As my readers would know I am a keen watcher of all things real estate and that makes me a very interested in the Queensland market. As tourist destinations, places like the Gold Coast and Cairns have always had large percentages of holiday homes and holiday “investment” properties. They are therefore fringe markets and in my opinion a leading indicator of what is going to happen to the broader market if the economic environment stabilises at a particular level. That is, they rise heavily in the booms and dive heavily when trouble starts and if the economic situation continues these effects will slowly show in the broader market ( just not at the same amplitudes). These fringe markets are already suffering and that is even before the flow-on effect of the Japanese disaster has had an impact.
Today I note that the Gold Coast has got so bad that the local marketeers are actually seeing foreclosure action by banks as a positive sign.
Receiver-initiated sales have delivered a minor shot in the arm for the Gold Coast’s battered high-rise unit market, according to the latest Midwood Report. The report for the February quarter reveals 69 new apartments were sold unconditionally, an improvement on the previous period when sales slumped to a two-year low of 47. While it is the most significant rise in unit sales since late 2009, the February figure is well short of the long-term average of about 300 deals per quarter, let alone the bumper 522 sales recorded in the three months to February 2008.
I was on the Gold Coast last weekend. Guess what? There are still cranes in the sky because they are still building even more apartments. I have no idea why. I suspect everyone, including the banks, is going to end up taking huge hits on this because the final product isn’t going to be able to be sold for anything like the business cases promised they would.
Southport Central — where 165 units remain for sale — was the city’s best-selling project for the quarter with 28 sales. Apartments in the project’s second and third towers are selling from $340,000, down from the 2007 entry-level price tag of $437,000.
You can do the maths on the potential loss of revenue on just that one little project. As I posted late last year this environment has already claimed a number of projects. But there are many more.
Other projects in the hands of receivers include The Oracle at Broadbeach, which recorded no sales during the quarter, and Nirvana by the Sea at Kirra where 36 unsold apartments were launched to the market earlier this month.
Midwood reported no sales data was available from Juniper’s Soul project for inclusion in the report. More than 720 new apartments remain for sale across the Coast, equating to just over two years of stock at the current rate of take-up. Midwood’s figures do not include the 357 apartments in the H20 project on Marine Parade at Southport, which are due to be released to the market mid-year.
As I said at the top of this post the Gold Coast is a place where the peaks and troughs have a high amplitude but if economic conditions continue then I would expect to see these same issues moving into the broader market. So I wasn’t really surprised to read the following from RPData’s latest report (18th March) on the Australia-wide market conditions.
The number of new properties advertised for sale over the last week increased by 1.9% and is now at its highest level since the week ending 28 November 2010. The number of newly advertised properties for sale is 25.9% higher than it was at the same time last year. The total number of properties currently being advertised for sale is at the highest level of any week since the beginning of 2007. The elevated stock level is largely due to the difficulty vendors are having selling their properties as investors and first home buyers remain on the sidelines. The total number of properties advertised for sale increased by 1.7% last week and is 24.2% higher than at the same time last year
And as I have explained previously, once the market starts to turn the rentals on the market rise.
The number of new properties advertised for rent has fallen by -0.7% over the past week. Despite the fall in new rental listings they are currently 8.7% higher than the 12 month average and 25.2% higher than at the same time last year. With new rental advertisements falling over the week, total rental advertisements have also decreased down -1.5%. Despite the fall over the week, total rental listings are 3.9% higher than the 12 month average and 4.5% higher than they were at the same time last year.
The weighted average auction clearance rate across the combined capital cities took a nose-dive last week, recorded at 48.4% following a clearance rate of 55.4% the week prior. Importantly, Vic and SA both had long weekends and the volume of auctions were substantially lower during the week, in saying this clearance rates were relatively steady in Adelaide however, rates dipped in Melbourne. In Melbourne, clearance rates fell to 55.7% last week from 62.5% the previous week. Sydney’s auction clearance rate was relatively steady, recorded at 53.3% last week and 53.4% the previous week.
The number of dwellings commenced during 2010 was recorded at 169,428. This represented an increase of 22.4% over the calendar year, the largest since they rose by 27.2% during 2002. With almost 170,000 dwelling commencements last year, it was a substantial improvement from around 138,000 commencements in 2009. On an annual basis, there has been an average of almost 156,000 dwelling commencements during the past 10 years which indicates that commencement in 2010 were 8.7% higher than the decade average an encouraging result given the need to deliver more dwellings.
I must admit I have been a little surprised by the comments here. Every week we post an auction preview. On Monday, after the results are reported on our site I remove it because it is no longer a preview.
It is very pleasing to know that people are interested.
The fact that we repeated the comment in a video would suggest we are not trying to hide anything.
Not only did we tell the public via our website but we also advised the media of the same thing and even tweeted it.
The REIV reports market results as we collect them. For instance in the last March Quarter we reported a 2 per cent drop in the median house price.
Thanks again for the interest.
Fair enough, I do not have enough experience with the inner workings of REIV’s website to argue this point so I can only side with Mr Larocca on this. I do wonder however why media statements about the number of auctions quickly disappear from the site, even though I can find them in the google cache. This sort of thing tends to make alfoil hat people nervous.
However, after Mr Larocca left that comment, and people actually realised who he was, a number of our readers left some questions for Mr Larocca that at this time have gone unanswered.
I do hope Mr Larocca returns at some point to answer them. We would even be happy to give him a guest post.