Gold Coast Market Report: Balancing Act Amidst Economic Shifts

Issue 18 | Thursday 7 September 2023 | Gold Coast Market Report: Balancing Act Amidst Economic Shifts

Hi Andrew Bell here with you and as promised I am going through a number of quick updates on some key things relating to the market and in particular here on the Gold Coast.

Firstly, we have some encouraging news as recently released figures indicate an unexpected decline in inflation. Inflation has dropped to 4.9%, a significant decrease from its previous peak in the early 7% range. This move brings us closer to the Reserve Bank’s target range of 2-3% for inflation. There’s growing speculation that we might have already witnessed the peak of interest rates, with the possibility of rate decreases on the horizon.

Consumer Confidence plays a pivotal role in shaping real estate prices. Before the inflation drop, Consumer Confidence had already risen by 2.3%, reaching 78.1 on the ANZ Roy Morgan Consumer Confidence Index. While this increase is positive news, it’s essential to note that it was starting from a relatively low base, with Consumer Confidence having spent a record six months below 80 on the Index. However, the anticipation of interest rates possibly leveling off is likely to contribute to further increases in Consumer Confidence.

The central challenge in the housing market, whether for rentals or purchases, remains supply. Despite ambitious construction targets set by the National Cabinet and promised investments, we are currently on track to fall short by over 60,000 new homes in the first year alone. Government projections often fall short and take more time and resources than initially estimated. The latest construction data from the ABS reveals just 174,051 new constructions in the past year. The Housing Industry Association predicts a modest increase to 178,839 new units, townhouses, and houses next year, with only 195,105 anticipated in 2025. These figures fall far below the required 240,000 new properties per year for the next five years. New home approvals have plummeted to a four-year low, with a 7.7% monthly decline in June. This suggests that the burden of high interest rates, construction costs, and delays will continue to exacerbate the housing shortage, despite recent government commitments. Short-term solutions are urgently needed to address this issue.

Locally, we observe that only 724 new apartments were constructed in the past 12 months, a fraction of the usual average.

On a brighter note, construction costs are finally showing signs of a downward trend. While they increased by 12.7% over the past year, the latest quarterly increase was just 1.2%, marking the lowest rise in almost two years. We hope this trend continues.

In terms of property price growth, the apartment sector is currently outperforming the housing sector. This reversal of the usual trend is driven by factors such as initial affordability, higher purchase prices in a high-interest rate environment, and increased security for some in apartment living.

Lastly, a notable trend is the shift from permanent rentals to short-term rentals, often referred to as “Airbnb.” However, the demand for holiday rentals in popular regions has declined in the past three months due to rising interest rates and the cost of living. As a result, some property owners are switching back to permanent rentals, finding them less prone to damage, cost-effective, and providing consistent income.

In conclusion, our market update reveals a mix of positive and negative factors influencing the real estate market. The housing crisis persists due to ongoing property undersupply amidst a rapidly growing population. There’s hope that interest rates have reached their peak, and we may see some relief in 2024. Additionally, the construction cost trajectory is showing promise.

We’d like to express our gratitude to everyone who contributed to the success of the Ray White Surfers Paradise Muscular Dystrophy Ball, raising over $4 million for a noble cause.

As we enter the Spring season, we are excited to offer nearly 60 properties for auction in September, alongside numerous private treaty options. For those aiming to settle into new homes before Christmas and the New Year, please explore the properties featured in this newsletter; you might find the perfect fit for your needs.

All the best. See you in a fortnight’s time.

Warm Regards,

Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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