Coastal Locations Booming in QLD, but is it a False Positive for Investors?

For many coming out of Lockdowns around the country, who wouldn’t be attracted to the sun, sand and surf that is the Queensland coast?

I know many seaside locations that are fast becoming the destination of choice for many.

You only need to pick up a paper or check a property market headline to see that it is all about Coastal locations right now.

Brett

While there is not doubt this will be a growing trend as Lockdowns ease in our southern states, but is it an opportunity investors should be looking at?

It almost seems like the perfect storm, as the work from home phenomenon adds and extra layer of positive momentum.

If you believe the headlines, people will be leaving our capital cities in droves in favour of these lifestyle destinations as they can now do everything from home…. apparently.

So, is the time right for investors to pounce?

Here are my thoughts

A Deeper Level of Analysis

I have explained the difference between Technical Analysis vs Fundamental Analysis previously.

In short, technical data can change weekly, monthly or quarterly (think short term), whereas fundamental data can take decades to shift (longer term trends).

Technically speaking and by that, I mean by using technical analysis, all signs point to this being the right time for investors.

There is no doubt that there will see a sharp rise in demand from people relocating and in time this will be compounded by the usual investors chasing the next hotspot.

In the short term I would suggest that the rise in demand will be greater than the supply on offer and this will cause an imbalance leading to growth.

But when analysing the fundamentals, long term data suggests a different story.

1. Employment

Granted there will be more people that will be able to and will choose to work remotely.

But in recent studies coming out of Norway and Chicago, it suggest it may only be possible for up to 37% of our workforce to work remotely.

With ABS suggesting these numbers are already circa 30%, that leaves an additional 7% that could choose to take up this option.

UnemploymentI would suggest that not all will take up the option as many will choose to stay put and of the ones that do, I suggest that would not all choose the same single destination.

This will leave a higher demand for employment should people choose to relocate and cannot work from remotely.

Considering the strongest economic drivers in these locations are generally Tourism and Retail, they may be in for a difficult search.

While this may evolve over time, it will happen over the short to medium term.

2. Wages Growth

As most Economists predict there is going to be very little wages growth over the next 4 – 5 years as both economic growth and inflation remain at all-time lows.

Growth Of WageSo, I would suggest targeting locations where wages have been and will continue to grow in value will be crucial.

Locations where there are multiple pillars to the economy, more professional services, businesses, higher paying jobs etc will be paramount.

This type of demographic has the ability to pay more for homes and prices will continue to grow.

They also have higher rates of savings and can ride out the storms when they arise, while other locations live pay cheque to pay cheque.

Therefore we target incomes growing faster than the average and quite considerably above the state average.

Before rushing in, it may pay to analyse the wages data in some of these more preferred lifestyle destinations.

In the Whitsundays, while data has previously been slightly ahead of the average, at the last cencus it fell behind.

Weekly Family Income

In Noosa (my lifestyle destination of choice) the average suburb has barely kept up with the Queensland average over the years.

Weekly Family Income2

While looking Surfers Paradise but wages have not grown when comparing to the Queensland average.

Weekly Family Income3

To highlight my point and true to form, it is these locations facing the highest level of mortgage stress in the current environment.

These suburbs are leading the way with greater than 10% of mortgages having been deferred during recent months.

They will likely continue to face more stress once the Jobkeeper and Jobseeker cease, and the banks mortgage holidays come to an end.

Mortages

Supply

We will see an increase in demand in the shorter term, the other side of the equation is supply and in particular, the supply of new properties and available land.

Like most central business districts, there is tight supply around the inner ring.

But in contrast to our larger capital cities, in these locations within a 5-10km radius and beyond, there remains a range of new developments and an abundance of developments and more new land.

There is probably further capacity to continue to build for another 5 and even 10 years and beyond in some cases.

This is hardly the level of tight supply and scarcity you should be targeting as an investor.

Location

In Conclusion

There certainly seems to be growing media attention, along with the superficial numbers pointing to positive short-term signs for Queensland’s coastal markets. Property Investor

In reality, short-term growth may be beneficial, but with the high transaction fees and taxes, it doesn’t make financial sense to continually cash in and out of markets.

Even holding in these markets is not effective as a short term hit soon fades once the cycle and latest trend moves on.

The risks are also significantly higher, as people only consider the best-case scenario to fit with their short term plan.

To create superior, long term wealth, focus on fundamentals and longer-term data, to increase your chances of above average returns while significantly lowering risk.

Employment, Wages Growth and Supply and Demand are all critical factors that these new “hotspots” always lack.

As an investor, before investors diving in headfirst, look below the surface, look longer term and don’t always fall for the hype.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Metropole

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.
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Brett Warren

About

Brett Warren is Director of Metropole Properties Brisbane and uses his 13 plus years property investment experience to advise clients how to grow, protect and pass on their build their wealth through property. Visit: Metropole Brisbane


'Coastal Locations Booming in QLD, but is it a False Positive for Investors?' have 1 comment

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    October 16, 2020 Tony Keetley

    QLD coastal boom is only part. We are seeing a treechange boom 100-200k radius North West of Brisbane. Valuable grazing land being bought for up to double its value. Returns from cattle would be non exsistant at these prices and the parcels are to large for tree changers to manage. Yet they buy even in near drought conditions.

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