nature itself. In an article entitled ‘Nature calls the shots’ which appeared in the March 2011 issue of the magazine ‘Smart Property Investment’, the chief economist of AMP, Shane Oliver, predicted that the combined impact of the Queensland floods and Cyclone Yasi will add to inflation across the March and June quarters. He also indicated that the Federal Government’s response of sourcing rebuilding funds from a temporary levy on taxpayers will not increase consumer spending. Such issues will obviously have an impact on the Reserve Bank of Australia’s interest rate decisions over the next couple of months.

Rainbow Realty Deal May 2011

2011-05-04T19:16:00.000-07:00

“Plan for the future, because that is where you are going to spend the rest of your life.”
Mark Twain

Easter has come and gone for another year and most businesses in town are now looking towards the June/July School Holidays for their next cash injection. The past six months have been less than stellar in terms of local tourism and many local businesses are starting to feel the strain.

There are now quite a few permanent rental properties in Rainbow Beach (particularly units) which are vacant as there has been a trend for some renters to move in with one another and share rather than rent on their own. As workers hours are cut back as a result of a lack of visitor numbers to town, many people are no longer in a position to afford the weekly rent without sharing with a friend or co-worker. There has also been some instances where tenants have chosen to leave Rainbow Beach altogether as they simply cannot secure enough work here in town.

In what is sure to be unwelcome news for state and local governments, the 2010-11 financial year looks set to see a drop in property related taxation revenues. Between May 2010 and February 2011 capital city dwelling values have fallen by -1.6% and sales volumes during 2010 were their lowest on an annual basis since 1996. As a result of these current soft conditions we expect that state and local governments will experience a budgetary hole at the end of this financial year due to fewer transactions within the sector which accounts for their greatest source of taxation revenue.

In the 12 months to February, property values in the combined capital cities increased by only 0.8 per cent. Considering inflation last year was 2.7 per cent, properties became more affordable in real terms. Values in Brisbane fell by 5.3 per cent in the year to February - the weakest of any capital. (The median house price in Brisbane is $451,000 and the median unit price is $380,000).

The Australian property market is undergoing a correction but we don't expect a significant drop in values. The reasons for this belief include:

* Nationally we still have a constrained supply of new housing at a time of above-average population growth

* The number of mortgage arrears in southeast Queensland, although higher than most regions in the country, remains very low

* Australia has recourse lending, which means choosing to default on a mortgage can involve losing much more than just the house
* Unemployment is at 5 per cent nationally and 5.6 per cent in Queensland, so most people who want a job, have one

* Wages are growing faster than inflation (3.9 per cent against 2.7 per cent)

Most of the country has a diversified economy that doesn't rely on just a couple of sectors (although tourism, resources and construction industries are very important). Many regional areas of Queensland are somewhat resource-dependent and those that are mainly focussed on resources are generally faring well due to the current strong demand for raw materials. Coastal markets; however, have been underperforming since the beginning of 2008. (Source: The Sunday Mail, 17 April 2011)

There are a number of factors behind this, including:

* A weak tourism sector in general (thanks in the most part to the dreaded GFC)

* A high Australian dollar, which is detrimentally effecting foreign and domestic tourism; and

* A lack of "sea changer" activity, which has historically underpinned areas such as Rainbow Beach

Consumers are extremely cautious at the moment and are paying down debt rather than selling their capital city homes and moving to the coast. Until consumer sentiment improves and/or tourism bounces back, we don't expect a significant recovery in the regional areas. (Source: The Sunday Mail, 17 April 2011)

What will result from the current economic conditions is improved affordability within the property sector. Buyers who have been considering purchasing within popular coastal areas such as Rainbow may have previously been reluctant to commit to a purchase due to the high initial capital outlay. With values falling back anywhere between 10 – 25% over the past three years; there is now an opportunity to purchase a property at a price similar to that of 2005 values.

This situation is not likely to be sustained as the economy improves. Historically Australia has entered a period of recession every seven to nine years. ‘Recoveries’, ‘booms’ and ‘corrections’ have occurred in varying intervals over centuries and it is almost impossible to predict the cycle.

Many forward-thinking individuals are making moves right now to purchase property in the location they are looking to retire in. We have had many experiences recently with prospective purchasers looking to buy a house or unit in Rainbow Beach through their self-managed Superannuation Fund with a view to renting it out over the next 3 – 5 years and then move here permanently themselves. There is an understanding and underlying belief that if they were to wait 5 years prior to purchasing, they may not be able to afford to get into the market at all then.

The key message to prospective buyers is: Act now!
We have a finite amount of useable residential land which will ultimately put upward pressure on prices.

Let's Start Talking About the Recovery

2011-03-06T20:23:00.000-08:00

“Take calculated risks. That is quite different from being rash”
George S. Patton

OK…. enough with the pessimism, the ‘doom and gloom’ and the GFC…. Life is actually not that bad and the sky is not actually about to fall down; despite the predictions of some economists and so called “experts”. There is no doubt that the local property market is very slow at present and much of south-east Queensland (and particularly the Sunshine and Gold Coasts) have had a significant reduction in sales volumes over the past two years.

However, the fundamentals that underpin property values are still there and in many respects – nothing has changed since that fateful day in September 2008 when the ASX took a nose dive. Although, have you noticed that we are back above 5,000 points on the ASX now incidentally?

* Unemployment levels are still relatively low from a historical perspective. In fact, our northerly regional neighbours in the Wide Bay have just recorded a decrease in unemployment rates over the last quarter.

* China’s appetite for our minerals and natural resources appears to be insatiable and this is subsequently producing jobs and stimulating the economy in numerous ways with plenty of money sloshing around central and western parts of Queensland.

The sheer infrastructure and logistics that needs to plug in to a mine site is mind-boggling; from truck drivers, to cooks, to payroll staff… and when we are talking about companies like BHP, Rio Tinto and XStrata dealing with literally billions of dollars in contracts to export minerals and resources offshore – even the guy that peels the potatoes in the kitchen is on pretty good dollars.

We have definitely noticed an increase in ‘fly-in-fly-out’ employees coming to Rainbow Beach (and other coastal communities) and either looking to rent or buy here so that they can have their two weeks off work in a laid back town and enjoy the natural attractions this area has to offer. Without having to commute to work every day – the two weeks on/two weeks off concept lends itself to having workers choose exactly where they want to live; without being constrained by travel distances.

* Interest rates are still historically very low which means the cost of borrowing is also relatively small. This is particularly true for investment properties as any expenses are tax deductible (including interest expenses) as part of negative gearing.

* Property prices in countries such as the United States have fallen dramatically over the past two years with some areas recording a decrease in values of over 30%. The US property market has suffered from an oversupply of housing which was created during the unprecedented boom between 1997 and 2005. Developers constructed hundreds of thousands of homes in an effort to “cash in” on the rising property market during the late 1990s and early 2000s and when the inevitable housing bubble burst – there were simply too many houses and not enough buyers.

Australia, in stark contrast, has a conservatively estimated shortfall of over 50,000 homes nationwide which translates into continued demand. Obviously, this demand is focused mostly towards metropolitan areas; however, the overall number of properties required has not yet been satisfied according to key property experts including Tim Lawless of RP Data.

* The old adage “they’re not making any more land” is relevant to coastal towns such as Rainbow Beach. Surrounded by National Park and bordered by the Pacific Ocean, there is extremely limited scope for growth and expansion. It stands to reason that the more unique and ‘hard to come by’ a commodity is, the more attractive and therefore valuable it is.

* The current economic climate presents an excellent opportunity to “trade up”. Some property owners have worked out that getting a bigger home and upgrading in a slow market can save you money. How? If prices were down 10%, your $500,000 home has dropped $50,000, but if you’re buying an $800,000 place it’s down $80,000. You might be $30,000 better off than if you had traded up during the boom. And right now the lower end prices are strong and the higher end properties are down anywhere up to 20-25%, so for many the trade up equation is even better.

Regardless of economic news the world goes about its business. People are born and people die, couples join and split and the normal demands affecting the real estate market continue. We don’t think the market is on fire but we do think that now is a great time to buy as all the evidence suggests that prices will not get any lower than they are right now.

The Realty Deal January 2011

2011-01-07T19:22:00.000-08:00

“A bank is a place that will lend you money if you can prove that you don't need it”
Bob Hope

We hope everyone had a very happy and safe Christmas and we wish you all a Happy New Year for 2011. We would like to give a special thank you to Andrew Smith, Nick Fitzgerald, Nina Lynch-Doyle and Ray and Val Brown for their efforts in maintaining all areas of their tenancy throughout 2010 and to their landlords for their lovely gifts of acknowledgement.

Kim would also like to thank all those tenants not mentioned, yet no less deserving .... “maybe your turn will be next year”.

Much of 2010 was spent analysing the effects of the global financial crisis and its impact on local property values and subsequently sales. It is difficult to accurately predict the future of residential property values, however, with the evidence at hand it is reasonable to assume that there will be a modest (albeit almost indiscernible) recovery during 2011.

Unfortunately, many coastal towns have suffered significant capital value declines over the past 12 – 24 months as investors who perhaps borrowed more than they should have become ‘unstuck’. With an increase in ‘mortgagee in possession’ sales and a seemingly never-ending supply of desperate vendors; buyers have found themselves in the box seat – being able to drive a hard bargain and negotiate a sale price often well below what would’ve been reasonably considered as a ‘fair price’. The fact is however, the market value of a property is always going to be what someone is prepared to pay for it – even if that figure is below that which a bank or certified Valuer calculates.

Rainbow Beach properties for sale are also competing against hundreds of comparable properties along the east coast of Australia. Houses and units from Airlie Beach in the north to Peregian Springs in the south of Queensland are being advertised at discounted prices often with guaranteed returns and other incentives attached.

Fortunately, we have a point of difference, being our unique location and natural attractions. We may not be able to offer as high a return on investment as metropolitan areas; however, we can boast proven capital growth over time as well as a fantastic lifestyle investment. Rainbow Beach has become a destination in its own right.

There are also a number of indicators that point towards favourable property conditions and increases in property values over time. There has been positive government spending on infrastructure within the south east corner of Queensland (including the upgrade of the Bruce Highway between Cooroy and Curra). In addition there is a significant predicted increase in population of nearby Gympie and the resources boom is gaining more momentum in our region.

Best wishes to everyone for 2011 and we hope that this year brings prosperity to all.



Sea or Tree Change Properties

2010-11-24T17:03:00.000-08:00

“A cynic is just a man who found out when he was about ten that there wasn't any Santa Claus, and he's still upset.”
James Gould Cozzens

Queensland home buyers and property investors are being cautious with their cash with more than a third of sales for houses during the last quarter priced under $350,000. Quarterly median house price figures released recently by the Real Estate Institute of Queensland (REIQ) show that sales of homes priced at less than $350,000 had grown in the September quarter.

At the same time the number of buyers spending up big - more than $2 million - was down, with only 22 transactions. Despite the low number of multi-million-dollar sales, there are still plenty of suburbs in Queensland with a median house price of over $1 million (albeit mostly in Brisbane). Despite an abundance of properties on the market, almost a third of the 145 suburbs in the Brisbane statistical division did not record enough sales to provide the REIQ with a reliable median for the September quarter. (Ten sales are needed to set the median house price). To put that into local prospective; there were only five sales recorded in Rainbow Beach for the July – September quarter.

REIQ managing director Dan Molloy said that whilst sales volumes were down and there were some drops in median house prices over the quarter - the year-on-year picture was much better. Strong performers in Brisbane were mostly suburbs in the middle ring and ‘upgrader’ suburbs such as Warner, Murrumba Downs and North Lakes. Gold Coast median house prices took a dive over the quarter dropping 3% cent to $480,000 but year on year recorded a reasonable 8.5 per cent increase.

Broadbeach Waters and Burleigh Heads took a battering with drops of more than 20 per cent, whilst Surfers Paradise values dropped over the year and quarter. Mr Molloy said that given the current conditions the Gold Coast results were fairly good. "The Gold Coast performance has been held back I guess because of the tourism issues and the Australian dollar," he said.

He also said that whilst there was a lower volume of sales throughout the state, prices seemed to be holding up reasonably well. "There is a lot of stock at the moment and some sellers are obviously having to adjust their expectations in terms of prices. I think what we are going to see is in the next couple of quarters we will start to see these sellers becoming a bit more philosophical (about prices).” Mr Molloy said the September quarter figures were affected by interest rate increases and uncertainty surrounding the outcome of the federal election. There also was an absence of first-home buyers and investors. (Source: Courier Mail 20 November 2010).

Again, to put the local real estate market into perspective; Rainbow Beach currently has 53 houses, 61 units/apartments/duplexes and 20 blocks of land for sale (as at 22 Nov 10). More than half of these properties have been on the market for over 12 months. Our local market has also been affected by the combined negative impacts of the GFC, lower tourism numbers and a general cautiousness from buyers.

In conjunction with this, it seems that the ‘sea change’, has lost some popularity over the past two to three years also due to the GFC and the corresponding coastal property market volatility across the nation. Many retired and sem-retired people are now looking for more of a ‘tree change’. Some of the drivers behind this green change phenomenon include Australia's ageing population, the growth in self-managed super funds and the back-to-basics movement which seems to be regaining popularity.

Baby boomers appear keen to unlock equity in their urban homes or investment properties in order to deliver lifestyle advantages. Recent statistics show that they, on average, have about $500,000 to spend, (which is purchasing less and less in many coastal markets). Hence, buying something inland, by default sometimes, is of increasing appeal.

Also, self-managed superannuation funds are looking for steady returns and ethical investments. Australia's 420,000 self-managed super funds are controlled predominantly by couples in their mid-50s, who are financially literate. Green tourist-orientated developments, with proven track records, appeal to this market segment. If you are considering buying into a green change investment opportunity, and you are looking to maximise resale potential, the following ingredient is important: proven growth in tourist demand. (Source: Michael Matusik, Courier Mail 15 November 2010).

Locations such as Rainbow Beach and the wider Gympie Regional Council area appeal to many people albeit for different reasons. Generally speaking, the area appeals to couples and families enjoying long weekends and empty nesters on longer breaks. Our area can also tap into additional markets, such as conferences and international visitors. Most visitors to our location come from the immediate area or closest major capital city (we actually have a relatively low number of international visitors in comparison to many coastal regions such as Far North Queensland).

Another key strength of our location is the unique natural attractions, which many visitors and property investors are looking for. Features such as a National Park, facilities such as a unique dining experience and/or the nature of the area itself or its surrounds (being either boutique/historic/scenic or all three in nature) also add to the appeal of a coastal or ‘tree change’ location.

Property analyst and expert, Michael Matusik has also cited the following items in a checklist when making a decision to purchase in a ‘sea change’ or ‘tree change’ area:

* buy within 200km of a capital city if possible
* close proximity to an airport
* small, yet functional, nearby town centre
* several visitor activities in the area
* at least one unique point of difference
* known location
* ability to sustain repeat tourism, and
* the ability to accommodate future growth without compromising the integrity of the place itself.

Rainbow Beach actually scores pretty well based on the above checklist in terms of where to invest long term – all we need now is for some realistic optimism to return to the property market.

In closing, Merry Christmas and Happy New Year to all from the team at Cooloola Coast Realty!

The Future For Growth

2010-11-24T17:02:00.000-08:00

“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.

Lifestyle Investments - A Long Term Approach

2010-11-24T16:57:00.001-08:00

"I'm a great believer in luck, and I find the harder I work the more I have of it."
Thomas Jefferson (3rd President of USA. 1743 – 1826)

Over the last three decades Australian house prices have recorded periods of extreme growth contrasted with periods of weakness. With the benefit of time, the peaks and troughs of house price growth tend to even out, with Australian house prices recording an average annual rate of growth of 8.4% (since 1980).

The Australian property market moves in cycles which are influenced by a wide range of factors including unemployment, interest rates, consumer confidence and of course previous rates of growth that impact on rental yields and levels of affordability on the consumer and particularly business investment.

Over the last three decades Australian house prices have increased at the average annual rate of 8.4%. That’s a pretty decent rate of growth when you consider that prices double every ten years based on an annual compounding rate of 7.2%. In comparison, the rate of inflation has averaged about 4.6% over the last 30 years and 3.2% over the last decade.

Of course, there have been some periods where growth rates have well and truly eclipsed this average rate of growth and periods where prices have underperformed.

As an example of one of the weakest periods for Australian house prices, over the five years from 1990 to 1995 the median house price across Australia increased by just 2.8% per annum. The soft market conditions came at a time when Australia was entering the “the recession we had to have” and unemployment raced upwards from 5.8% in January 1990 to peak at 10.9% in December 1992. Mortgage rates during this five year period averaged 11.75% and peaked at 17%. (And we think interest rates are high now!)

At the other end of the spectrum, the most spectacular five year run was recorded during the ‘boom’ which ran from 2001-03 around most areas of Australia. Despite a slowing in growth rates between 2004/05, the five year period ending July 2005 saw average house price growth of 13.9% per annum. In Rainbow Beach itself, house prices went up in the order of 30% within two years – this growth was unsustainable and has since seen a correction with prices receding approximately 10-15% since the peak of late 2007.

Currently the residential housing market is transitioning out of a strong growth phase, whilst economically the country is just starting to ramp up. Gross domestic product figures show the economy is once again growing at about 3.2%, unemployment is trending downwards, consumer confidence remains high and rental yields are showing the first signs of improvement after being eroded by value growth and lower rental rates during 2009. The Reserve Bank is signaling that they may be forced to increase interest rates as a result of strong inflation figures mostly due to the mining resources boom.

In contrast to the broad market drivers outlined above, we can expect there also to be factors that will dampen market demand. Interest rates are likely to increase at least once over the coming six months after increasing by 150 basis points since October last year. Population growth appears to have peaked and will most likely fall further as the proposed cuts to immigration are implemented and housing affordability is likely to become more of an issue in the larger metropolitan markets around Australia.

For prospective buyers it is worthwhile considering the long term trends in the market. The average length of tenure for Australian home owners is about 7.3 years; a time frame that is likely to smooth out the peaks and troughs of price growth encountered through the cycles. The economic and demographic foundations of the market remain solid which suggests that we are likely to see ongoing improvements in Australian house prices, albeit at a much more modest rate than we have seen in the past five years.

The key to success in investing in the residential property market is having a long term approach. Buying and selling property with a quick turn over approach limits the amount of capital growth the investment will realise and also incurs more costs such as sales commission, legal fees and stamp duty etc.

Purchasing an investment property in a coastal or regional area, as opposed to metropolitan areas, requires research and an ability to withstand the volatility of supply and demand cycles. The yield (rental return) is generally lower compared to properties in metropolitan areas due to demographic constraints. Ie. people living in coastal and regional areas are generally on lower incomes than people living in the city or more built up areas.

Advantages of purchasing a ‘lifestyle investment’ include the ability to utilise the property yourself whilst still having the ability to negative gear the asset and claim associated costs as a tax deduction. For example, you may plan your annual family holiday to include a week’s stay at your own beach side house or unit, whilst holiday letting the property for the remainder of the financial year. You could then claim interest expenses, maintenance and upkeep costs etc associated with the property as it is actually a rental property.

The great Australian dream of home ownership extends to a beach house and many families have invested in a coastal property, some as part of a syndicate or combined family purchase in order to reduce the individual cost of the acquisition. This option may work for many investors and allows individuals the opportunity to ‘get into the market’ with a view to potentially moving to the property permanently in the future or buying out the other parties to own the investment property outright.

There are no guarantees in life and that includes the potential gains to be made from investing in property but the statistics from the past three decades certainly point towards the positive when it comes to capital growth – across Australia and in coastal regions such as Rainbow Beach.

Lifestyle Investments - A Long Term Approach

2010-11-24T16:57:00.000-08:00

"I'm a great believer in luck, and I find the harder I work the more I have of it."

Thomas Jefferson (3^rd President of USA. 1743 – 1826)

Over the last three decades Australian house prices have recorded periods of extreme growth contrasted with periods of weakness. With the benefit of time, the peaks and troughs of house price growth tend to even out, with Australian house prices recording an average annual rate of growth of 8.4% (since 1980).

The Australian property market moves in cycles which are influenced by a wide range of factors including unemployment, interest rates, consumer confidence and of course previous rates of growth that impact on rental yields and levels of affordability on the consumer and particularly business investment.

Over the last three decades Australian house prices have increased at the average annual rate of 8.4%. That’s a pretty decent rate of growth when you consider that prices double every ten years based on an annual compounding rate of 7.2%. In comparison, the rate of inflation has averaged about 4.6% over the last 30 years and 3.2% over the last decade.

Of course, there have been some periods where growth rates have well and truly eclipsed this average rate of growth and periods where prices have underperformed.

As an example of one of the weakest periods for Australian house prices, over the five years from 1990 to 1995 the median house price across Australia increased by just 2.8% per annum. The soft market conditions came at a time when Australia was entering the “the recession we had to have” and unemployment raced upwards from 5.8% in January 1990 to peak at 10.9% in December 1992. Mortgage rates during this five year period averaged 11.75% and peaked at 17%. (And we think interest rates are high now!)

At the other end of the spectrum, the most spectacular five year run was recorded during the ‘boom’ which ran from 2001-03 around most areas of Australia. Despite a slowing in growth rates between 2004/05, the five year period ending July 2005 saw average house price growth of 13.9% per annum. In Rainbow Beach itself, house prices went up in the order of 30% within two years – this growth was unsustainable and has since seen a correction with prices receding approximately 10-15% since the peak of late 2007.

Currently the residential housing market is transitioning out of a strong growth phase, whilst economically the country is just starting to ramp up. Gross domestic product figures show the economy is once again growing at about 3.2%, unemployment is trending downwards, consumer confidence remains high and rental yields are showing the first signs of improvement after being eroded by value growth and lower rental rates during 2009. The Reserve Bank is signaling that they may be forced to increase interest rates as a result of strong inflation figures mostly due to the mining resources boom.

In contrast to the broad market drivers outlined above, we can expect there also to be factors that will dampen market demand. Interest rates are likely to increase at least once over the coming six months after increasing by 150 basis points since October last year. Population growth appears to have peaked and will most likely fall further as the proposed cuts to immigration are implemented and housing affordability is likely to become more of an issue in the larger metropolitan markets around Australia.

For prospective buyers it is worthwhile considering the long term trends in the market. The average length of tenure for Australian home owners is about 7.3 years; a time frame that is likely to smooth out the peaks and troughs of price growth encountered through the cycles. The economic and demographic foundations of the market remain solid which suggests that we are likely to see ongoing improvements in Australian house prices, albeit at a much more modest rate than we have seen in the past five years.

The key to success in investing in the residential property market is having a long term approach. Buying and selling property with a quick turn over approach limits the amount of capital growth the investment will realise and also incurs more costs such as sales commission, legal fees and stamp duty etc.

Purchasing an investment property in a coastal or regional area, as opposed to metropolitan areas, requires research and an ability to withstand the volatility of supply and demand cycles. The yield (rental return) is generally lower compared to properties in metropolitan areas due to demographic constraints. Ie. people living in coastal and regional areas are generally on lower incomes than people living in the city or more built up areas.

Advantages of purchasing a ‘lifestyle investment’ include the ability to utilise the property yourself whilst still having the ability to negative gear the asset and claim associated costs as a tax deduction. For example, you may plan your annual family holiday to include a week’s stay at your own beach side house or unit, whilst holiday letting the property for the remainder of the financial year. You could then claim interest expenses, maintenance and upkeep costs etc associated with the property as it is actually a rental property.

The great Australian dream of home ownership extends to a beach house and many families have invested in a coastal property, some as part of a syndicate or combined family purchase in order to reduce the individual cost of the acquisition. This option may work for many investors and allows individuals the opportunity to ‘get into the market’ with a view to potentially moving to the property permanently in the future or buying out the other parties to own the investment property outright.

There are no guarantees in life and that includes the potential gains to be made from investing in property but the statistics from the past three decades certainly point towards the positive when it comes to capital growth – across Australia and in coastal regions such as Rainbow Beach.

Rainbow Beach Property Trends

2010-08-30T23:10:00.000-07:00

"Avoiding danger is not safer in the long run than outright exposure. Life is either a daring adventure, or nothing."
Helen Keller

By the time this month’s Community News hits the streets, we will have a new Priminister elect. The future of our economy will rest on the government’s shoulders fairly and squarely and it will be interesting to see whether or not the winner of the election can get us ‘back in the black’ by 2013 as promised. Hmmmmm….

The national property market could best be described as volatile over the past month or so with housing finance commitments for owner-occupied housing falling 3.9 per cent in June, (almost twice the market forecast of 2 per cent). (Source: The Courier Mail) AMP Capital Investors chief economist Shane Oliver said the fall pointed to an ongoing deterioration of the housing sector."It's basically telling us the housing recovery that we've seen over the last 18 months has come to an end," he said."Going forward we can't rely on housing construction to continue pushing the economy ahead, we're going to be more reliant on the consumer and particularly business investment."

A weakness in housing finance will also continue the weakness we're starting to see in house prices, which was only evident towards the end of June."It's another reason for the Reserve Bank to leave rates on hold," Dr Oliver said. CommSec economist Craig James said the figures, which were now at nine year lows, were "a bit of a concern". "They show continued weakness in the housing market," Mr James said. "In the last couple of months, investors had served to prop up the overall market but that wasn't the case this time around. "It must be starting to come as a concern for the authorities." He said Australia was now seeing "the loss of momentum" in the housing market, with housing finance commitments at nine year lows. "Certainly, the rate hikes that have been applied late last year and early last year are continuing to bite." Weakness in retail spending, the housing market as well as manufacturing services and construction, were now revealing an economy that has "lost its way to some extent," he said.

Australia was still paying for the government stimulus which kicked in late last year, Craig James said. "It brought forward a lot of activity, but unfortunately in 2010 the market just dried up." Mr James said the poor construction finance figures would signal concerns about a lack of demand for projects in the second half of the year.

Many prospective buyers and investors have been sitting on the sidelines over the past 18 months, trying to predict the best time to buy. Often, it is difficult to pick the ‘bottom of the market’ or the exact right time to purchase and the best advice is probably to research the area you are looking to buy in and have a medium to long term strategy of holding the asset.

We have been doing some research on sales volumes and residential property price averages in Rainbow Beach over the past ten years and the trend over that period was quite interesting. There was obvious price growth and an increase in sales volumes during the periods 2002/2003 and again in 2007/2008; however there has been a significant reduction in both sales volumes and median prices since the beginning of 2008.

See the graph below:

These trends coincided with national residential and commercial property growth as well as ‘dips in the market’; most recently being the global financial crisis. Demand for ‘holiday homes’ and properties in coastal regions has decreased since the beginning of 2008 and values have therefore declined in line with that.

There is a clear anomaly in this graph which appears in 2008. The median sale price jumps dramatically due to an abnormally large number of high value units sold (ie. $1 million +) which drove the median price up. This median price line inevitably dropped back to ‘normal’ levels in 2009 as there were no further releases of units such as Rainbow Sea Resort or Plantation Resort. This also confirms our observation that buyer enquiry range remains in the $300,000 to $600,000 bracket.

Based on statistics, in our opinion, now is a great time to buy. Solid capital growth over the past decade is likely to continue and although there has been a correction in the market over the past two years, the long term capital growth prospects for Rainbow Beach are excellent. Surrounded by National Parks and on Fraser Island’s doorstep, yet only 2.5 hours from Brisbane – this is a destination that more and more people are discovering.

Rainbow Beach Property Market Predictions

2010-07-30T16:18:00.000-07:00

“Money can’t buy you happiness, but it can buy you a better form of it.”
A friend of ours

Calculated risk is generally considered to be where you estimate the possibility of failure and then try to define the probability of success versus failure prior to making a decision or undertaking some action. Fundamentally, if there is an element of uncertainty and a lack of guarantees or assurances, the risk of failure is increased but in many cases the potential gains are higher.

There are many investment options available today including shares, options, term deposits, managed funds, property (residential or commercial). Investors can choose to have a defined return by investing their money in vehicles such as term deposits however the disadvantage of this type of investment is that your return is limited to the defined amount.

Generally speaking, ‘safe’ investment options include blue chip shares (such as shares in a major bank) or residential property within 10km of a major city centre. Often, investors make decisions regarding the appeal of an investment based on either the returns (ie. dividends or rental income) or the projected capital growth of the investment.

With specific regard to investing in coastal or regional property; with the exception of residential property in mining towns/regions, the capital growth of the property is likely to be more attractive than the annual return through rental income. Values of coastal and regional properties tend to be more volatile than those within metropolitan areas – hence, the calculated risk approach to investing in these areas. Overall, the best advice for investing in a coastal region is to have a medium to long term approach. There should never be an expectation that you can purchase a beach house one year and sell it for a profit the next.

Property generally goes in cycles and the fluctuations in property values in coastal regions can be significant. A perfect example of value fluctuations in Rainbow Beach is the recent sales of a house on Larapinta Court. The property featured four bedrooms, a renovated bathroom with separate toilet, renovated kitchen and a single lock up garage. This property would’ve been appraised and more than likely achieved a sale price in the low to mid $400’s in late 2007/early 2008. The same house sold last month for $380,000.

Across the nation at present, there is a lot of discussion about the direction of the economy and house prices. Consumer sentiment figures published by Westpac and the Melbourne Institute in July points towards a resurgence in confidence amongst Australians during July. The Index gained 11.1% in July and has remained above 100 points (an index value of 100 is where optimists and pessimist are equally weighted) since June last year. (Source: RPData) Since interest rates started rising in October last year the Index had been trending downwards, however the July result brings the confidence measure back well above the five year average. This is great news for both the real estate and property market as well as retail sales.

The latest figures show that generally speaking, Australians remain reasonably optimistic about the nation’s economic prospects. A stabilisation in interest rates, strong job figures and some improvement in global financial markets are likely to be the main drivers behind the improvement. A separate section of the Consumer Sentiment Index is the ‘Time to Buy a Dwelling Index’ which has also seen a significant improvement during July. This Index recorded a 15.6% jump in July, suggesting that consumers are viewing a residential property purchase much more positively than they have been in recent times. (Source: RPData)

Even though there has been an improvement in the ‘Time to Buy a Dwelling Index,’ Australian’s remain much less optimistic about the real estate market than they were at this time last year. The index is down from a high in early 2008, highlighting the slowdown in market conditions that has been seen over the second quarter of 2010 (the RP Data-Rismark Hedonic Home Value Index showed home value growth has virtually stalled in April and May this year). Looking forward, the consumer mind set with regards to residential property is likely to be largely influenced by the perceived direction of interest rates as well as global economic conditions. The consensus seems to be that interest rates are likely to remain flat for the foreseeable future; however the big test will of course be CPI results which are released at the end of July. The Reserve Bank may be forced to act and raise rates to combat inflation.

Despite this, it is unlikely that we will see consumers viewing the residential property market with the same exuberance as they have previously (ie. late 2007 – early 2008), especially considering that value growth has slowed and the historically low interest rates seen throughout most of 2009 are well and truly behind us.

The banks and other lenders do not appear to be in any hurry to free up credit and this lack of liquidity has certainly affected investor’s ability to pursue opportunities.

From our viewpoint, the local property market has certainly ‘hit the bottom’ and has remained stable since the beginning of 2010. There has not been any evidence of further reductions in values over the course of this year and although we can’t see a property boom in the near future, the future looks positive with steady interest rates predicted and a continued resurgence in the mining sector.

Rainbow Beach Property Price Predictions

2010-06-21T23:00:00.000-07:00

“Statistics: The only science that enables different experts using the same figures to draw different conclusions.”
Evan Esar

Believe it or not, but the average Australian’s annual income is $67,000 (Source: Australian Bureau of Statistics, Household Income and Income Distribution, Australia 2007-08). This figure may appear relatively high however it should be taken into account that there are extremes at either end of the scale. Ie. Personal incomes in excess of $1 million blow the average out and tend to ‘mask’ the lower income earners (less than $30,000 per annum).

There are some financial commentators believe that if house prices are in excess of 4 x the average annual family income, they are considered “unaffordable”. At present, Australian’s median house price is close to 7.5 times the average family income. This is almost twice the sustainable rate and some property data professionals believe it could point to problems over the long term.

In line with these statistics, recent media reports predicting the future of the Australian property market have featured the opinion of Jeremy Grantham. Grantham is the Chairman of the Board of Grantham Mayo Van Otterloo (GMO), a Boston based asset management firm well known among institutional investors, but relatively unknown to retail investors. He is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets.

Grantham has built much of his investing reputation over his long career by correctly identifying speculative market "bubbles" as they were happening and steering clients' assets clear of impending crashes. Grantham avoided investing in Japanese equities and real estate in the late eighties, as well as technology stocks during the internet bubble in the late nineties. (Source: Wikipedia)

Interestingly, in GMO's April 2010 Quarterly newsletter Grantham wrote about the tendency for all “bubbles” to revert to the mean saying “that Australia had an unmistakable housing bubble and that prices would need to come down by 42 per cent to return to the long-term trend…..You cannot possibly miss it."

As an example, he cited the British housing market bubble of 1989. At the time, he said people dismissed the bubble because there was no more rezoning, creating a land shortage and as such, they believed prices would rise forever. "Seven years later, in 1997, they hit the lowest multiple of family income since the record books started in 1945. It's always the same old argument; they are not making any more land". In Australia's case, Mr Grantham described the housing market as a "time bomb" just waiting for interest rates to increase and become impossible to support. Since last October, the Reserve Bank has raised the official cash rate six times. If the Australian housing market did not return to the normal multiple of family income, he said "it will be the first time in history…. sooner or later, the rates will go up and the game is over." Grantham’s opinion reflects that of our own Professor Steven Keen who boldly predicted back in 2007 that Australian property values would decrease in the order of 40%.

The Reserve Bank of Australia (RBA) has downplayed concerns over a house price “bubble” in Australia, but painted a bleak picture for heavily indebted governments (ie. Europe and the USA). RBA deputy governor, Ric Battellino, said at a business function in mid June: “house prices in Australia, relative to income, were reasonable …. people feel that house prices in Australia are quite high and that's quite often because the ratio of house prices to income that are published for Australia tend to focus mainly on prices in the cities, and they are quite elevated." Mr Battellino went on to say: "But, if you look across the whole country, the ratio of house prices to income is not that different from most other countries."
The argument against Grantham and Keen’s logic centres on the fact that there is simply too much demand for housing in Australia for prices to dramatically decrease. Natural population growth and immigration have led to a shortage of housing in many areas and this in turn leads to higher prices. Where there is an inherent oversupply of properties, there have been casualties of the GFC and this has led to situations of too much stock on the market and a lack of demand = lower prices.

Overall, the fundamentals of property values rest on the location and surrounding amenities of the investment itself. Access to public transport, main roads, schooling, shops, sporting/recreational and health facilities will always be important to investors and owner occupiers however the natural surroundings of a property also have an influence on buyers. Whilst the cost of building/construction along with developing land and supplying infrastructure such as power, water and sewage remains relatively high – prices should remain stable despite the dire predictions of some.

Housing undersupply and it's impact on the local property market

2010-06-02T20:47:00.001-07:00

“A budget tells us what we can't afford, but it doesn't keep us from buying it.”
William Feather

For those of you who really like figures and statistics – you will get a kick out of this month’s article. The property market across the board could best be described as a ‘mixed bag’ with Western Australia and Melbourne going gangbusters whilst much of the remainder of the nation is still experiencing a general lack of demand and urgency from buyers. The Rainbow Beach market remains sluggish and although properties are still selling, we are still well below average sales volumes. As stated in our May article, we believe we have hit the bottom of this market cycle – the only question is – how long will the ‘bottom’ last?

National housing finance data recently released showed a further slowdown across the property market. On a seasonally adjusted basis, owner occupier finance commitments for: construction of new dwellings (-7.3%), purchase of new dwellings (-3.2%), purchase of established dwellings (-2.9%) and total owner occupier loans (-3.4%) all recorded falls during March 2010. Over the year to March 2010 only commitments for construction of new dwellings has increased, albeit by only a small percentage, 1.6%. Meanwhile, on an annual basis, finance for the purchase of new dwellings is down -21.7%, finance for established dwellings is down -26.0% and total owner occupier loans are down -23.3%. (Source: RP Data April 2010)

These figures represent the continued effects of the Global Financial Crisis despite an apparent recovery in the resource sector which seems to be taking its’ time in cheering up pessimistic and almost paranoid investors.

Again at the national level, the Federal Government’s National Housing Supply Council recently released their second State of Supply Report. Probably the most important finding of the 228 page document was the estimate that nationally there is a cumulative undersupply of 178,400 dwellings. The greatest undersupply in dwellings was found to be within New South Wales (57,600) and Queensland (56,100). The states with the smallest estimated shortfall in housing were found to be: South Australia (100) and Tasmania (1,000). See the graph below:

Source: RP Data April 2010

This data supports the view that Australia will face a major housing crisis in the very near future and raises the issue of further development as it is needed to meet the demand. Although environmental, community and social needs are important and should always be taken into consideration – it is evident that at some point – a compromise will need to be made.

South-east Queensland’s population is predicted to increase dramatically over the next 5-10 years and beyond through immigration, births and the aging population (ie. People are living longer and the number of births per year is greater than the number of deaths). This will place a huge amount of pressure on both the State Government and Local Councils to provide housing solutions for tens of thousands of Queenslanders. Infrastructure is vital to support this population growth and hand-in-hand with this is providing affordable, residential options for individuals and families are paramount.

What affect these housing undersupply issues will have on our local property market remains to be seen however it is certain that it will have an impact in the medium to long term. The pressure for further development in and around our region will also increase as a result of the resources boom as workers look for housing within a radius of centres such as Gladstone, Rockhampton, Bundaberg and Maryborough.

A light at the end of the tunnel for the Rainbow Beach property market?

2010-05-05T17:40:00.000-07:00

“There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction.”
John F. Kennedy (1917-1963)

The optimistic view of the local property market we expressed in our last article has been backed up by data and comments from experts published throughout last month. Although the last two years has seen a decline in both values and demand, the future looks bright. Unemployment figures are better than expected, interest rates are still historically low and despite dire predictions from so called experts (ie. Professor Steven Keen) the sky has not fallen down and Australia appears to have weathered the GFC relatively well.

As the economy improves, tourism picks up and the resources sector gathers pace, regional markets may start to show a better performance. In cyclical terms, regional markets tend to lag behind the capital cities with demand rippling outwards from the capitals as more buyers seek the relative affordability of regional housing markets.

If that is the case, many of the regional markets around Australia may currently present solid growth opportunities for astute buyers. (Source: RPData April 2010)
On Queensland’s Sunshine Coast, which is the third most populous statistical division in the State after Brisbane and the Gold Coast, house values have increased by just 4.7 per cent per annum over the last five years compared to Brisbane’s annual capital gains of 7.0 per cent. Sunshine Coast values fell by 6.8 percent between March 2008 and May 2009 (peak to trough) and still remain 1.4 per cent below their peak. (Source: RPData April 2010)

In some areas around Australia the number of premium sales remains well below average. These regions are mainly characterised by coastal markets outside the capital cities where conditions remain soft. The number of million dollar plus house and unit sales on The Gold Coast, Sunshine Coast, Tweed Coast and Byron Shire are about 55 per cent lower than what they were in 2007. (Source: RPData April 2010)
For those that can afford the price tag, premium property markets have generally provided stronger capital gains than the broader market place thanks to the inherently tight supply of inner city, coastal and character properties.

Property market experts have indicated that the tourism and holiday home markets have reached the bottom of the cycle and with predicted increases in tourism numbers and ultimately tourism dollars to be spent as the economy recovers, this will lead to an increase in demand for property in ‘tourist centric’ locations such as Rainbow Beach.

As the average Australian realises that the worst of the economic crisis has passed and they inevitably begin to spend again, money will start to flow back into domestic tourism and discretionary purchases such as holiday homes. The Banks appear to have loosened up their lending criteria somewhat with personal and business borrowings marginally easier to get approved now compared to back in mid 2009. Lenders are looking for relatively low-risk investors but at least they are returning calls these days.

Overall, the signs look to be pointing towards an imminent recovery in the local property market. Although recent sales indicate prices are still approximately 10% below the peak of 07/08, demand should increase over the next 12-18 months. We’re not saying there’s a boom on the horizon but we are confident that we’ve seen the bottom of this market cycle.

Rainbow Beach Property Market Predictions

2010-03-27T21:41:00.000-07:00

“Interest rates are going to go up because employment is going to go up. If employment goes up, then our apartments get filled. And if employment goes up, our office buildings get filled. The reality is that increased economic activity combined with increased interest rates is basically bullish for real estate.”
Sam Zell

Ok, so this month we’re going to (figuratively) go out on a limb and suggest that we think their might be a light at the end of this tunnel and that we should probably be seeing it soon. What we are referring to by the term ‘tunnel’ is the significant reduction in both sales volumes and values within Rainbow Beach over the past 2 years. Since the first quarter of 2008, Rainbow Beach has had less than half the amount of sales that would normally be recorded (based on the average from 2001). For example - the number of sales in both 2008 and 2009 combined was only 75% ofthe total number of sales for the entire 2007 calendar year.

From the sales figures, it can be extrapolated that the past two calendar years have seen a significant downturn in the local property market and this has seen an increased number of properties on the market for extended periods.

The reduction in sales volumes in Rainbow Beach coincided with the Global Financial Crisis and the fallout was that those in the higher income earning demographic reined in spending and became much more conservative with their financial decisions. This was coupled with the fact that some holiday house/unit owners made the decision to sell their property in order to become less exposed to debt. This led to the lethal combination of high stock levels and lower buyer demand.

Based on recent national economic data, both consumer and business confidence levels are on the rise. For the property market these are positive signs. High levels of confidence generally translate to higher levels of market activity as more consumers are willing to make such a high commitment decision as purchasing a property.

Many coastal and regional areas have generally seen stronger price growth during the last ten years thanks to mining and resource booms coupled with the fact that their prices have come from a very low base.

The mining and resources boom looks set to continue so we would expect that many of the existing areas plus new ones which will undoubtedly evolve will continue to have a solid capital growth. “In ten years time we’d also expect that given our growing population which is heavily centralised, areas closer to major capital cities will probably fare much better in terms of price growth than they have during the last decade.” (Source: RP Date Property Pulse 19 March 2010)

Plans for mining projects in the Galilee Basin (western Queensland near Emerald/Barcaldine) include major infrastructure and expansion including the construction of additional rail lines as well as jobs for thousands for workers over the next 10-20 years and this will have a flow on effect for the rest of Queensland.

Low unemployment levels and higher median incomes means more discretionary spending which is good news for luxury car and boat dealers as well as real estate in coastal and regional areas. Once people are confident that their income is secure, lifestyle purchases go back on the agenda and the economy in general moves back onto an even keel. We aren’t there yet, but all the signs indicate that we’re heading in the right direction!

Based on the table displaying sales volumes in Rainbow Beach over the past decade, historical evidence proves that a significant number of properties can change hands over the course of any given year. On average, 96 properties have sold in Rainbow Beach each calendar year since 2001 and there is no doubt that there will be a return to these figures. The high number of sales over the period 2002/2003 seemingly came without warning and this will happen again. So, if you are a buyer sitting on the sidelines waiting for the perfect time to buy …. don’t wait too long or you might just miss your opportunity.

March Update - Proposed Developments for Rainbow Beach and Surrounds

2010-02-25T16:59:00.000-08:00

“It's tangible, it's solid, it's beautiful. It's artistic, from my standpoint, and
I just love real estate.”
Donald Trump

The month of February saw plenty of visitors still heading to Rainbow and taking advantage of the off peak rates on accommodation. Even in the busiest of weeks, you can still find your own patch of beach but it is especially unique at this time of year when you can often walk for over an hour along the shoreline and see either one or two people or no one at all. There aren’t many beaches in the world that you can say that about.

There has been some discussion regarding future development and progress in the region and much of that has centred around the proposed Tin Can Bay Marina, upgrade of facilities at Camp Kerr and Rainbow Shores Stage Two. Issues relating to development have always been contentious and those effecting our community are no different.

The State Government (specifically the Department of Environment and Resource Management or DERM) has decided to suspend work on the Inskip Point Master Plan until a final decision has been made on the Rainbow Shores Stage Two development. This will hold up any major infrastructure in the area for up to two years or more.

On August 17, 2009, DERM instructed Gympie Regional Council to refuse the Rainbow Shores Stage Two material change of use application, effectively halting the development. However, Rainbow Shores Pty Ltd has appealed the decision and the case will now be heard in the Land and Environment Court in early April.

The Gympie Regional Council appears to back development in and around Rainbow Beach, with Councillor Larry Friske agreeing that everything is basically on hold at Rainbow Beach at the moment. “We would like too to see some more land opened up at Rainbow, whether it is Krauchi’s land or someone else’s,” Councillor Friske said. He went on to say “There is not a lot of opportunity for growth there at the moment”.
Without going into the specifics, there does not appear to be many other options for growth in Rainbow Beach aside from Rainbow Shores Pty Ltd development lease. As previously stated in our Realty Deal articles, the prospect of no future growth or development in town is not necessarily a good thing. Not good for local businesses and not good for the youth in our community either.

On a separate issue, there was standing room only when the Australian Army addressed local construction industry representatives and sub-contractors on opportunities offered by the $60 million upgrade of the facilities at Camp Kerr near Tin Can Bay.
Department of Defence officials reportedly spoke about the project and supplied local building contractors, and companies capable of delivering packages, with what they needed to tender for jobs and what the work would entail.

The $60 million upgrade is purported to provide a variety of training areas and ranges to support the Army’s 7th Brigade which is currently based at Enoggera in Brisbane. This does not represent sufficient funding to move Army units from Brisbane to Camp Kerr.

Many locals are still wondering what Woolworths knows that the rest of us don’t ….. why is it that a huge company would sink $15 million into a shopping centre built on $2.7 million worth of land with less than 6000 customers in a 25 kilometre radius? Hmmm…..

February 2010 Community News Article - New Development

2010-01-25T14:23:00.000-08:00

“Genius is one percent inspiration and ninety-nine percent perspiration.”
Thomas Edison

The Christmas holidays certainly proved to be busy as usual and we had plenty of visitors and guests looking at property and considering a holiday home of their own. It is sometimes the case that people expect the rental returns on a holiday property to be higher than what is realistically attainable and as we always say “if a holiday house by the beach paid for itself – everyone would have one.”

Overall, the Rainbow Beach property market remains steady with existing homes and units from $250,000 - $750,000 generally representing good value when compared to vacant land. Generally speaking, a “typical” three bedroom, two bathroom house within 10 minutes walk of the beach will sell for between $450,000 - $600,000 (this doesn’t include properties within 300 metres of the beach). Conversely, a block of vacant land with similar proximity to the beach might be worth anywhere from $300,000 - $400,000. With current building costs, the construction of a new home will generally cost between $250,000 and $350,000 (depending on materials utilised and the standard of fixtures and fittings). In saying that - many prospective buyers prefer the option of a “blank canvas” in order for them to make their own choice on design and layout.

Beyond Rainbow Beach and across the nation, media reports are pointing towards a recovery and even “mini booms” in certain property markets -particularly in metropolitan areas such as Melbourne and Brisbane. Often there is significant “lag time” for these trends to hit coastal and regional areas and this accounts for the sometimes considerably steep upturns and downturns that affect many beachside towns and rural areas over time.

Without trying to necessarily predict the future, we feel that the local property market is likely to experience a slow recovery throughout 2010 with prices having stabilised since the “lowlights” of the latter part of 2008 and the first half of 2009. Prices should firm up across all sectors but we are not likely to see significant value increases or strong demand for property until 2011/2012.

In terms of future development and new stock to the market, Rainbow Shores will see construction begin on the Bluewater Lodges in March this year. The site will have 36 three bedroom, two bathroom, single carport lodges within a complex which will incorporate a 20 metre lap pool, outdoor spa and professionally equipped gym. Stage One prices start from $465,000 with an average price of $495,000 – which is really a niche price point in the unit/townhouse market within Rainbow Beach. (At present, there are affordable units within both the Rainbow Shores and Getaway Resorts where you can purchase a one bedroom unit for less than $200,000, a two bedroom unit for less than $250,000 or a three bedroom unit for less than $300,000. At the other end of the scale are the Plantation, Rainbow Sea and Ocean Palms Resort where the entry level is closer to $800,000.)

Construction on the Bluewater Lodges complex will provide a boost to the local economy and many local businesses will benefit either directly or indirectly through the employment of local tradesman, or the opportunity to accommodate, entertain and cater for those that are working on the site.

January 2010 Community News Article

2010-01-03T00:34:00.000-08:00

Quote of the month:
“The future, according to some scientists, will be exactly like the past, only far more expensive.”

John Sladek

Phew…. Christmas is over for another year! By the time this Community News hits the streets we will have braved the mayhem of Christmas and Boxing Day as well as the revelry of New Years Eve. We hope everyone thoroughly enjoyed the festive season and didn’t get too caught up in the traffic jams of the main street during such a busy time.

This month we would like to recognise some of our most valuable tenants. The backbone of most real estate businesses is in its permanent rent roll and thanks to our Permanent Rental Manager, Kim McIlroy – Cooloola Coast Realty - Rainbow Beach has a solid permanent rental portfolio.

Kim has assessed all of our tenants against a set of criteria including rental arrears, harmonious relationships with neighbours, maintenance of the property, etc and she has identified a number who have gone above and beyond their responsibilities in terms of their rental agreement.

A few of our tenants were recognised this month by their property owners for exceptional conduct of tenancy in the property they reside in. There was a tough decision to make as we have so many good tenants. After careful deliberation, we arranged for the top three to be awarded with gifts to show our appreciation as well as the appreciation of the property owners.

Just prior to Christmas, the following tenants were presented with gifts provided by the property owners in recognition of their excellent tenancy:

First prize went to Chrissy & Henry Fleming as well as Kaylah Fallo. Second prize was awarded to Byron Rush and third prize went to Kathy Beer and Michael Greenbury.

Congratulations to these tenants and thank you to all our landlords who entrust us with the management of their asset.

In other Rainbow Beach real estate news, enquiry levels for residential sales have increased over the past two months and the prospects for a return to more ‘normal’ sales volumes (based on the 20 year average for Rainbow Beach) are looking positive. Prices have steadied and are still down from the peak of late 2007/early 2008 however values have held throughout 2009.

Rainbow Beach Property Update December 2009

2009-11-22T15:25:00.000-08:00

Rainbow Beach Property Update

“Real estate is at the core of almost every business, and it's certainly at the core of most people's wealth. In order to build your wealth and improve your business smarts, you need to know about real estate.”
Donald Trump, Think Like A Billionaire

There has arguably never been a better time to buy in Rainbow Beach. With the (generally speaking) over-inflated market of late 2007/early 2008 long gone, we are now looking at good value across all sectors of the property market from units to established houses. Vacant land appears to have held its value more so than both units and houses with blocks recently selling for prices similar prices to those that were achieved by comparable properties in early 2008.

Property prices in coastal and regional areas have tended to bear the brunt of the correction in values, mostly due to the absence of confidence by investors. Many punters close to retirement age felt the pain of the share market losses last year and reeled in their discretionary spending on luxury items, ie. flash car/big boat/holiday house at the beach.

Conservative thinking will always err on the side of caution and when financial experts are warning us about the banks tightening their lending criteria and the likes of Professor Keen predicting property values will fall up to 40% across the nation – you need to have a bit of self confidence and rational thought to move forward with your plan of buying an investment property outside of a metropolitan area.

Rainbow Beach will benefit from the growth of nearby regional centres such as Gympie – which is expanding at an unprecedented rate and is also encouraging big business into town. (The recent opening of Harvey Norman is a good indication of where Gympie is headed in terms of growth). Our close proximity to such a centre allows us to benefit from the strong fundamentals of the South East Queensland residential property market overall. Ie. Our current population growth is increasing at the fastest rate of any urban region in Australia, there is a large deficiency of housing stock in relation to demand and State Government infrastructure improvements are underway or planned for the near future. A good example of the last point is the upgrade of the Bruce Highway between Brisbane and Gympie which will cut travel time for all those ‘city slickers’ who come and visit us on weekends. (Whom we welcome with open arms incidentally!)

According to the Department of Infrastructure and Planning, “Queensland is attracting strong population growth and increased by 97,957 people from 2007 to 2008, to reach a population of 4.3 million. This represents an increase of around 1,900 people per week and an annual growth rate of 2.3 percent. This is a huge change from 10 years ago when the population was growing by 66,000 per annum.” Many of the state’s new residents moved to Queensland for the climate and many relocated due to work opportunities. These are the people that will drive the property market onwards and upwards in all areas of the state and particularly in regions which represent value to investors (either through rental returns or future capital gains).
We believe this population growth coupled with an aging population and strong growth in the mining industry position Rainbow Beach for very strong capital growth. Not only will it become more popular as a destination it is sure to benefit financially. In terms of investing in Rainbow Beach for future capital gains you would have to consider it a ‘no brainer’.

The expectations of buyers haven’t changed – they are still looking for a great house at a bargain price whilst sellers “don’t want to give away” their property. The fundamentals of the market don’t change – regardless of the economic climate. The current state of the residential property market in Rainbow Beach still sees an oversupply of stock and relatively low demand however this is beginning to change with more genuine enquiry and commitment over the past couple of months. Since late September, there has been a return to “normal” sales volumes (based on a 20 year average). This is mostly a result of increased confidence from buyers combined with realistic expectations from sellers.

Whilst the local real estate market is likely to take a breather as interest rates rise, once home buyers and investors realise the rises will be relatively moderate, further growth can be expected. So if you’re sitting on the sidelines waiting for the perfect opportunity to buy – you’ll probably miss it.

Rainbow Beach Property Report

2009-10-26T02:43:00.000-07:00

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.

Rainbow Beach Development

2009-09-27T00:38:00.000-07:00

It used to be that you could commit to an idea, engage the experience of experts and move forward with a plan. Now it appears that all you have to do to stop a project that you don’t agree with is to imply that there’s been some sort of corruption or political deception involved and all of a sudden there’s a media circus and everyone involved is tarred with the proverbial rotten egg brush.

Even those who consider themselves fence-sitters or genuinely couldn’t care less whether or not Rainbow Shores Stage Two goes ahead should have an opinion on the events of the past few weeks. A volley of emails and letters have appeared in local and national newspapers and Rainbow Beach has made the six o’clock news more than once of late.

Amidst the backdrop of the: ‘he said/she said’, personal vendettas, environmental concerns, ulterior motives and fundamentalist anti-development lobbyists – there has been absolutely zero community consultation. No Master Plan, no presentation of facts and no opportunity for those most affected by the proposed development to voice their opinion: either for or against.

With the State Government’s current financial position best described as ‘dire’ at present, one would think that any proposal providing: jobs, infrastructure and ultimately revenue raising through Stamp Duty and Rates, should be given more than a just a cursory once-over.

To announce that Rainbow Shores Stage Two will not proceed on the basis of environmental conservation is a smoke screen. The Government has been on the back foot for weeks over allegations of corruption and ‘mates doing deals for mates’ behind closed doors. To deny a community of future growth to get yourself out of political trouble is just as unjust and unethical as attempting to circumvent due process by using ‘connections with power and influence’.

We might live in a small town, but we’re not all small-minded. It appears to be both coincidental and hypocritical for the Government to reject a development on the basis of environmental concerns when; less than 100km away they are planning a dam which will detrimentally effect the native habitat of the Mary River cod, Queensland lungfish and the Mary River turtle. The dam - incidentally, is planned to supply to water to the ever-expanding development of other parts of south-east Queensland.

For Rainbow Beach to survive there must be some scope for growth. Our population of just over 1000 permanent residents is largely dependent upon the success of local business. The vast majority of these businesses rely upon visitors to the town to support their income stream. If Rainbow Beach is to see no future development or growth, many of these businesses will recognise that their bottom line is likely to recede than improve over time as there will be no opportunity to expand or make progress.

Any new development should meet the strictest of environmental and conservation guidelines as it is vital for us to protect of our native flora and fauna. After all, our natural surroundings are what draw thousands of visitors every year to our region. It would be irresponsible and short-sighted to allow unsustainable development to occur in such a pristine environment. Given that Rainbow Shores Stage One has proven to be both ecologically and environmentally friendly, the precedence has been set that we can achieve a ‘win-win’ with developers.

Considered discussion between stakeholders armed with all the facts -should result in a rational, well-thought out decision based on statistical data and credible evidence. (Not knee-jerk press releases based on media hype and opinion poll pressure).The people of Rainbow Beach deserve to know these facts as well and be given the opportunity to understand both the benefits and disadvantages of any future development.