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Gold Coast, Sunshine Coast rents rise after exodus of sea-changers from capital cities: Domain Rent Report

Gold Coast and Sunshine Coast rents rise 2
South-east Queensland’s hottest coastal hubs could be on the brink of a rental property bidding war after median asking prices rose to record heights late last year – outstripping Brisbane by as much as $60 per week.

Following a mass exodus of sea-changers from the nation’s major capital cities, demand for houses on both the Sunshine Coast and Gold Coast skyrocketed over the three months leading up to December, sparking price rises of almost four per cent in just three months as vacancy rates continued to plummet.

The median asking rent price for a house on the Gold Coast is now $540 per week, up 3.8 per cent in the December quarter, with the Sunshine Coast sitting just behind at $530, up 3.9 per cent, the latest Domain Rent Report shows.

Meanwhile, the median asking rent for a house in Brisbane is now $480 per week – making the Queensland capital more affordable than its smaller coastal neighbours.

While ongoing restrictions and higher COVID-19 case numbers in Sydney and Melbourne had fuelled the sea-change trend and thrust the city’s property markets into the stratosphere, the global rise of remote working had also sparked the mass migration, Domain senior research analyst Nicola Powell said.

“It has happened before at particular times where we’ve seen stronger rent prices on the Sunshine Coast and Gold Coast than Brisbane – but I think when you show the added dynamics of what the pandemic has created it’s really interesting,” Dr Powell said.

“Those coastal areas are now in high demand … and with our ability to work from home (it’s even higher).”

Sunshine Coast unit rents recorded their steepest annual gain since mid-2009 to $430 a week, and house rents had their steepest gain since 2014, with lifestyle locations in increasing demand from local travellers and remote workers, she said.

“In terms of rental performance, the Gold Coast and the Sunshine Coast are really similar … over the past five years, rent prices for houses on the Sunshine Coast rose 16.1 per cent while houses on the Gold Coast rose by 15.2 per cent. They really outperformed Brisbane,” she said.

“And unit rent prices on the Gold Coast rose by 17.1 per cent and by 19.4 per cent on the Sunshine Coast. The vacancy rate for the Gold Coast was 0.6 per cent in December 2020, compared to 1.9 per cent in 2019 – it’s a landlords’ market.

“And on the Sunshine Coast it was 0.3 per cent – so it’s extremely tight. In December 2019 it was 1.4 per cent.”

Gold Coast and Sunshine Coast rents rise

Sea-changers have been heading to the Sunshine Coast. Photo: Belle Property

Principal and sales agent at McGrath Noosa, Matt Powe, said the sheer demand for rental properties on the Sunshine Coast had reached boiling point with “no light at the end of the tunnel” as interstate migrants continued to move north in droves.

“Our rental market is actually the same as our sales market – we are seeing unprecedented sales and growth,” Mr Powe said.

“It’s hard to say what exact percentage of new tenants are from interstate, but it’s significant – about 50 per cent – and it’s the highest it’s ever been.

“Even in the ’80s (during the boom) it wasn’t like this – we have surpassed it. Right now the market is literally without precedent,” he said.

“We are seeing below one per cent rental vacancy rates and people are just on waiting lists – but those lists are out of control.

“And what’s fuelling it is people wanting to get out of the cities. Every little flare-up of COVID-19, whether it’s Brisbane or Sydney, throws fuel on the fire.”

Ray White Runaway Bay business development manager Amanda Blake said the Gold Coast rental market was currently the hottest she’d seen in more than two decades.

“I’m getting $570 per week for a property that’s normally $500. This market surge started at the end of November and it happened in the blink of an eye,” Ms Blake said.

“While they are not all interstate tenants it’s a lot … and duplexes and townhouses are absolutely hot property right now.

“We need a crystal ball to know what’s going to happen in 12 months’ time, but I would say in my opinion the trajectory of this growth will depend on whether those interstate tenants can establish their businesses here … they are going to wait and see.

“But right now there’s a seven to 10 per cent rental yield and it’s incredible – it’s also a real sellers’ market at the moment.”


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Boomers a ‘Force of Change’ in Retirement Property Market

Property Market

As teenagers they invented pop culture and now—much older, collectively wealthier and arguably wiser—they are defining a new age group and re-inventing retirement living.

Millenials may have surpassed them in numbers but baby boomers are still having significant influence on world economies and trends—not least in the property market.

“The baby boomers are coming through and have become a force for change in the seniors’ market,” said Cameron Kirby, managing director of Kirby Consulting Group, a retirement and aged care specialist.

“The more progressive operators are definitely getting their ducks in a line.

“And there’s a lot of developers interested in dipping their toes in the market for the first time, some of them with more than 30 years’ experience in the development industry, because they can see there is huge opportunity.

“[But] many developers that want to enter into this space are probably a bit reticent because they’re worried about the complexity of it, they’re worried about the unknowns.

“The opportunities, however, far outweigh any of their concerns.

“And if you’re offering what the market wants, you’re going to be successful.”

Kirby will be a speaker at The Urban Developer Developing For An Ageing Demographic vSummit on April 28.

“The sector is continuously changing,” he said.

“You’ve got land lease communities and over-55 developments that have been moving into the traditional retirement village space.

“And, at the moment, there’s a lot of talk about integrated care in retirement living with a greater weighting on having more retirement villages and less aged care.”

Last year, a survey by benchmarking firm StewartBrown showed 58 per cent of aged care homes were operating at a loss, up from 55 per cent the previous financial year, and 32 per cent made a cash loss.

“Aged care has got some major challenges … but in the meantime there’s also the baby boomers coming through,” Kirby said.

“What I’ve seen over the last 10 years is a bit of a slide where low-care people that used to go into aged care are more likely to go into retirement villages and, equally, people that used to go into more traditional retirement villages are now probably more interested in moving into land lease communities and over-55s concepts.

“Land lease communities are growing very fast and are hugely attractive, there’s no doubt about that … but retirement villages have upped the ante enormously as well, they tend to offer much more wellness and are moving more towards the care side of things.

“Certainly, operators who are offering care in retirement villages are going from strength to strength.

“There’s an increasing amount of quality retirement villages with hotel and resort-style living and state-of-the-art amenities coming online. Pools, gyms, spas, saunas, cinemas, you name it they’ve got it. 

“But those retirement living operators that have a full continuum of care solution that’s what the market is demanding … [the boomers] know they’re going to need some support down the line so they’re planning for their future.

“It really doesn’t matter, however, whether you’re doing aged care, retirement, over-55s or land lease community … because demand is outstripping supply. There is a market for all of those and they attract very different types of buyers.”

Kirby said given Australia’s ageing demographic, the seniors and retirement market was a “much more defensive proposition” for developers.

“Just as healthcare is a defensive stock on the stock market, I think seniors living is a much more defensive play in the property sector,” he said.

“It tends to be more needs driven than what a straight-out residential property play would be.

“And so, I think if we are going to be headed towards a softer property market this is an area that can really shine because seniors will still have the wealth and will still want to move and look at downsizing opportunities.”


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Houses still in high demand, apartment prices lag


The price growth of apartments continues to lag rocketing house prices in many suburbs across Sydney and Melbourne, with the trend showing little signs of abating.

The widening price gap between houses and units is a long-term trend driven by land scarcity in our biggest cities, with the difference tending to be widest between houses and high-rise apartments.

While house prices in Sydney’s North Ryde soared 29 per cent in the year ended March 31, unit prices in the suburb grew by a mere 6 per cent. Similarly, prices in Homebush grew 29 per cent, compared to unit price growth of just 7 per cent.

In Sydney’s Pennant Hills, house prices grew 24 per cent, while unit prices were flat, figures from CoreLogic show.

It is the same story in many parts of Melbourne, with Essendon North house prices growing by 19 per cent over the same period, while apartment prices fell by almost 1 per cent.

Houses in Melbourne’s Canterbury saw their prices jump more than 14 per cent, while units dipped 4 per cent. In inner-city Hawthorn East, houses were up 9.6 per cent, compared to a 6 per cent fall in unit prices.

Earlier analysis by CoreLogic showed more expensive property markets, particularly those close to CBDs and in areas where there are high numbers of units relative to houses, tend to have the biggest price gaps.

Eliza Owen, head of research at CoreLogic, says one of the reasons for the relative recent poor price performance of unit markets is COVID-19 related travel restrictions, including the closure of Australia’s international borders.

Demand for investment units in urbanised centres likely fell because of their high exposure to migrants and international students.

During the height of the pandemic, many units were empty, particularly in inner Melbourne.

The re-opening of international borders is seeing arrivals from overseas rising quickly, which should help to support the prices of units in both Sydney and Melbourne, she says.

However, Owen says one area of concern remains the prospect of higher mortgage interest rates, with prices of investment units more sensitive to rate movements than houses.

Many analysts expect the Reserve Bank of Australia to start increasing official interest rates this year, possible as early as June, with lenders expected to pass on any hikes in their variable rate mortgages.

Following two years of surging property prices, the big gains made over the past year appear to be over.

Sydney house prices were 0.1 per cent lower in March after being flat in February. Unit prices were 0.5 per cent lower in March and 0.3 per cent lower in February.

In Melbourne, house prices down 0.2 per cent lower in March, following flat prices February. Unit prices were 0.2 per cent higher in March and 0.1 per cent higher in February. However, those small gains came after big falls in inner-city unit property values during COVID-19 restrictions.

Coming off the back of strong annual growth, falling affordability continues to be a key factor affecting property market conditions.

A surge in the cost of living and rising rents is restricting the ability of prospective homeowners to save and borrow.

In last month’s federal budget, the government expanded the number of places available in its low-deposit scheme.

The program allows first-home buyers, and others, to buy new or existing dwellings with a deposit of only 5 per cent, instead of the usual 20 per cent that is needed to avoid paying expensive lenders’ mortgage insurance.


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Brisbane house prices leave units in the dust

Brisbane house prices

The gap between house and apartment prices in Brisbane is now the widest in at least two decades, but is set to shrink over the next 12 months as housing affordability bites and buyers choose cheaper options, Colliers says.

Colliers residential director Queensland, Andrew Roubicek, said the price difference between houses and apartments in Brisbane has reached 45 per cent compared with an average of around 20 per cent between 2003 and 2015.

Brisbane house prices further escalated with the onset on COVID-19 when people placed a higher value on privacy with interstate migration to the Sunshine State also propelling Queensland’s property market.

Property data company CoreLogic estimates that Brisbane house prices increased 32 per cent in the year ended March 31 compared with 15 per cent growth for units over the same period.

CoreLogic said house price growth is slowing faster than units and Mr Roubicek predicted that Brisbane apartment values will rise by “at least” another 15 per cent in the next 12 months.

Mr Roubicek said rising construction costs have hit the new apartment market hard and that comparable established stock costs about 25 per cent less.

“There have been several examples of new developments achieving pre-sale [targets] only to have developers refund deposits and tear up contracts because building costs escalated to a point where it was financially unviable,” he said.

“As a consequence, developers who are looking to acquire new development sites are forced to increase their projected sales prices by around 20 per cent.

“Just 18 months ago a two-bedroom apartment in Brisbane might have sold off the plan for $9000 per square metre.

“But to build that apartment today the developer would need to achieve a sale price of $11,000 per square metre for the project to stack up.”

He said as result new stock is selling slower than established units, a trend that will play out through the rest of this year.

“The market is coming to terms with those newer prices and are seeing in the short-term better value for money in the established unit market.”

He said it is a similar scenario to when GST was introduced in 2000.

“When GST came into the market overnight the cost of housing went up 10 per cent and put more demand into the established market, where the prices of stock grew and the difference between new and second hand became narrower.”

Mr Roubicek said he believed the record price gap between houses and apartments will contract through the year.

“If you believe in history, if you believe in charts, and take a long-term view you would have to think that gap is going to narrow because everyone’s talking about affordability, everyone’s talking about interest rate movements,” he said.

“Natural forces will push what would have been a buyer of a detached home back into the unit market because of affordability.”


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