Coastal property more affordable: report

Australia’s capital city markets performed well during 2009 and last week’s Property Pulse detailed that the larger rural areas had mixed results which were also generally positive. This week’s Property Pulse will uncover the facts about the much maligned coastal markets.

Capital city median prices at the end of January 2010 are recorded at $475,000 for houses and $398,000 for units. Whilst many coastal regions have some exceptionally high quality and expensive properties, median prices are generally more affordable in these markets than they are within capital cities.

Queensland’s Gold Coast was the most active of the coastal markets for house sales during the last 12 months. The Gold Coast recorded 7,038 house sales at a median price of $490,000 which coincidentally is greater than the current Brisbane median house price ($460,000).

Across the housing markets within the regions detailed the results generally indicated no change or a decline in median prices during the year (23 of the 29 regions analysed showed no change or a fall in median house prices). The largest increases in median house prices were recorded in: Greater Geelong (2.1%), Port Lincoln (1.5%) and Newcastle (1.5%). In terms of price growth, all capital cities have recorded stronger levels of growth than the 2.1% recorded in Greater Geelong.

The largest falls in median house prices during the last year were recorded in: Mandurah (-7.6%), Byron (-6.4%) and Albany (-6.3%). Over the last 10 years these regions have recorded some of the strongest levels of average annual growth at: 13.1% in Byron, 12.7% in Mandurah and 11.1% within Albany, highlighting that over the longer term these markets have certainly provided higher than average gains.

When looking at house rentals, capital city markets have been characterised by easing rental rates during the last six to nine months. Whilst capital city rents have eased, most of these coastal markets have recorded increases in rental rates with only: Busselton (-5.3%) and Bundaberg (-1.9%) recording a fall in rents. The greatest rental increases were recorded in: Victor Harbor (9.1%), Eurobodalla (8.0%) and Albany (7.7%).

Coastal regions are generally the markets outside of capital cities which have the greatest supply of units. The greatest volume of unit sales within these coastal regions during the last 12 months was recorded on the Gold Coast with 9,091 sales (more units sold on the Gold Coast than houses).

Across the coastal markets detailed, 11 of the 28 regions have recorded positive growth in the median price of units during the last 12 months. These results tend to mirror capital city markets where unit product, which is generally more affordable than houses, recorded the greatest levels of price growth.

The best performer in terms of median unit price growth during the year was Geraldton where prices increased by 11.4%. Other strong performers during the last year have been: East Gippsland (7.8%), Bundaberg (4.5%) and Newcastle (4.3%).

The greatest falls in median unit prices have been recorded in: Albany (-17.6%), Gladstone (-15.9%) and Whitsunday (-10.8%).

The rental market for units within these coastal areas performed quite well during the year. Only two regions: Gladstone (-7.1%) and Fraser Coast (-2.0%) recorded falls in median weekly rents. The strongest growth in median weekly rents were recorded in:

Bunbury (22.7%), Victor Harbor (21.2%) and Byron (17.8%).

The results confirm that coastal markets have struggled during the last year witnessing low levels of median price growth with falls recorded in many regions. Generally speaking, the global economic uncertainty, increases to the unemployment rate, the falling value of the share market (which is now recovering) and the loss in value of superannuation has hampered coastal regions more than most. We have seen fewer ‘sea changers’ and retirees moving to these coastal markets and a large number of non core assets such as holiday homes were placed on the market as owners looked to reduce their exposure to debt and become more liquid.

Looking towards the next 12 months we anticipate that these markets should record a stronger performance than that witnessed during the last 12 months. The reason being that many factors are creating a more confident market: unemployment is lower than forecast, consumer and business confidence sits at strong levels, inflation is within target and whilst interest rates are likely to climb higher, on a historical basis they sit at quite low levels. The renewed confidence should see demand pick up in lifestyle regions and as a result prices should begin to strengthen.