Noosa continues to “Keen it”

How do you lose $160,000 over 15 years? Buy a Noosa apartment.

Savagely discounted prices fetched by receivers for apartments previously owned by former Sunshine Coast tourism boss Phillip Harding has sent shock waves through Noosa with some estimating the state of the market is now as bad as the Gold Coast.

Over the past few weeks receivers have sold 27 of Mr Harding’s units in the Noosa Blue complex for about $4.5 million, implying a price of about $166,000 each.

Fifteen years ago, the same properties sold for about $320,000, sources said.

Analysts estimate Noosa’s property values have fallen by 40 per cent since the peak of the market.

….

Mr Harding, who is the former head of Tourism Noosa and a former chairman of Tourism Sunshine Coast, has also lost control of a Noosa Heads development site and his farm.

These have been sold by receivers at severely discounted prices. Debts of about $15m were owed to Bank West on his property portfolio.

Demand remains weak in the Sunshine Coast holiday destination for beach properties that typically sold for between $1m and $4m at the peak of the market.

One market source estimated that there was currently one buyer for every 50 properties available in Noosa, saying property values had “fallen off a cliff”.

“It was a special market and went up every year for 18 years or so, this is the first dramatic downturn,” the source said.

I have talked about this before , 15 years of  5-10% inflation followed by 10 years of credit expansion have created an environment of what seemed to be “never ending growth”. But it is all coming to an end because the RBA is targeting inflation and credit expansion has reached it limits without a sudden influx of rich migrants or more government stimulus. Places like Noosa and the Gold Coast are leading the pack down because their markets are heavily driven by local and overseas “investment”.

As the Unconventional economist and I have been explaining the demographics of the boomers is now against housing and areas with high levels of investment properties will be the first to suffer. However it must also be mentioned that the high Australian dollar is adding significant stress to these areas in 3 ways.

  1. Something I have mentioned previously. The high AUD is keeping foreigners from making new purchases.
  2. It is also encouraging offshore investors to attempt to sell, as any capital losses could be recouped by the Australian dollar appreciation. Obviously any capital gains would also be magnified.
  3. The same dynamic works for ex-pats. Their foreign currency earnings would have been losing value recently so there is certainly no driver to return to Australia, and secondly any ex-pat expecting to stay overseas for more than a year would be encouraged to sell up, convert the money to their local currency and return at a later stage when the AUD has depreciated.

You can also see these dynamics in some of the population data I have posted recently.

I was about to suggest that Noosa is the new Gold Coast, but it seems that it is doing its best to keep up.

Racing car driver Max Twigg is tearing up more than $10 million and wearing one of the biggest losses ever on a Queensland property, four years after he bought the Gold Coast beachfront house in a market distorted by a secret and elaborate price-fixing scam.

An investigation by The Australian has previously highlighted how side-agreements, including “put and call” options, had artificially inflated the prices of beachfront properties in a strip along the Gold Coast’s famed Mermaid Beach.

Mr Twigg is now selling his house at 199 Hedges Avenue for less than $8m after buying it for $17.5m — with a further $1m-plus in stamp duty and other taxes — in 2007, meaning his investment has fallen in price by about $50,000 a week for four years.

The huge loss is the result of a bust in Gold Coast beachfront property since the global financial crisis, compounded by the unravelling of the price-fixing scam. Hedges Avenue properties have dropped by significantly more in percentage terms than other markets.

Mr Twigg — who lives in Melbourne, where he made his fortune in waste management — has broken his silence, telling The Australian he did not know when he bought that the market in Hedges Avenue properties had been fuelled in the boom by unusual and hidden deals.

Former Queensland fair trading minister Peter Lawlor has previously said the deals “stink to high heaven” and called on police to investigate alleged fraud in a number of the transactions.

It’s funny how no one ever complains about fraud when prices are going up.

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Comments

  1. over 30 years ago as teenager with drinking rights, I visited the beer garden at the Mt Tambourine pub in the Gold Coast hinterland.
    After a few with my mates, I visited the urinal and there scribbled on the wall was a joke:

    “What’s the difference between herpes and a unit on the Gold Coast?”
    A. “You can get get rid of herpes”

    Its only taken me 30 years to get the joke!

  2. LandDeveloper

    I was reasonably confident this would happen several years ago now (around 2004) when I was based there developing a large project. Whilst our project was very successful at the time, it took a lot of convincing by me to stop my interstate bosses from buying up a swag more large scale 10-year projects at ridiculous prices…. I wonder if they’ll be thanking me (I work for someone else now in another state).

    Noosa was my first real exposure to ridiculous price speculation. We did bid on one other development property there (there were good synergies with our existing project), but were outbid by such a huge margin that I just could not fathom how anyone could make their feaso stack up at those bid prices. Without sounding smug, it looks like they couldn’t.

  3. Looking at the 50% drop I was tempted to quote Will Smith ‘welcome to Miami’ until I saw the time frame. Wow, this lot is a disaster.

  4. Sam Birmingham

    One point of order…

    If I remember correctly, Steve Keen’s prediction was of a 40% fall in REAL prices

    I dare say that $320k fifteen years ago is the equivalent of something like $650k nowadays, implying a real collapse of more like 75% !

  5. Strictly speaking, Noosa Blues Resort Apartment is not a ‘home’. It should be classed as commercial real estate. There are not many who wants to live in a one bed room apartments with high management fees next to nowhere, even if the pool and scenery is great.

    Some Noosa Blues Resort apartments are still listed on the web for $350000, so either the 4.5mil for 27 apartments is a great bargain, or they’re looking for really big suckers.

  6. This is not quite on topic but I can’t resist. We rent in Davidson, on the North side of Sydney and found this in the letterbox today.

    MARKET UPDATE

    Dear Residents,

    As we leave the the Summer months behind us we are welcomed by the inconsistant Autumn weather, we can see an expected change in the market in the months ahead.
    (WTF I am a gardener, Autumn in Sydney is usually crisp clear sunny days).

    On Tuesday the 5th of April the RBA decided to leave the cash rate unchanged from the current 4.75%. This coincided with yet another negative article written about the Sydney real estate markey going down. Negative articles almost always create concern for the already cautious buyer and will also plant seeds of doubt in the minds of those thinking of selling.

    However this market is one of the best types of market to make a move as you don’t have the concerns of paying too much like you would in a booming market.

    The key at the moment is to keep an eye out for overpriced properties and watch the prices fall, this is not due to the decline in the market, this is due to agents setting high asking prices or home owners expecting too much.

    It is important to set a realistic asking price in order to recieve strong buyer enquiry. This will ultimately result in multiple offers on your property which will naturallt drive the price upwards. The current market is perfect for this type of approach and properties with large asking prices will remain for sale for a very long time.
    Be realistic and trust your chosen agents advice. It may mean the difference between a sale or no sale at at all.
    Kind regards, Shane ——–

    Seriously, you couldn’t make this sh*t up.

    Also from what I can tell properties here are still being listed at high prices, although they seem to be on the market a week or so longer than usual and the sold price on the poorer quality ones is usually not disclosed.

    Thanks for the blog, its helping to keep me sane,
    Scott

  7. Why would one be selling property at the loss?
    Those guys, have gabled on Real Estate and borrowed money to gamble. They did the wrong think and overestimated there’s own finance and the market. Same as many other Australians. There will be many more to come causing drop in prices.
    Those who have unrealistically large debt’s against the properties will get burned but those who been conservative will be just fine.
    If you own your property, you do not really care what is nominated market value is. It’s just a place to live in.

    It’s a new hunting season to make so money – wait 2-3 more years and buy few houses for 50% if what they are now. Just remember to be realistic with your finance…

    Josh
    http://www.pa-international.com.au