No shore thing
September 7, 2011 Leave a comment
Is it too soon to buy a coastal retreat?
The coastal property boom hit the rocks, with too many homes and too few buyers
Many Australians’ vision of a relaxing second life by the sea has collided with the reality of increased debt, higher interest rates, faltering consumer confidence, oversupply and most telling falling asset values.
Home and apartment prices have fallen in most leading lifestyle market during the past three years by more than 50 per cent in some cases after several years of astonishing growth fuelled by development, media hype, slick advertising and the pre-global financial crisis debt frenzy.
Now, like a hungover drunk swearing off alcohol, households are focused on saving and debt reduction, eliminating any unnecessary expenditure from their budgets, and holiday homes are at the top of their “new austerity” list.
Combined with forced developer sales, a second wave of properties is coming on to already saturated markets with virtually no demand at present prices, suggesting there may be further price falls through the year unless some unexpected catalyst emerges.
Analysis by a property research group of 10 lifestyle destinations across Australia from Margaret River in Western Australia to the Myall Lakes in NSW shows that properties are spending an average 70 weeks on the market before being sold or withdrawn.
The research shows in many locations lifestyle property is in a very bad place. The problem, according to the researchers, is new year delivery of supply from sellers who have been waiting for the market to improve. However, there is a sense prices may not have bottomed out. So a scenario has developed where vendors are taking property to market to cut holding costs, hoping to get more now than in six months, but they are confronting potential buyers who think the same that prices will fall further and are prepared to wait.
Bargains are there, but for long term buyers: seachangers and retirees, who can wait for a rebound.
As a general rule, the worst performing markets are in, where else? Queensland coastal locations, especially in developer-created or more isolated areas, although even established, previously reliable lifestyle economies such as Noosa have collapsed. The town is in poor shape with banks in control of property that would have been worth if the developer hype was to be believed almost $1 billion at the height of the lifestyle boom.
In Western Australia’s beautiful Margaret River region, RP Data estimates house prices have fallen almost 36 per cent from their pre-GFC peak but agent Kelly Donaldson from First National isn’t so sure.
“What those figures fail to take into account is the style and type of property being sold,” Donaldson says.
Donaldson says Margaret River was “absolutely booming” before the global financial crunch with house prices doubling in a couple of years.
Land speculation was also rife but those investors, many of them inexperienced, ended up getting burned when the economy turned and they have left the market.
“There have definitely been some distressed sales,” he says. “Supply is high and demand really low, and that needs to come back into balance but it could take a while.”