Gold Coast unit market softens as over-supply looms

Posted on 11/08/2008  

A softer trend is emerging in the Gold Coast high-rise apartment market as higher interest rates, declining stockmarket conditions and credit retraction take their toll.

Buyers in this notoriously fickle market are preferring projects which offer longer settlement timeframes, according to a LandMark White research report. Projects in this latter category include Elston, Paradise Resort, The Hilton Hotel and Residences, Oracle and Soul. All of these projects, which are set for completion by 2010, are performing better than the built stock sector.

Analyst Ben Davies says the recent settlement of projects such as Sierra Grand and Southport Central (Tower 2) has seen a reduction in the proportion of contracts proceeding to settlement compared to previous years. "This is again seen as a sign of the current softer market in terms of built stock," Davies says.

Larger completed projects like Circle on Cavill and Trilogy are taking longer to sell than was originally envisaged. Some completed high-rise buildings still have unsold stock a year after completion. The normal Gold Coast market cycle would see 95% of stock sold out prior to completion and the remaining units sold within the next three months.

Four years out, however, the market could be in a completely different cycle, considering that the Gold Coast often demonstrates a market cycle all of its own.
At present, 8,000 new units are expected to be completed over the next four years - that's an average of 166 new high-rise units per month.
However, as LandMark White notes, "there are a number of factors which could alter this, including construction cost increases, or higher infrastructure and holding costs, or a decrease in buyer demand. At this point, 2010 is the year which will deliver the largest quantity of finished product to the market."

Incidentally, this report defines "high rise" as an apartment building of 10 storeys or more.

But, getting back to 2008 - the Gold Coast currently has 4,600 new high-rise units including off-the-plan projects and recently-settled stock. A third of these (1,464 units), remain unsold. As usual, Surfers Paradise is the focus of 50% of the new unit activity, with almost 58% of new stock in Surfers already sold.

Of the 2,625 units in the off-the-plan sector, 58% (1,521) have presold - the majority of them in Surfers Paradise, Broadbeach and Southport. Surfers Paradise dominates the off-the-plan sector, with 1,344 new units (51% of total stock). This is mainly attributable to five large projects - Hilton Residences, Elston, Reve on River Terrace, Paradise Resort and Soul. These projects have sold well (with only 686 units left to sell), when you consider than two of the projects (Hilton and Reve) were only recently released.

18% (360) of the 1,970 units within completed high-rise buildings being marketed as "built developer stock" are still for sale. Once again, Surfers Paradise is the largest source of built developer stock - 925 units, or almost half of the entire Gold Coast stock in this category.

Surfers Paradise and Southport have the largest proportion of unsold unit stock in the $500,000 to $750,000 price bracket (416 units) while the largest proportion of unsold stock in the $750,000 to $1.5 million price bracket (486 units) is in Surfers Paradise and Broadbeach.

Despite the apparent slowdown, the LandMark White research report is confident that there are signs that developers are continuing to buy and consolidate high-rise sites within Surfers Paradise.

ENDS

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