surfers paradise - Markwell Residences

SURFERS
PARADISE
APARTMENT MARKET INVESTOR
SUMMARY REPORT
AUGUST 2015
SURFERS PARADISE APARTMENT
MARKET KEY POINTS
This Surfers Paradise market now appears to have stabilised with the
recovery only in its infancy. This market sits well below its former peak
in 2008, and like most market dynamics, there is an expectation that
the current cycle will surpass the previous peak. This report explains the
market cycle and capital gain indicators.
Employment Growth
The Gold Coast’s workforce is forecast to expand by 51% from 236,393
employees in 2011 to 355,896 by 2031. Employment growth on the
Gold Coast is expected to outpace Brisbane, South East Queensland and
State averages. The Gold Coast’s workforce is predicted to increase at an
The current stabilisation in median apartment price has been driven by
average annual growth rate of 2.5%, outpacing growth in Brisbane and
growth in the resales market and three consecutive years of increased
Queensland as a whole throughout this forecast period.
annual apartment sales volumes. Although coming from a historically low
base, annual apartment sales volumes increased by 51% from 863 in 2011
to 1,301 in 2014 at an average annual growth rate of 15%.
Capital Gain in Median Price
Benefits of Infrastructure & Connectivity
In the shorter term, the foundations continue to be laid as the region works
to facilitate not only the abovementioned population growth prospects,
but also the upcoming 2018 Gold Coast Commonwealth Games. The first
The recent stabilisation in price has been supported by increased demand
major infrastructure project was completed in July 2014 through stage
in apartment resales, which have returned a median capital gain of
one of the Gold Coast Light Rail, which alone is estimated to have been
$12,250 thus far in 2015, their highest point since 2010. Throughout 2011
a $1 Billion project. Stage one of the light rail now provides residents and
- 2014, the local market did not see any notable new apartment projects
guests with direct, far reaching, public transport access to the broader
introduced, leaving the brunt of this growth to be achieved via apartment
community, with 16 stations along a 13 kilometre route stretching as far
resales, which were responsible for upwards of 75% of sales between
north as the multi-billion dollar health and knowledge precinct in Southport
2011 and 2014.
and as far south as Broadbeach precinct.
Strong Population Growth
Lack of Supply
Strong population growth prospects in the medium term and considerable
The current price performance of the Gold Coast has continued to be
investment in new infrastructure projects in the short term are the
restricted by a lack of new supply, which is set to change in the wake of
underlying factors that are driving demand in the local apartment market.
record building approvals throughout the Gold Coast. With prices now
Between 2011 and 2036, Surfers Paradise’s population is set to increase
stable at a ten-year low, with considerable infrastructure upgrades recently
by 75% from 20,883 to 36,441. Applying the conservative assumption that
completed or planned and a 75% increase in population projected for
population densities were to remain stagnant at 1.9 persons per dwelling,
the region in the medium term, the Surfers Paradise apartment market
this rate of population growth would equate to a need for approximately
provides a strong potential upside to investment.
8,200 additional dwellings by 2036.
Between 2011 and 2036,
Surfers Paradise’s population
is set to increase by 75% from
20,883 to 36,441.
2
SURFERS PARADISE: APARTMENT MARKET INVESTOR SUMMARY REPORT
AUGUST 2015
National Property Research Co. POPULATION GROWTH
The Gold Coast remains the fastest growing LGA in Queensland and consistently ranks in Australia’s top five.
• Gold Coast’s population is projected to increase by 76% from 515,202
• Importantly, the portion of those aged within the ‘wealth creation’
people in 2011 to 905,681 people in 2036.
demographic, between 25 to 64 years, will continue to host the largest
population base throughout the projection period. Combined, the
• The 65 and over demographic is the fastest growing age group on the
number of Gold Coast residents aged from 25 to 44 and 45 to 64, is
Gold Coast, expected to grow by 147% from 73,572 people in 2011
forecast to grow by 173,513 people or 63% between 2011 and 2036.
to 181,550 people in 2036. Subsequently, 20% of the Gold Coast’s
population will be aged 65 and over by 2036 which is highly supportive
of the apartment market.
93,366
2011
157,116
71,150
2036
2011
68%
Age Group 0-14
116,388
2036
148,562
2011
64%
Age Group 15-24
234,868
2036
128,552
2011
58%
Age Group 25-44
215,759
73,572
2036
2011
68%
181,550
2036
146%
Age Group 45-64
Age Group 65+
Source: ABS and NPR Co.
Demand for New Apartments
The following table designates the total number of new apartment dwellings required to meet population growth within the Gold Coast LGA by 2036. These
calculations are based on the assumption that apartments will continue to make up 19.6% of all dwellings throughout the Gold Coast LGA. If this was the
case, (although this is expected to be conservative), 30,614 of the 156,150 new dwellings required would be provided in the form of apartments. That
would equate to the need for an additional 133 apartment towers throughout the Gold Coast, hosting an average of 230 apartments each.
Currently
there are:
Gold Coast
Population Growth
Total New
Dwellings Required
% of Apartment
Dwellings
New Apartment
Dwellings Required
New Apartment
Towers Required
(At 230 Apartments Each)
2.5
people per
household
390,479 156,192 19.6%
by 2036
by 2036
in Gold Coast LGA
30,613
in Gold Coast LGA
133
Apartment Towers
Source: QLD Treasury, ABS & The NPR Co.
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3
EMPLOYMENT GROWTH
The Gold Coast’s workforce is forecast to expand by 51% from 236,395
employees in 2011 to 355,895 by 2031. On the back of rapid population
growth projections, employment growth on the Gold Coast is expected to
HEALTH CARE & SOCIAL ASSISTANCE
outpace Brisbane, South East Queensland and State averages. The chart
below highlights changes in employment figures at an industry level, with
regards to the top six industries of employment.
Health Care and Social Assistance will increase its total number of
employees by 83% from 29,307 to 53,714 in twenty years. This growth
will be encouraged by an ageing demographic and facilitated through
29,307
53,714
2011
2031
83%
considerable investment in Southport’s 200 hectare Health & Knowledge
Precinct. The Health & Knowledge Precinct will also encourage growth in
the Education & Training industry, which will jump from the 6th to the 5th
RETAIL TRADE
largest employer on the Gold Coast between 2011 and 2031 through an
additional 8,013 employees.
In all, the Gold Coast is shown to host a diverse economic base, with
employment growth to continue to be supported by sound population
growth projections, continued support from the tourism sector and
significant infrastructure upgrades ahead of the 2018 Commonwealth
28,241
48,684
2011
2031
72%
Games.
ACCOMMODATION & FOOD
21,553
36,292
2011
2031
68%
CONSTRUCTION
22,843
28,515
2011
2031
24%
Image: Tourism & Events Queensland
EDUCATION & TRAINING
18,528
26,541
2011
2031
43%
Source: SGS Economics & Regional Development Australia
National Property Research Co. MARKET CYCLE GROWTH –
THE KEY TO CAPITAL GAIN
The chart below depicts patterns in median price growth during the two
most recent apartment market cycles in Surfers Paradise. This chart
Surfers Paradise - The Right Time To Buy Now for Capital Gain
identifies the two most recent market cycles, as well as highlighting that
The chart below depicts the annual, upper quartile capital growth achieved
each time the market has bottomed, prices have remained well above the
through apartment resales at Surfers Paradise between 1992 and 2015.
previous low. Each of these patterns is explained individually below:
The upper quartile is defined as the middle value between the median
• The first price peak in the Surfers Paradise apartment market occurred
and the highest value of the data set.
in 1996, where median apartment price reached $185,000 after
Surfers Paradise Upper Quartile Apartment Resale Capital Growth
growing by 23% since 1991. Coming off this peak, median apartment
price trended downwards between 1997 and 2001, falling by just 3%
$180,000
$160,000
to bottom at $180,000.
$140,000
Capital Gain/Loss
$120,000
• Between 2001 and 2008 the Surfers Paradise apartment market
endured its next growth cycle, as median apartment prices increased
significantly by 116% from a low of $180,000 in 2001 to a peak of
$100,000
$80,000
$60,000
$40,000
$20,000
$400,000 in 2008. The following decline was influenced by the GFC,
$0
-$20,000
which led to a 15% fall in median apartment price between 2008 and
2014
2015*
2013
2011
2012
2010
2009
2008
2007
2006
2004
2005
2003
2002
2001
2000
1999
1998
1997
1996
1994
1995
2015, from $400,000 to a new, stable low of $340,000.
1993
1992
-$40,000
Upper Quartile Resale Gain
• The orange arrows below identify an important trend of price growth
*2015 sales data is restricted to approximately the first 3 months of the year.
between each cyclical low. Between bottoming prices in 1991 and
Source: PriceFinder & The NPR Co.
2001, there was a 20% increase in median sales price, whilst the
difference in the base price in 2001 and the current bottom in 2015
The graph above demonstrates that the Surfers Paradise apartment
has been an 89% increase. This suggests that, similar to the stock
market has turned the corner after reaching the bottom of the cycle in
market, each time the market has reached the bottom of a price
2012. It also indicates that the 2012 cyclical low achieved a significant,
cycle; it remains well above the previous low. Accordingly, market
315% increase on the previous cyclical low in 1999. However, the
cycle trends favour long term investments as every cycle has
recovery remains in its infancy and current market conditions maintain
surpassed its previous peak.
a strong upside potential, should the cycle reach similar heights to the
previous peak in 2004, where the upper quartile capital growth
Median Growth & Decline in Market Cycle
23%
in apartment resales reached $144,500.
116%
1991 - 1996
2001 - 2008
3%
Location is Important in Capital Gain
15%
1996 - 2001
In addition, the chart above also brings much deserved attention to the
2008 - 2015
fact that apartment resales performance can vary considerably from
one property to another, as influenced by a range of underlying factors,
Surfers
SalesSummary
Summary
SurfersParadise
ParadiseApartment
Apartment Sales
4,050
$400,000
3,600
$250,000
2,250
1,800
Total Sales
Median Growth
Median Decline
2014
2015*
2013
2011
2012
2010
2009
2008
2007
2006
2004
2005
2003
2002
2001
2000
1999
1998
1997
1996
450
1994
$50,000
1995
900
1993
$100,000
1992
1,350
1991
$150,000
$0
negative. Even at the most recent low in the resale market in 2012, the
2,700
20% INCREASE
$200,000
throughout the recording period, has the upper quartile dropped into the
3,150
89% INCREASE
$300,000
as the holding period, timing and personal circumstance. At no point
0
Total Sales
$350,000
Median Sales Price
including but not limited to the physical and locational attributes as well
$450,000
upper quartile resale capital gain remained in the positive at $41,500.
This suggests that even during unfavourable market conditions, individual
properties that have been held for a reasonable length of time, are well
located and finished at a high standard have still been able to return a
positive capital gain for the owner.
Growth cycle
Source: PriceFinder & The NPR Co.
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5
SURFERS PARADISE &
SYDNEY PRICE COMPARISON
The next chart depicts the difference between median apartment prices
Surfers Paradise’s median price sits at a ten year low. This begs the
in Surfers Paradise and Sydney between 1991 and 2015. It should be
question, “where is the best value proposition?”
acknowledged that at the time of writing, 2015 sales data is restricted
Although occurring at a different scale, a similar pattern arose back in
to sales occurring within the first quarter of the year, due to a lag in sales
2001, where Surfers Paradise’s median price reached a cyclical low, whilst
records.
Sydney achieved record sales prices at the time. However, in the years
With questions being raised around the sustainability of Sydney’s price
that followed, growth slowed for Sydney and by the time Surfers Paradise
growth; Surfers Paradise appears to be in a more favourable point in the
reached its peak in 2008, the price gap had dropped significantly from
property cycle for those looking to buy. The current median apartment
$188,000 or 104% to just $80,000 or 20%.
price at Surfers Paradise could provide greater upside potential than
Sydney, due to the capacity for investors to purchase at the bottom of the
cycle, rather than buying into Sydney where median sales prices remain at
historical peaks.
Accordingly, the most opportunistic time to buy has historically been when
Sydney’s apartment market is at a high and the Surfers Paradise market
is at a low. With this being the case in today’s market, past trends would
suggest that purchasing within the Surfers Paradise market now, may
The current median price difference between Surfers Paradise and
provide a strong upside potential.
Sydney City is at an historical peak of $420,000, with Sydney City’s
median apartment price 124% greater than, or more than double that of
the Surfers Paradise median. This is representative of distinct differences
in market cycles with Sydney achieving peak median sales prices whilst
Surfers Paradise & Sydney City Historical Median Apartment Price
$800,000
$420,000 or 124% Price Gap
$700,000
Median Apartment Price
$600,000
$80,000 or 20% Price Gap
$500,000
$400,000
$188,000 or 104% Price Gap
$300,000
$200,000
Sydney City Median Apartment Price
Source: PriceFinder & The NPR Co.
SURFERS PARADISE: APARTMENT MARKET INVESTOR SUMMARY REPORT
AUGUST 2015
2015*
2014
2013
2011
2012
2010
2009
2008
Surfers Paradise Median Apartment Price
*2015 Sales data is restricted to approximately the first three months of the year.
6
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1994
1995
1993
1992
$0
1991
$100,000
National Property Research Co. UNDERSUPPLY &
RENTAL MARKET UPSWING
The two following charts depict median and upper quartile rental rates as
well as total new bonds lodged for two and three bedroom apartments for
each quarter between the start of 2005 and the second quarter of 2015.
Upper quartile rents represent the premium attached to new product in
comparison to the established market (median), whilst the number of new
bonds lodged provides an indication of market depth.
• Median rental rates for two bedroom apartments in Surfers Paradise
• During the same period, new two bedroom apartment product has
commanded an average 21% premium over the existing market.
• Median rental rates for two bedroom apartments in Surfers Paradise
are currently achieving an 8% premium over general Gold Coast stock
($410 per week vs $380 per week).
• Likewise, two bedroom apartment product within the most recent
have increased by 37% from $300 to $410 per week in the past 10.5
developments in Surfers Paradise are currently achieving upwards of
years.
$600 per week, at a 58% premium over the broader market ($600 per
week vs $380 per week).
Surfers Paradise Two Bedroom Apartments: Detailed Rental Analysis
• Median rental rates for three bedroom
Surfers Paradise Three Bedroom Apartments: Detailed Rental Analysis
apartments in Surfers Paradise have
increased by 58% from $380 to $600
per week in the past 10.5 years.
• On average, since 2005 new three
bedroom apartment product has
achieved a 28% premium over the
existing market.
• Median rental rates for three bedroom
apartments in Surfers Paradise hold
a significant, 40% premium over the
broader Gold Coast market ($600 per
week vs $430 per week).
Source: RTA & The NPR Co.
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7
SEE THE THINGS THAT
OTHERS DON’T; HEAR
THE THINGS THAT OTH
ERS DON’T; DISCOVER
THE THINGS THAT OTH
ERS DON’T; BE IN THE
KNOW.
Matthew Gross - Director
[email protected]
Tasman Nealon - Property Economist
[email protected]
The National Property Research Company
Level 1, 307 Queen Street, Brisbane, QLD, 4000
Tel: (07) 3229 0111
This report may not be reproduced, distributed or published without the written permission of National Property Research Pty Ltd. Any
recommendations contained herein are subject to the property market at the time of writing the report and as such are conditional. They must not
be relied upon without specific advice from an Analyst of National Property Research Pty Ltd as to the appropriateness of the intended action.
Past performance of property is no guarantee of future performance. Given that some of the material conveyed in this report is from speaking with
Agents, Operators and other persons in positions of trust, National Property Research has endeavoured to ensure that all information is true and
accurate. National Property Research reserves the right to amend the report should new information become available.