Byron's "boom" is pure fiction

Posted on 12/09/2014  
Byron's

Some years ago I published a report called Iconomics – the economics of iconic real estate locations or situations. It used research to show that many of Australia’s most iconic investments were duds.

 Apartments at Noosa Heads were at the top of my list of iconic failures – and today, despite some value growth in the past 12 months, the typical Noosa unit is still worth considerably less than it was 10 years ago.

On average, Noosa apartments have fallen in value at a rate of 3% per year for the past decade. It’s the ultimate real estate lemon among our iconic locations.

Surfers Paradise apartments have been little better. Despite all the clamour and propaganda about the recovery of the Gold Coast market, there has been no growth in the past 12 months in the median unit price in Surfers Paradise. Prices remain well below the levels of five years ago.

The New South Wales counterpart of these iconic flops is Byron Bay, a favoured burial ground for the money of people with way too much income and not nearly enough nous.

These thoughts on places where investment performance is in inverse proportion to the reputation of the location were prompted by another iconicloser, The Australian newspaper, which recently declared “a boom in Byron”.

What prompted this rather big statement about a market that has delivered almost zero growth for 10 years? It was a press release from the developer of a small project described as “a luxury beachfront development”.

The development had sold five apartments off the plan and that, apparently, constituted a boom. Clearly, Byron is growing off a very small base.

The research shows that Byron Bay prices have spent more time going backwards than forwards in the past decade. House prices have collapsed several times in the past 10 years, including double-digit declines in 2006, 2009-2010 and 2012-2013.

(There are much better places to invest in New South Wales than Byron Bay – to find out more, get our new edition of Top 10 Sydney & NSW Hotspots report.)

Over the past three years, the Byron median house price has dropped by an average 3.4% per year. The long-term growth rate, the average annual growth over 10 years, is marginally better than Surfers Paradise – about 2% per year.

Similar to houses, the median price for units remains lower than three years ago and the average growth rate over five years is basically zero.

Australian Property Monitors figures indicate the typical Byron Bay apartment placed on the market takes almost a year to find a buyer, while houses typically take 7-8 months to sell.

The Australian quoted local agents as claiming that sales turnover in Byron Bay is up 150% on a year ago. But a quick check of the latest data shows no change at all in overall sales volumes compared to a year ago – and for houses there has actually been a small decline in sales volumes.

The problem for Byron is that there is no economic substance to the iconic status. Investing in Byron is like buying in a mining town – it’s a one-industry town.

And, like mining, tourism is volatile and vulnerable. There can be sharp price peaks but they are always – always – followed by a trough of equal or greater magnitude.

I would urge investors to not be deluded by headlines proclaiming a property boom in Byron.

Terry Ryder is the founder of hotspotting.com.au

ryder@hotspotting.com.au

twitter.com/hotspotting

 

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