Oh, We Do Like To Be Beside The Seaside

The Age

Saturday December 10, 2005

Aileen Keenan

The property market's recipe for success is simple - just add water. Aileen Keenan reports.

EMBRACING the global sea-change phenomenon of living on the coast was always going to be easy for beach-loving Australians. Sun, sand and surf is ingrained in our national psyche and, when combined with our passion for property, it inevitably sparked a coastal boom.

The consequent rocketing residential values along the eastern seaboard created another generation of lucky Australians who had tapped into the dream of blue views in paradise and made a motser in the process.

So sharp and dramatic was the rise in coastal values that it had the effect of leaving bystanders gasping for air. Cliff-top mansions in Portsea became castles in the air, with price tags tipped to reach $20 million.

While those forecasts never came to fruition, the pointy end of the peninsula is now officially Australia's most expensive postcode and is still the touchstone of success for Melbourne's blue bloods.

The heady mix grabbed media headlines, and despite doomsayers predicting a sad end to our torrid affair with coastal property, few investors were caught in the undertow. The party that began with the turn of the new millennium took three years to end.

Now, in the wake of the east coast boom, beachside residential values in Western Australia, the Northern Territory and northern Queensland are enjoying their day in the sun. It seems where there is surf and celebrities, prices will kick up, even after levelling over the past two years.

John Edwards, managing director of property analysis group Residex, tips solid growth over the next five years in blue chip Byron Bay, Broadbeach and Noosaville. On the Sunshine Coast, Caloundra and Peregian Beach are also set to rise. But Mr Edwards has a bearish outlook for the value of beachside apartments over the next five years. He attributes anticipated declines of up to 9 per cent in some locations to the oversupply of medium-density developments in coastal areas during the property boom.

Colliers International Asia Pacific's residential managing director, Justin Brown, says Australia's east coast beachfront market is doing it tough for now, as it takes its lead from what is happening in the capital cities. With much lifestyle property funded off the back of capital gains reaped in Sydney, Brisbane, Canberra and Melbourne, cash had been tight for investment in the past two years, he says.

"I think the eastern seaboard capital city market has plateaued," he said. "It will take the next 12 months to get back to a normal sales rate and in 2 to 21/2 years it will start to rise again."

Mr Brown says the five to 10-year view was very healthy, with the multiple market drivers of empty nesters, offshore investors and lifestyle investment showing ongoing strength. He says coastal markets within a two-hour drive of a capital city showed the greatest potential for growth, and it's a view shared by many analysts. They argue the plateauing east coast market is driven by the core demand of owning a holiday home that is easy to drive to on the weekend.

Sydney-based Mr Brown tipped beachfront locations around Gosford and Newcastle would benefit from the changes to the expansion of the Hunter Valley regional growth plan. While Australia's state capitals are all dotted along its expansive coastline, it was not until early 2000 that the international sea-change phenomenon, driven by the desire for a better lifestyle, took hold.

It was then that Macquarie Bank's head of property research, Rod Cornish, began touting the sea-change trend on his national speaking circuit. He thought it was going to be a significant change but what resulted was beyond anything he imagined, with the pull forward in demand for coastal property sending values soaring around the country.

Byron Bay flagged the trend in 1977, when values started to rise in the northern NSW coastal town, according to a coastal property report by PRD Nationwide. It peaked last year, with a median house price of $770,000, and has since dipped by 16 per cent to $646,000.

The Gold Coast - renowned for its white-shoe brigade and being the capital of high-rise glitz - has a median house value of $385,000, after adding $200,000 between 2000 and 2003. Homes along exclusive Mermaid Beach now fetch $5 million.

Melbourne property developer Genovefa Pilarinos smashed the Queensland residential record when he paid $18 million for a Mediterranean-style mansion in exclusive Hedges Avenue in November 2004.

Further north in Noosa, described by a local property source as "Melbourne in shorts" for its status as the favourite Queensland investment destination of Victorians, has marched ahead. Sunshine Beach, south of Noosa Heads, jumped 55 per cent over the past year, with house prices rising to $1.08 million, according to the PRD report.

Mr Morris says Noosa has the highest property values per square metre in Queensland and will continue to reign supreme, with the council placing a population ceiling of 60,000 in Noosa Shire. He says there is no prospect of further development in the town, only redevelopment of existing sites.

As southern Queensland markets slowed at the end of the boom, buyers looked north to tap into emerging tropical hot spots that were opened up by competition between airlines offering cheap air fares to Cairns and Townsville. Property prices in Townsville have risen 25 per cent in the past year.

Mr Morris says the number of tourists visiting Cairns and Townsville has risen by 15 per cent annually over the past two years, and it has spurred demand for housing and holiday accommodation.

Palm Cove, described as the "Noosa of the far north", with its beachfront village and holiday apartments similar to Noosa's popular Hastings Street, recorded a median house price of $640,000 last December - from $190,000 five years earlier.

A planned $1 billion canal estate on Townsville's breakwater, including a cruise ship and military terminal, will place a spotlight on the town. When completed in 2009, the terminal is expected to draw an extra 40,000 visitors to the city.

Early next year, Townsville is set for a major expansion when Jetstar commences direct flights from Melbourne, Sydney and Brisbane, providing an extra 1400 airline seats into the city each week, the report says.

Property development is also in top gear in the Whitsundays, with a shortage of development sites along Airlie Beach - where house prices are around $660,000.

Melbourne developer Richard Healey, who began riding the coastal wave three years ago, still has his feet planted firmly in the sand, with three projects on the go in Queensland.

The executive chairman of the Baracon Group, who says some apartments in Byron Bay and Surfers Paradise are now more expensive than similar dwellings overlooking Sydney Harbour, is bullish about the coastal market.

So strong is his belief, he has sent an employee on a three-week scouting mission to assess possible new development sites along Queensland's glittering coastline.

Along with gathering details about nearby towns and access to transport and airports, the scouting mission will include information about the quality and colour of the sand and water, the length of the beach, and a description of the views it offers and the surrounding topography.

When selecting development sites, Mr Healey considers four factors: affordability, proximity to an airport, the quality of the town's medical facilities, and its social infrastructure.

These are points picked up by Queensland analyst Bill Morris, author of the Midwood Report, who cautions against getting too excited about investing in areas that are riding on single drivers such as tourism or a resources boom. "You need to have a bit of balance in the place," he said.

Mr Morris believes the coastal market has not yet hit rock bottom, after peaking at the end of 2003 in southern Queensland and late last year in Townsville and Cairns.

But he is confident the Gold Coast, the destination for most of the interstate influx, will have an average value of $625,000 by 2008-09, up from $425,000 now.

With an average property value that already exceeds Brisbane, Mr Morris says planning policies that limit the supply of land will continue to underpin residential values.

Macquarie Bank's Mr Cornish says the downturn in the beachfront market in the past two years has been relatively mild, and is far from the recession of the early 1990s when millions of dollars were shaved off the values of Portsea and Sorrento cliff-top properties. Marine Parade at Watego Beach, Byron Bay and Hedges Avenue, at Surfers Paradise on the Gold Coast, compete for the title of most expensive beachfront property, according to Mr Cornish.

In Victoria, Mr Cornish says properties along the Great Ocean Road have fared better than the Mornington Peninsula. He predicts coastal property values in Melbourne will remain flat for the next few years.

Over the past 12 months, Western Australia recorded the highest coastal gains, albeit in low-priced hamlets. The Albany bayside suburb of Bayonet Head recorded the greatest rise of 40 per cent to a median value to $241,000, according to property analysts Residex.

Usher, a suburb of Bunbury, and the crayfishing town Dongara both gained 38 per cent - bringing their respective median values to $191,000 and $233,000.

Augusta increased in value by 31 per cent, feeding off the growth in nearby Busselton at the entrance to the Margaret River wine region. Augusta's median price of $353,000 was the highest of Australia's top 10 coastal residential increases recorded by Residex in the year ending September.

© 2005 The Age

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