The Australian property market has been experiencing a boom since 2012, fuelled by low interest rates, strong confidence and a weak currency. These favorable economic conditions spur foreign investment, which now makes up about 50% of total property purchases.
As a result, the Gold Coast is markedly witnessing a revival. It has recovered from the collapse of its building sector during the Great Financial Crisis and an oversupply of properties in 2011.
The city’s affordable dwellings are a boon for buyers, especially alongside exponential price growths in major cities like Melbourne and Sydney.
According to the Real Estate Institute Queensland, the median price of a home in Gold Coast was AUD 557,500 ($422,178) in the year’s first quarter, just over half the cost of an abode in Sydney.
Furthermore, investor confidence has been boosted by the upcoming 2018 Commonwealth Games. Infrastructure developments lining up to the event, such as the Light Rail System and an airport expansion is set to improve the city’s connectivity and quality of living.
“More High Net Worth Individuals are looking into the Gold Coast as the perfect setting for semi-retirement or short getaways”, Michelle Ciesielski, Director of Residential Research in Knight Frank, told the Australian Financial Times.
“People are adopting a fly-in, fly-out approach whilst monitoring the capital values of main residences in bigger cities such as Sydney”, she added.
Whilst analysts predict that growth will slow down in other major cities due to overheating and oversupply by 2017, things are just building up in the Gold Coast. According to QBE Insurance’s Australian Housing Outlook Report, the cost of homes in the Gold Coast is projected to increase by 12 to 14% by 2018.
Residential projects surge with demand
In 2015, increased urbanisation and developmental projects caused a spike in the city’s population, attracting 9,000 new dwellers and creating 15,000 jobs. As the upcoming Commonwealth Games expects to welcome 690,000 visitors, there is a higher demand for housing and rental solutions.
Approvals for residential developments have therefore surged to a decade-long high. About 8,387 building requests in Gold Coast were approved from June 2015 to the same month this year.
As foreign buyers are only allowed to buy new homes by Australian law, this influx of approvals will prove beneficial, bringing a wider selection and supply. In addition, the country’s weak dollar may lead to price cuts for properties, giving overseas buyers a monetary advantage.
Stumbling blocks: Local legislation fights back
In an effort to regulate an overheated property market and assist first time local homeowners, various institutional restrictions have been implemented to soften foreign demand.
The Queensland government recently announced that an additional 3% stamp duty would be placed on foreign purchases of property effective from 1 October 2016. This comes on top of a 5.75% transfer duty.
“This will ensure that foreign buyers, who benefit from government services and infrastructure, make a contribution to their delivery – as local buyers do,” said Queensland Treasurer Curtis Pitt to the Queensland Media Club.
Likewise, major Australian banks are tightening lending schemes for foreigners. Westpac, ANZ, CBA and NBA have placed restrictions on applications from foreign buyers with income from overseas. They have also lowered maximum loan values. This could be a deterrent for small-scale foreign investors, who may have to take loans from overseas banks.
Will the boom last? A look into the future
The city’s property market looks optimistic for the next two years.
Job creation and the prospect of increased tourism with the upcoming Commonwealth Games is driving the property boom.
Investors are happy to take advantage of appreciating capital values. Beyond 2018, property may be a mixed bag. The construction frenzy at present could result in a slump, as an oversupply of residential units will dampen rental and property prices after the Games wrap up and tourism dollars move away.
This article was first published in PALACE.
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