Gold Coast pins its hopes in Commonwealth Games-led revival

By Terry Ryder, 1st December 2011

One of Australia’s worst offenders for values going backwards has been handed a get out of jail card. Maybe.

The Gold Coast has won the right to host the 2018 Commonwealth Games and with it hope that the event will put its property markets back on the straight and narrow.

Whether the lead-up to the event does significantly boost the most over-supplied and over-rated property market in the nation remains to be seen.

What is 100 per cent certain is that the coast’s propaganda machine will milk this for all its worth. By the time the White Shoe Bridgade is finished, the 2018 Commonwealth Games will have the ability to turn night into day.

Currently it’s midnight in the Gold Coast property market. Everything that matters is over-supplied: offices, industrial property, house-and-land packages and, in particular, high-rise apartments.

The Gold Coast residential market last showed growth in 2007. Prices have been declining since.

Despite years of prolific population growth – or perhaps because of it – the Gold Coast has been one of the worst performers in Australia for capital growth over the past five years.

Developers flock to high population growth areas and build new product with scant regard for the activities of competitors. The periodic bouts of surplus destroy prospects for capital growth.

The only serious challengers to the Gold Coast’s title as worst capital growth performer in the state are two other prolific population growth markets, the Sunshine Coast and the Fraser Coast.

Many of the Gold Coast markets have median prices lower today than they were five years ago.

Against this background, the Commonwealth Games in a little over six years time has the potential to bring some daylight to the gloomy Gold Coast market – just as long as developers don’t over-react and flood the market, yet again, with apartments and townhouses.

Certainly there is evidence from the recent past that hosting a major sporting event can lift property prices.

Brisbane property investment advisor Simon Pressley has researched the subject and says: “The economic benefits which will flow from the preparation required to host an event of this magnitude is just the shot in the arm that the Gold Coast – and Australia, for that matter – needs.”

Pressley, who runs 6-Point Property and regularly puts together quality research reports, says the Gold Coast will be exposed to billions of people around the world as preparations unfold in the lead-up to April 2018.

“Property markets will reap rewards, too,” he says.

Around $500 million will be spent on sport and transport infrastructure, including a project to increase the capacity of Metricon Stadium (home of The Suns AFL team) from 25,000 to 40,000 seats.

A sports and leisure centre will be built at Coomera and accommodation for 6,500 athletes will be built near Griffith University, to become the homes of local residents after the Games.

A new health and knowledge precinct will be built next to the new $1.7 billion Gold Coast University Hospital and the $1 billion rapid transit passenger rail network will be fully operational by then.

The State Government says the Games will generate up to $2 billion in economic benefits, with the equivalent of 30,000 full-time jobs created between 2015 and 2020.

We know from recent experience in the UK, where the 2012 London Olympics has created 10,000 long-term jobs just on the construction of the new Olympic Park and athletes’ village, how much impact these things can have on employment.

Pressley says the improved facilities and infrastructure have the potential to transform the Gold Coast into Australia’s premier sports and leisure location.

“The Games will not just benefit the Gold Coast,” he says. “Big international events create hype, positive sentiment and improved productivity which the entire host nation tends to benefit from at some level. I believe Brisbane, only an hour away via the M1 and less by rail, will benefit substantially.”

Pressley’s research indicates we can expect a significant reduction in the Gold Coast’s unemployment rate, currently one of the highest in the nation. In the period between 1997 and 2003, the NSW unemployment rate was at its lowest at the time of the 2000 Olympics.

Pressley’s research has charted movements in median prices before, during and after major sports events including the 2000 Olympics in Sydney and the 2006 Commonwealth Games in Melbourne.

Sydney’s market rose 14 per cent in 2000 and continued to grow strongly in the next three years, including a 24 per cent increase in 2002, well ahead of other major cities.

Melbourne showed moderate growth in 2006, while hosting the Commonwealth Games, but had two good years immediately following the event.

Going back to the Eighties, Brisbane home prices rose 31 per cent in 1981, the year before it hosted the Commmonwealth Games, and 35 per cent in 1988, the year in which it hosted the World Expo.

Pressley says factors other than the mega events may have helped in the rise in property values. “That said, there is no question that Australian cities which have hosted such events in the pat have been beneficiaries of significant increases to their property values,” he says.

Pressley also points out that hosting a world sporting event is not always a path to riches. If costs blow out and/or revenue under-achieves, the event can leave behind big debts.

Greece, a recent host of the Olympics,  is the basket case among the economies of Europe.

And if the host city doesn’t get the infrastructure planning right, the legacy left behind can be negative, with “white elephant” sporting facilities like the QEII Stadium which was central to the 1982 Commonwealth Games in Brisbane.

The ongoing concern about the Gold Coast is its tendency to have bouts of major over-supply and its over-reliance on tourism to pump its economy. If there is a boost from the Games, it’s likely to short-term – and, if developers over-react, it’s also likely to be somewhat muted.

Pressley says: “The big concern I’ve always had about investing on the Gold Coast is its unhealthy reliance on tourism. An event like the Commonwealth Games and the international exposure it brings is wonderful for tourism but it’s a one-off. Unless the coast’s economy develops some diversity, its property market will always be highly vulnerable.

“I do think the Games will be good for the coast’s property market - but I would not recommend rushing out to invest there.

“There are many better property markets in which to invest your hard-earned dollar.”

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