Experts are hailing Queensland’s Sunshine Coast as the hottest place in the nation to invest in property right now.
Underpinned by record low interest rates, a lack of housing and tight rental market, and a rapidly growing population mean supply is failing to keep up with demand in the region — creating perfect conditions for investors.
Economic growth and jobs are closely tied to every property market’s performance and despite Queensland previously feeling the impact of the mining downturn, it appears increased infrastructure development, boosted tourism figures, surging gas exports and the strongest annual growth in jobs in more than a decade are combining for a comeback.
As property prices continue to slide in many mainland capitals, Queensland’s Sunshine Coast has been quietly kicking goals and defying the national trend.
Leading real estate industry figure Sean Cox of prestige property agent Tom Offermann, said the Sunshine Coast presents one of the best opportunities for capital growth because of its liveability, affordability and future economic prospects.
“Despite tougher restrictions on housing investment, the number of local investors in new property markets are especially active in the sunshine state, with more than 32 percent of buyers in this market in the second quarter of 2018.
“I don’t think there is a location that’s going to offer better investment growth in the future.”
His views are echoed by Lyn Pearsall of Management Rights Sales, who claims the Sunshine Coast “is on the cusp of the highest growth period in its history”.
Speaking of the MLR sector specifically, Pearsall said: “Large ‘permanents’ are always in demand particularly from new entrants to the market because of the guarantee of a higher body corporate salary to cover loan repayments, however these are in short supply on the Sunshine Coast.
“What we are seeing instead is the accumulation of buildings being purchased through syndicates and partnerships (disclosed and undisclosed) looking for a better ROI than term deposits.”
When asked about ‘off-the-plan’ sales, Peter Brewer, director of PBB Consult said: “There are currently a number of development projects in progress, and we expect the interest for the caretaking and letting rights to continue to be high provided the developers maintain reasonable expectations in terms of the price and quality of operator.”
Michael Kleinschmidt, legal practitioner director of Stratum Legal concurs: “Sometimes the bigger holiday complexes are not even hitting the market; a direct enquiry leads straight to a sale. Competition for prime sites is very high and deals are becoming more complicated and experiencing tougher due diligence.
“Right now however, there’s a terrific window of opportunity where people can capitalise on the immense growth we’ve seen in the southern states.”
Asked if he believes that issues surrounding finance may have an impact, Kleinschmidt adds: “Some bank policy is tightening up and more work is necessary to source appropriate finance particularly in the larger complexes but the situation is fluid. Some banks now apply more difficult lending criteria, either to start slowing down the rate of increase to their loan book or potentially considering risk exposure if there is an economic down-turn (and an associated down-turn to domestic travel and accommodation needs).
“There is however, still a lot of value to be found. Areas tipped to enjoy above average growth over the next year include suburbs like Tewantin, Noosa Heads, Buddina, and Forest Glen – all of which have posted growth in excess of 13 percent in the year to October 2017.”
In a recent report, Herron Todd White noted an increase in investor activity in the Sunshine Coast market.
“Sydney and Melbourne have shown unprecedented growth over the last five or six years,” said Sasha Jancevski of the RAAS Group. “Now that those markets have plateaued there a lot of people saying; ‘Do we take our profits and reinvest them, or do we move up north and get better value for money?’
Sean Cox agrees: “We are seeing unprecedented activity in the Sunshine Coast property market, with strong interest from both local and interstate investors. We’re seeing growth across the board with investors also looking to buy in the less expensive suburbs, where new housing developments were popping up, such as Caloundra, Sippy Downs, Birtinya and Mountain Creek.
He adds however, that investors who are not already in the market, need to act fast. “If you were here three years ago, you could have bought between $400,000 and $500,000, now you’re looking at anywhere from $600,000 plus, so it’s definitely on the up.”
Contrary to the management rights market, he said that lending restrictions and the impact of the banking royal commission has had little impact on the region’s prestige market. “The vast majority of deals being done at the top end of the market are cash,” he said. “They’re self-funded retirees who’ve already sold their principal place of residence.”
Local agents say the region is crying out for more investment properties to cater to the needs of the increasing population.
According to Sasha Jansevski: “There is an increase in migration from outside the region and reinvestment from people within the region into the property sector, contributing to increased building approvals and economic activity”.
Well known as a hub for tourists, retirees and summer holiday getaway seekers, the coastal city is thriving as population growth is bringing opportunities in construction, as well as business and services.
Bypassing Brisbane, many migrating north from Sydney are plunging into the cooler property waters of the Gold Coast and the Sunshine Coast and with the perfect coastal lifestyle on offer and a stronger property market, they are ripe for the picking with both averaging gains of about six percent.
According to demographer Bernard Salt, the Sunshine Coast’s population of around 298,000 residents is set to rise to 550,000 in 23 years, which will require more than 100,000 new homes to be built. The latest Real Estate Institute of Queensland figures show the rental vacancy rate on the Sunshine Coast is just one percent, with Caloundra having the tightest vacancy rate in the state at just 0.5 percent.
Amongst the thousands of southern migrants relocating north, there is a clear preference for beachside living, with the Gold Coast and Sunshine Coast favoured over Brisbane.
About 5,200 Sydneysiders and 2,500 Melburnians moved to the Gold Coast in FY17 and a further 1,500 migrated from Melbourne to the Sunshine Coast.
This has translated into better property price growth in the region, with house prices rising 6.1 percent on the Sunshine Coast compared to 3.1 percent in Brisbane over the 12 months to June 2018.
The coast is now more expensive than the state’s capital, with median house prices of $650,000 and $589,000 respectively compared to Brisbane at $536,000. The last time the Sunsine Coast had such a substantial premium to Brisbane was in July 2008.
While affordability is part of Queensland’s attraction, massive growth in Sydney and Melbourne property prices over a prolonged period means southern migrants can afford to buy wherever they like.
“We’re already seeing an increase in Australian expats buying back into the market, but if accessibility becomes easier, we’re expecting a more aggressive upward trend in high-end premium property,” said Brewer.
According to the Sunshine Coast Daily, the rising population is stimulating the construction industry with new developments boosting the region’s economy. There were 4576 total dwellings approved for construction on the Sunshine Coast in 2016-17 and Australian Bureau of Statistics data shows there were 2242 new dwellings approved for construction halfway through this financial year.
“It’s good news for investors, who are currently achieving healthy rental returns of around five percent,” adds Brewer.
“And I believe the increased international access the new airport will provide will likely change the profile of buyers in the Noosa region. The opportunity to work remotely, set up a home business or take up one of thousands of new jobs is a big drawcard for the Sunshine Coast.”
The fortunes of the coast property market now appear to be propelled by some solid fundamentals, with economic growth projected to accelerate from 2.5 percent in FY17 to three percent by FY19, supported by the biggest infrastructure spend since the 2011 flood recovery.
While Brisbane house values grew by just 2.5 percent and units fell by 2.2 percent (to June 2018), it’s a vastly different picture up the highway where there’s a new confidence, not only among buyers, but developers too.
The region is in the midst of an infrastructure boom, with billions of dollars being invested in upgrading and creating new facilities.
Major infrastructure upgrades such as the $1.6 billion Bruce Highway lane expansions and the $347 million expansion of Sunshine Coast Airport to accommodate international flights are in development.
The Maroochydore CBD and surrounding areas with strong infrastructure and tourism projects are a game changer,” said Pearsall.
SunCentral Maroochydore, established by the Sunshine Coast Regional Council in 2015, is the company overseeing the design and delivery of the new $2.1 billion city centre, and CEO John Knaggs says the major precinct has garnered interest from a range of sectors including technology, professional services, health, education, hospitality and government. “Because the new city centre is being built on a greenfield site... we have an opportunity to create a city centre with unprecedented communications and technological abilities.”
Sunshine Coast Mayor Mark Jamieson says the new Maroochydore city centre aims to be one of the ‘most digitally advanced’ in the country.
“More than $10 million in underground infrastructure will ensure the latest technology is available, while an international broadband submarine cable landing in Maroochydore will provide Australia’s fastest data and telecommunications connection to Asia and the second fastest to the United States,” said Jamieson.
Economics and property professor Mike Hefferen, formerly of the University of the Sunshine Coast and QUT, says the coast is riding the wave of a $20 billion infrastructure investment, including: the new 450-bed public hospital costing $1.8 billion dollars in Kawana that has the capacity to expand to 900 beds by 2021 effectively establishing it as one of the largest health precincts in the southern hemisphere and an international broadband submarine cable project that will position the coast as Australia’s leading smart city region and putting it on international business maps as a leading investment destination for commerce and industry.
Hefferen adds the big spend is fortuitous timing, with several large projects converging over the past three years.
The area, he says, sells itself, with an attractive climate and relative housing affordability – compared with major cities – fuelling rapid population growth.
While the council has achieved some broadening of the economy, Hefferan said the population is growing faster than jobs can be created, cementing the Coast’s future as a commuter centre for Brisbane – not necessarily a bad thing, he argues.
“People might be earning in Brisbane, but they’re still buying property here and spending their money here,” he says. “But if that’s the case, good, safe quick transport infrastructure into Brisbane is essential, and that means a heavy rail connection.”
To this end the Sunshine Coast Regional Council is also planning light rail by 2025 and a Business and Technology Park adjacent to the new university.
Mosaic Property Group is just one developer proving the old axiom that private investment flows from public investment. Mosaic, and is confident about the future prospects for the market.
“Years of consideration and research have gone into this strategy and we’ve been closely watching the local economy and its growth as a regional city,” said Mosaic managing director Brook Monahan.
Mosaic has two residential developments at Kings Beach, Caloundra, and another due for completion at the end of 2018 at Coolum Beach.
It’s recently launched Avalon; a luxury, 87-apartment, $106 million development on the riverfront in Maroochydore will include an artisan cafe, and be another step in the company’s long-term strategy to invest in the coast, based on the region’s 20-year economic plan, infrastructure and jobs growth, and an undersupply of luxury apartments.
The company says sales in Avalon have been strong, with locals and residents from Brisbane, Sydney and Melbourne buying either as an investment, a holiday home, or permanent sea change. Their second Coolum Beach project, First Bay, is set to launch in April 2019.
“The raft of infrastructure projects that are delivering exceptional lifestyles are game changers,” adds Peter Brewer. “Astute property investors who recognise what is happening, and take action to secure the best located property they can afford, will reap the rewards of their foresight.”
A prime example of this is the Shakespeare Property Group that invested over $100 million in the Novotel Twin Waters property, and their announcement of the construction of a new $8 million convention centre at the hotel.
While the big-ticket projects appear to be moving in the right direction, we queried whether the government is as supportive in terms of business and operational development?
“Yes and no,” said Michael Kleischmidt. “The current Sunshine Coast council has been pro development as part of its strategy to put in place larger projects which will drive development and investment throughout the rest of the local. Conversely, there are some signs of council’s mis-appreciation of the difference between Airbnb and traditional management rights means that Council is on the back foot in relation to the negative impacts of Airbnb and ameliorating them whilst not negatively impacting upon the management rights sector.
“External short-stay booking operations, such as Airbnb, are both a threat and an opportunity. As a “channel” for astute management rights operators Airbnb has a certain attraction and is proactively being used by some clients as part of their marketing mix. For other clients it represents a significant problem including in the traditional areas of concern being lack of guest supervision and increased costs for the balance of the letting pool as Lots are taken out of the pool for Airbnb letting.
Lyn Pearsall agrees: “There is a reasonable level of support at state and federal levels with some significant road infrastructure projects in progress. With the anticipated future population growth expected in the region however, stakeholders will need to lobby hard to ensure the region delivers adequate infrastructure to cope with additional demand.”
And when asked how they view the market post 2019, the experts agreed: Slightly weaker based on the anticipated East Coast down-turn that will impact on development approvals and construction meaning less off-the-plan complexes coming onto the market.
If there is a reduction in consumer spending and domestic travel then the competition for prime holiday and permanent management rights complexes is likely to go up while the demand for secondary (and below) holiday complexes is likely to diminish.
The potential for bed taxes has caused some concern and clear statements in relation to that issue by the local authorities in the region would remove some uncertainty.
In our experience the Sunshine Coast region has experienced a strong recovery in holiday lets with some visitors who had previously stayed away due to adverse weather events or economic conditions, now beginning to return.
Direct flights to the Sunshine Coast regional Airport from New Zealand (Auckland) have provided some excellent results and once the Airport expansion is completed then significant opportunities are expected to arise depending on where direct flights in and out of the Airport are negotiated for.
The Sunshine Coast should continue to perform strongly throughout 2019/20 with plenty of large-scale projects feeding employment opportunities and population growth.