Suncoast over-supply slowly reduces

Posted on 28/08/2009  

The Sunshine Coast is slowly absorbing its over-supply of apartments – but still has unsold new units equal to two and a half years’ supply.

 

A research report from PRDnationwide says the Sunshine Coast market is a place for bargain hunters as developers struggle to move their backlog of unsold stock.

 

The report found there were 69 sales of new apartments across the Sunshine Coast in the June Quarter, leaving about 600 unsold, the equivalent of 29 months supply at current sales levels. This is a considerable improvement on the five years’ supply that existed in mid-2008. Supply has fallen for four consecutive quarters since then.

 

Most of the sales in the June Quarter were at the southern end of the Coast around Caloundra.

“It was another tough quarter for the Sunshine Coast new unit market”, the report says. “But there are positive indicators that the market is on the mend.

 

“It is clear current buyers are after a bargain. Most sales are being achieved towards the more affordable end of the market and any luxury apartment sales are being snagged at basically cost price.

 

“There is still a reasonable over-supply of new unit product and buyers can afford to be selective and demand some bang for their buck.”

 

Almost a third of sales in the June Quarter were at prices under $450,000, while 25% of sales were in the price range from $550,000 to $650,000. “For the astute buyer, this is where the opportunity lies,” PRDnationwide says. “Investors who can afford to spend a little more will see the benefits over time. These slightly more expensive units often offer far more in quality and value, due to less interest from buyers. Spending an extra $50,000 for a third bedroom in a struggling market is certain to pay off when the market turns.”

 

I would, however, urge buyers to be cautious. The prolonged period of over-supply is not unusual for the Sunshine Coast and is one of the reasons I include the region in my No Go Zones report.

 

PRDnationwide notes that 54% of sales were two-bedroom units.  “This trend highlights a change in the mindset of buyers away from luxury and towards affordability,” it says.

 

“The struggle to move built luxury product in the current climate is quite a task. The June Quarter saw 25 three-bedroom apartments sell, but no four-bedroom or penthouse apartments were transacted.”

 

This highlights another reason I urge caution on the Sunshine Coast: the market generally lacks affordability, as numerous affordability surveys have shown in recent years.

 

ENDS

 

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