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Gold Coast loses its lustre with international developers

Unless you’ve been living under a rock, you probably know that Queensland’s property market has had a less than sunny run lately.

A dark cloud has shrouded many parts of the Brisbane housing sector and Gold Coast real estate prices have fallen substantially in recent months as buyers look for their little piece of paradise elsewhere.

Some hefty discounting is going on

To highlight the issues facing Queensland’s most famous holiday haven, South Korean company Lotte Engineering and Construction, has been forced to slash the asking price of apartments in its $650 million Salacia project by almost half as the construction giant struggles to move its Gold Coast units.

Lotte is not the only casualty of the toppling Gold Coast market either, with receivers stepping in to discount apartment prices by a whopping 30 per cent in the Oracle Broadbeach tower last year, along with sharp reductions in the price of new apartments in many other failed projects in the area.

Lotte Engineering and Construction director Harrison Byun said although their apartment prices have been reduced by 40 per cent in response to only a quarter of the stock selling to date, the project hasn’t been a total loss for the South Korean based developer.

Launched in 2012, plans for Salacia Waters includes 470 apartments, as well as villas, shops, restaurants, pools, a gym and a 72-berth marina. These plans have been put on hold indefinitely though, with the company deciding to sit it out until the market improves.

According to a report in The Australian, the development is yet to move beyond the first stage, in which 131 dwellings were initially priced between $430,000 for an 87sq m unit and $3.1m for a 369sq m penthouse.

Six apartments were sold in the first week after the launch in 2010 for a total of $7.27m, and the company said sales had been in excess of $15m, with Lotte reporting the sale of a four-bedroom penthouse for $2.3m.

“We have not been immune from the market slowdown, but we have continued to see invigorated interest in our currently highly competitive price points, which have been revised to meet the market,” saud Byun.

How about an incentive to buy?

In an attempt to resurrect flagging sales in the project, Lotte is offering incentives for buyers such as free golf memberships, and is also engaging with local real estate agents to relaunch another of their Gold Coast apartment developments, Victoria Towers.

The $220 million complex, intended to cater for buyers over the age of 50 with facilities including an indoor bowling green, library and boutique cinema, previously offered apartments from anywhere between $400,000 to $1 million.

However with the relaunch it’s anticipated that prices will be cut significantly.

Lotte previously announced that it had targeted the Gold Coast because of the region’s strong population growth and Australia’s stable economy. Now though, the company joins a long list of developers who have been burnt by the area’s falling prices and waning buyer interest.

Some developers have pulled the pin entirely on their projects, whilst others have opted to rent out completed apartments rather than slash their sale prices.

No sign of improvement

Gold Coast property market analyst Bill Morris said the market had been flat since the beginning of the 2008 global financial crisis and showed no signs of improving, with 250 high-rise units selling annually, well below the average of 1,500.

He said there were 490 units for sale on the Gold Coast, and of those, 325 were luxury apartments priced at more than $700,000.

This glut of stock would not be such an issue for developers if there were willing buyers in the market. But as often happens when consumer confidence takes a dive, holiday and lifestyle areas such as the Gold Coast are always the first to lose favour.

So, is anyone interested in a bargain apartment that comes with sun, sand and surf? And don’t count on the Commonwealth Games to lift the Gold Coast market. It won’t!

 

 



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Gold Coast loses its lustre with international developers' have 5 comments

  1. Avatar for Property Update

    May 16, 2012 @ 12:56 pm Bruce

    Funny, Michael Matutsik paints a very different picture in recent articles about the Gold Coast and he is always spot on. Remember the Gold Coast is not just made up of apartments but a much broader range of real estate and this is plain negative scare mongering.
    Dissappointed in this article. And no I don’t own an apartment up there!

    Reply

  2. Avatar for Property Update

    May 16, 2012 @ 2:29 pm Michael Yardney

    Thanks for your comments Bruce
    If you’re following my blogs, you’ll know I also respect Michael Matusik’s views and frequently quote them and publish his articles.
    That does not mean we always agree on things. The short term fate of the Gold Coast market is one on which we disagree. And yes I realize it’s not all apartments. I know the Gold Coast market very well.
    In fact I’m up there for a week in a 10 days

    Reply

  3. Avatar for Property Update

    May 16, 2012 @ 6:38 pm STIVEN DENKOVSKI

    Michael,
    Thanks for the market update, yes I agree with you the the Gold Coast unit market is something I wouldn’t invest in, especially when, large firms like South Korean company Lotte Engineering and Construction, has been forced to slash the asking price of apartments in its $650 million Salacia project by almost half as the construction giant struggles to move its Gold Coast units. when question marks appear, consumer confidence drops. It’s also great to see you have a different opinion to most investors etc. Keep up the great work.

    Reply

  4. Avatar for Property Update

    May 16, 2012 @ 6:47 pm Michael Yardney

    Thanks for your thoughts Stiven and the words of encouragement

    Reply

  5. Avatar for Property Update

    May 25, 2012 @ 1:36 pm Sam

    There does appear to be signs of improvement across the house and land market but in terms of medium density product especially to the northern end of the Gold Coast, its dead in the water. There are at least 3-4 large scale developments gone into receivership and therefore prices will continue to fall. People have to remember that the majority of new developments on the coast naturally carry a premium price tag and are more vulnerable to market conditions. I wouldn’t say stay clear from an investors point of view, in fact now would be an ideal time to buy with heavy discounting as developers are forced to sell, however don’t expect to see anything remotely similar to the unsustainable growth experienced pre GFC. Hopefully this was a lesson learned.

    Reply


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