The Gold Coast Housing Cycle History Shows This Cycle

By Michael Matusik, 25th July 2012

THE GOLDIE

All that most people hear and read about the Gold Coast residential market is when something goes cactus or when a big sale takes place.

We have seen in recent weeks two high-value sales – most recently Dudley Quinlivan’s former Southport riverfront home, which sold for $9.5 million at auction and a few weeks prior to that, motor vehicle dealer John Zupp paid $12 million for a Sanctuary Cove home.

These two sales – the media are in a rush to tell us – are the highest paid prices for a Gold Coast residence in the last three years.  Well whoopee!

I was contacted in both cases by local media outlets to make comment.  I was happy to do so, but only if we discussed the Gold Coast market in more general terms and especially regarding its fundamentals.  The media’s interest sunk like a stone when I wasn’t prepared to preach doom and gloom or get into “well below replacement cost” chatter or embellish on the rumoured defects regarding the Quinlivan property and the potential repair bills.

So, I will use this space to highlight what I would have touched on.  It is something that very few understand about the Gold Coast, and to be honest, very few in the property industry these days appear to really have an understanding about the markets they are writing about.

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The Gold Coast housing cycle is very pronounced and history shows that this cycle, typically, has a six-year frequency.  Also, our analysis, going back to the 1960s, shows that the peaks are usually 250% higher (in sales/construction volumes) than the previous five-year averages, and the downturns are 50% lower.

Since I have been working in the industry, the Gold Coast experienced market peaks in 1988, 1992, 2002 and 2008.  Downturns were experienced in 1982, 1990, 1995, 2000 and 2012.

After close to 30 years in this business, you see certain patterns emerge.  History usually repeats.  The Gold Coast looks set to have a market peak in 2014-2015, followed by peaks in 2020 and 2026.  Downturns will also return and most likely in 2017-2018 and in 2023.  This isn’t gospel but history is on my side.

Just as we wrote about Brisbane turning the corner a month or so back, the Gold Coast seems to be following suite.  It isn’t there yet, but it looks to be heading down the right path.  Some tell-tale signs include:

• Well-priced properties starting to sell soon after listing
• Multiple offers starting to happen, again on well-priced properties
• Some properties are now selling above reserve
• Vacancy rates are on the decline and rents are rising
• Fewer well-priced properties for sale – there is an actual shortage of saleable stock for sale across many parts of the Gold Coast
• Time on the market, as a result, is starting to drop and in some cases dramatically
• Intra-state and interstate interest is on the increase

My general reading is that people (me too!) are tired of having their life on hold and they want to get on and do things.  This especially applies on the Gold Coast, which has been in limbo for much longer than the rest of the country.  The recent state and local government changes help make this possible.

For mine, the Gold Coast has just about bottomed.  End values are likely to start growing during 2012/13 and most likely between 5% and 10%.  But here they might sit and for some time, because, as I will explain next week, the Goldie needs to supply more affordable housing stock.

The potential bump in Gold Coast prices over the next 12 to 18 months is re-correcting an overly bearish market.

END

Michael Matusik

Michael Matusik is a leader in residential market analysis and property advice in Australia.

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