As the Sydney and Melbourne property markets cool, realtors are suggesting that the Gold Coast could be the next hotspot. But, they also recommend that an investor explore all factors that attribute to a hotspot being created before they buy in an area.
The city area of the Gold Coast is expected to continue to attract investors from Sydney and Melbourne, as the market cools in these areas. Many realtors have also noted that interest in the Sydney and Melbourne markets has shifted to the Gold Coast as the property market’s in Sydney and Melbourne have become more unaffordable.
Investors are said to be flying to the Gold Coast and buying an investment property on the weekend, while others are buying property unseen over the Internet. This is occurring because property prices on the Gold Coast have not changed much, and rental yields are relatively high. In addition, vacancy rates are low.
Another drawcard for the Gold Coast is the 2018 Commonwealth Games will be held in this location and this means a greater spend on infrastructure and future economic development. In fact, it is estimated that more than $10 billion dollars has been spent in this region over the last 24-months. This is a combination of government and private spending, which has increased consumer confidence and optimism in the area.
Realtors are suggesting that property prices in the area will rise by 7 to 11% during 2016 and that rental yields will rise by 8% over the next 12-months. Some realtors feel that the area will prosper over the next 3-years with both rental yields and the capital growth of property rising.
Robina, the centre of the Gold Coast, has more than a billion dollars’ worth of investment currently being facilitated. This includes a private hospital, upgrades and expansion to existing infrastructure, as well as the building of residential homes and commercial property.
The auction clearance rate for the region is over 50%, with lower-priced homes and apartments making-up the bulk of the market. Higher-end property that is more expensive has had marginal sales volume.
Of course, there are several factors that will affect the Gold Coast and other property markets across Australia, such as population growth, interest rates and, business and consumer confidence. All of these factors dictate to how the property market will perform.
• The Australian economy – The economy in Australia is slowing and this will have an effect on how the Reserve Bank of Australia (RBA) will adjust the official cash rate. This, in turn, will play a crucial role in how the property market behaves; lower rates will increase activity and higher rates will reduce it.
• The Australian Prudential Regulation Authority’s guideline changes – New lending guidelines have been brought into play that have slowed investor and owner-occupier home buying demand. The new regulations have reduced investor and home buyer numbers who have a marginal ability to service their loans. It will also make it harder for investors with a larger portfolio to buy more property, especially when they predominately rely on the rental income collected to service their loans.
• Population growth – While the growth rate of the Australian population is expected to climb, this rate will be slow. The largest rate of population growth in Australia is expected to occur in Sydney, Melbourne, Brisbane and Perth.
• Interest rates – It is highly likely that the official cash rate will remain low throughout 2016. The rate may even be reduced further if the Australian economy remains slow.
• Business and consumer confidence – While business and consumer confidence is climbing it’s been slow on the up-take. A change of government leadership has seen marginal increases and with an election looming, confidence may dwindle.
• Job growth and unemployment rates – If growth in the job market remains strong and unemployment continues to rise, then this, in turn, will lead to an increase in consumer confidence.
While hotspots can, and do exist, often these markets are attributed to a number of factors that are often short-lived. Property investment should be a long-term venture and this means buying in areas that have predicted long-term growth.
It is estimated that interest rates will remain low until 2017 and that there will be marginal wage growth in Australia, if this is the case then some suburbs will be affected more than others.
The areas that will be most affected by rate change will be rate-sensitive blue collar suburbs, regional locations and areas where the number of first home buyers are high. Property values are anticipated to rise in affluent, mid-centred suburbs in capital cities where locals don’t depend on CPI wage rises and interest rates rises won’t have an impact on disposable incomes.
Property hotspots can be found nationwide, in many different locations. Typically, a hotspot will be in an area that is popular and where buyers are prepared to pay a higher cost due to the location being favourable. Therefore, buying in an area earmarked for growth will allow you to make a good return later down the track. But, it’s vital that you don’t buy property at a high price due to market readjustments, as this could be costly later down the track, especially in terms of affordability.
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