by Trish Riley - Editor Resort News
21st January, 2020
The Sunshine Coast: An economic revolution
The Sunshine Coast is the strongest market in Queensland at the moment and indeed one of the strongest in Australia.
According to report author Terry Ryder of Hotspotting, the Sunshine Coast has become Australia’s most compelling economic growth story - an evolution built on infrastructure and innovation.
“Spurned on by the massive $20 billion infrastructure pipeline of projects, the Sunshine Coast is evolving rapidly from tourist destination to international city, out-performing larger and higher-profile markets such as Brisbane and the Gold Coast.
“I see the events happening on the Sunshine Coast as an economic revolution,” said Ryder. “Nothing supports property price growth like major new infrastructure spending, which generates jobs, economic activity and improved amenity for residents.”
And that appears to be true. The latest edition of The Price Predictor Index has found that the Sunshine Coast has more locations with rising sales activity than any other municipality in Australia. And that kind of outcome is likely to create sustainable long-term price growth.
Akin to a sleeping giant, the scale and strength of the Sunshine Coast as a region is often underestimated. It is currently the 10th largest urban area in Australia – but experiencing a higher percentage population growth than Sydney, and expected to overtake the NSW Central Coast to become Australia’s ninth largest urban area with a projected population of 580,000 within 20 years.
The region boasts an economy worth $17.74 billion, having grown by around 29 percent in seven years and 12 percent in the previous two, effectively making it one of the largest regional economies in Australia – and on infrastructure it’s outspending several of the nation’s capital cities.
Major infrastructure upgrades include the $1.6 billion Bruce Highway lane expansions and the launch of the first five-star hotel development, among others.
Just one of the major infrastructure projects in the area is the $347 million Sunshine Coast Airport Expansion Project (SCAEP) that will connect the Sunshine Coast on an international scale and deliver one of the Sunshine Coast’s most significant transport, tourism and economic infrastructure assets, adding $4.1 billion to Gross Regional Product between 2020–2040, and opening-up new direct destinations in Australia, the Pacific and Asia to benefit Sunshine Coast residents and visitors.
Central to everything that’s happening in the region however, is the development of a Sunshine Coast CBD from the ground up – a $5 billion enterprise that is now under way on a 53ha greenfield site in central Maroochydore.
The new city centre has attracted investment from local, national and international firms interested having an early presence in the growing region, and is expected to contribute more than $350 million to the region’s economy in the next five years and generate $5.9 billion in expenditure by 2040.
The new CBD will be host to the most technologically advanced infrastructure foundations in Australia, ranging from high speed digital connections to Australia’s first underground pneumatic waste systems, and from 2020 is expected to deliver Australia’s fastest telecommunications connection to Asia and the second fastest to the United States, attracting global digital giants like Facebook, Google and Amazon.
The health, education and technology sectors – including the new $5 billion health precinct - are bringing new residents to the Sunshine Coast and this is providing strong impetus to the real estate market, notably at the top end. The median house price for the region has increased 30 percent in the past three years, while the median apartment price has jumped 20 percent in the past year.
Because of the large number of knowledge-based start-ups and small businesses such as information technology, clean-tech, creative industries, aviation and education, demographer Bernard Salt has described the Sunshine Coast as “the entrepreneurship capital of Australia”.
It is credited with being one of the top 10 leading regions in the country for employment generation, experiencing a solid, progressive employment growth of 13 percent increase during the past five years and adding more than 20,000 jobs over the same period.
The $1.8 billion Sunshine Coast University Hospital (SCUH) has created 5,000 jobs since opening in April 2017 and the new Maroochydore City Centre is forecast to provide 15,000 jobs over the lifespan of the 20-year project and inject $4.4 billion into the economy.
The Sunshine Coast International Broadband Network will deliver 800 new jobs once it’s operational next year, and one of Australia’s fastest growing universities, The University of the Sunshine Coast will add an additional 8,000 students over the next six months.
“Economies reliant on tourism traditionally fail to deliver sustainable real estate growth, but the Sunshine Coast has diversified and strengthened and is now, I think, the nation’s most compelling growth story,” said Terry Ryder.
While the Sunshine Coast might be better known as a holiday destination, it does however, also have a significant local population – in some cases, hundreds of thousands of people who live there all year round – so what does this mean for them?
“What this means is that these markets have solid fundamentals primed for growth, including the economic principals of demand and supply that apply upward price pressure,” said Peter Brewer, director of PBB Consult.
“So when it comes to investing into the property market, it’s important to ensure you are maximising the ‘effortless advantage’ or value uplift from public investment into new or upgraded infrastructure and amenity.
“An incredible 22 percent median apartment price growth has been experienced over the past three years,” he said.
“This growth, combined with a consistently low vacancy rate averaging 1.4 percent over the past five years to 2019 – which is essentially full occupancy – bodes extremely well for the management rights sector,” said Lyn Pearsall of Management Rights Sales.
“Apartment rental yields were at 5.1 percent as at January 2019,” said Pearsall, “significantly higher than those being achieved in Sydney and Melbourne, which have fallen to record lows of 3.8 percent and 3.9 percent respectively.
So has the tide swell of investment and development impacted on the management rights sector at all?
Glenn Miller of ResortBrokers said: “The management rights market has been reasonably stable over the past 18 months, with demand for larger, high-net management rights very buoyant. Those at the lower end of the scale are taking an extended period on the market to achieve a sale, due to a lower demand and unrealistic price expectations.
Lyn Pearsall agreed: “We’re seeing a mixed bag; strong enquiry for high-net properties that can be syndicated or purchased in partnerships - giving investors up to 20 percent return on investment. We are also seeing a resurgence in enquiries for smaller properties that can be operated as an ‘add-on’, or by a single person or retired couple supplementing their income.
And what of new developments?
Glenn Miller said that ResortBrokers are aware of only 15 new builds under construction across the region, with another eight that are in final approval/pre-sale stages that will have management rights attached.
Michael Kleinschmidt, legal practitioner director of Stratum Legal believes that developers are continuing to acquire sites for future development, and that both the more affordable properties, and those at the top end, are moving quickly.
“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,” he said.
“There is no doubt however, that smaller infill development is easier to achieve while larger scale development is quite difficult, for example the Sekisui Development at Yaroomba.”
With the infrastructure projects and development shifting the region towards long-term investment and growth, are the sales favouring short- or long-stay complexes, and has there been any shift in the types of buyers presenting themselves?
“We continue to see strong sales both short- and long-term complexes,” adds Kleinschmidt, “with the larger properties drawing premiums.”
Glenn Miller agrees, adding that while the Sunshine Coast has not traditionally attracted Chinese buyers, they are starting to receive enquiries from this sector – albeit, almost entirely looking for permanent complexes.
“Interstate and intrastate buyers still make up 90 percent of the buyer market, but we are also seeing strong growth in buyers out of South Africa and Zimbabwe. The Kiwi market has dropped off dramatically in the last few years.
“We are also seeing a change in the demographic of buyers from the traditional “baby boomers to millennials, and couples with families, which in turn has a significant impact on the type of managers residences required,” added Miller.
Brewer expands: “The Sunshine Coast has enjoyed strong occupancy (both short and long term letting) over the last three to four years. Historically, there were greater fluctuations on a year to year basis across the three distinct markets of Noosa, Maroochydore and Caloundra – now that the southern end is ‘coming of age’, occupancy is perhaps a reflection of the Sunshine Coast maturing.
There are varying views as to whether management rights sales are cyclical with Brewer believing that there is little to stop the shifts in political policies unsettling the market to a degree, but he also notes that the number of interest rate cuts have tended to make management rights lending extremely competitive.
Glenn Miller and Michael Kleinschmidt however, say that holiday complexes seem to sell more in the spring with interest increasing after people have visited the area during the traditional holiday periods.
Considering that the last review of the Sunshine Coast was a full 12 months ago, and the market was still being heavily influenced and affected by the banking royal commission, I ask those on the ground what, if any, are the potential impediments to sales at the moment?
Lyn Pearsall and Peter Brewer believe the spectre of the banking enquiry is still a factor, and that the scrutiny of every aspect of the ‘purchaser’s’ spending has made lending very difficult.
“Another aspect is the critically important function of disclosing accurate profit and loss reports,” says Lyn. “While there may be a lack of clarity with regard to wages for properly managing the building, this needs to be clarified.
For Glenn Miller, it’s the frustration of trying to market older accommodation facilities that have not been maintained in line with consumer expectations in terms of the quality of fittings and fixtures. “The accom sector is evolving quickly – particularly in the short-stay arena, and despite the progress and development (and competition) evident all around them, the individual owners or bodies corporate don’t see the correlation between the value of their assets and their ongoing returns.”
Michael Kleinschmidt is direct. “Despite the very positive outlook for the region generally, there is a growing trend for bodies corporate to seek to impose more control during a transfer process. This together with the Gallery Vie amendments still being required by financiers is definitely making them more difficult to obtain.
“There also appears to be a trend (and not just on the Sunshine Coast) of single-issue committees being elected with an agenda of reducing body corporate levies, which then leads to dispute with the caretaker. Unfortunately, certain law firms have been facilitating advancing combative strategies with a view to trying to terminate management rights and there is both increasing costs to management rights operators and increasing litigation as a result. As with any investment, I would urge significant attention to all aspects of the process.
Local agents say the region is crying out for more investment properties to cater to the needs of the increasing population.
According to a Lyn Pearsall: “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.
The latest National Visitor Survey indicates that a record 3.5 million domestic visitors travelled to the Sunshine Coast in the year ending September 2018, generating record expenditure of $2.4 billion, a rise of more than 18.4 percent. With the new runway coming on line in 2020, combined with the already strong organic growth, demand for accommodation is going to continue to increase.
Expect the Sunshine Coast to continue being a region on the grow… as long as all tiers of government continue to recognise its economic importance – and treat its infrastructure requirement with the gravity it deserves – then there’s little doubt the Sunshine Coast will continue to forge ahead.
So how do my venerable participants view the next few years? In a word – positively, but Peter Brewer sums it up.
“Even without the stats, there are plenty of positive signs of what’s to come for the Sunshine Coast,” said Brewer. “There will be adjustments – as with any form of growing pain – and aside from the development and economic growth, the Sunshine Coast will always be able to offer what it always has; a great place to live, a desirable place to holiday and now, an easy place to get to from any airport.”
The local tourism industry means the Sunshine Coast continues to maintain a thriving economy – propping up small and big businesses alike, and generating a healthy property market that welcomes new buyers in master-planned communities and established suburbs.
Considering the current and planned infrastructure developments for the Sunshine Coast, population and economy growth are looking healthy for the foreseeable future, based on the Sunshine Coast’s 20-year economic plan. If their predictions come to fruition, now could be the ideal time to buy a property in the region.