In These Stormy Economic Seas, How Resilient Will Gold Coast Property Prices Be For The Rest Of 2023?
[PLEASE SEE OUR UPDATED ARTICLE: PROPERTY PRICES RISE DESPITE INCREASING INTEREST RATES - SHOULD THIS BE HAPPENING?]
There is a lot of uncertainty in the property market at the moment due, in significant part, to the Reserve Bank of Australia (RBA) fluctuating between keeping interest rates on hold and increasing them. Here we consider what has happened in the market over the recent past and where it is expected to be going for the remainder of 2023.
Looking Back At The Gold Coast Market Over The Recent Past
The Gold Coast had one of the strongest markets in Australia during 2021/2022. A number of factors contributed to this, but it was due in particular to the significant increase in interstate migration (driven by the relative affordability of the area when compared to locations such as Sydney and Melbourne), as well as the enhanced lifestyle afforded by the region.
CoreLogic released data in early 2023 showing that, while property prices had softened nationwide, the Gold Coast was one of the most resilient markets in the country. The data indicated that during the pandemic, Gold Coast prices increased by around 40% and after taking into account recent falls, at the time of publishing this article, prices still remain around 30% to 35% above pre-pandemic levels. This clearly shows that existing homeowners who are considering selling have plenty of scope to achieve healthy capital gains.
The resilience of the Gold Coast market has also been evidenced by the fact that property sales are, on average, only just under 12% lower than they were 12 to 18 months ago when the market was extremely “hot”, and almost 14% higher than 5 years ago.
Looking Forward - Expectations For The Gold Coast Market In 2023
At the time of publishing this article (early May 2023), the RBA had just raised interest rates by another 0.25% in its battle to control inflation. This was the 11th increase in the past year and takes the bank cash rate up to 3.85% (the highest in 11 years).
Some were surprised by this increase given that at its April 2023 meeting, the RBA kept rates on hold.
The crucial question now is to what extent will this latest rate rise, and any future rises, impact the long-term prospects for the national property market?
It’s worth mentioning that shortly before the May 2023 interest rate rise, there had been a 0.6% increase in national property prices - the first such increase in 11 months (per CoreLogic’s report of April 2023). The three main factors driving this were (1) the April 2023 RBA decision to keep interest rates on hold, (2) the very limited amount of property listed for sale and (3) rising inward migration. With interest rates having been increased once again in May 2023, factor (1) above is currently no longer available to help further lift property prices (what the RBA does in the future with rates is obviously an on-going story).
Although an additional uptick in prices is unlikely in the near term, most analysts at the major banks are of the view that the residential market as a whole will probably continue to remain stable. The principal reason for that view, and which we agree with, is that there is currently only a limited amount of property listed for sale (stock levels are down around 25%). This is particularly the case on the Gold Coast which is creating strong buyer demand and, as a result, minimal discounting of prices by sellers.
We believe that the May 2023 interest rate increase is unlikely to cause prices to drop and should probably just be seen as a bit of a “speed bump” for a market recovery. However, if there were to be additional future interest rate rises (a number of economists think that is likely to happen), or a significant increase in the number of properties for sale (the big unknown here is what is going to happen later this year when the very sizeable pool of low fixed rate mortgages taken out a couple of years ago come to an end – many of those mortgage holders may need to sell before being impacted by higher mortgage rates), this could result in downward price pressures.
Final Thoughts...
Although a degree of uncertainty exists in the property market, here on the Gold Coast we are still continuing to see strong buyer demand and stable prices (this is especially the case with apartments).
While the median house price on the Gold Coast has reduced slightly over the past quarter from $950,000 to $947,250, apartments have seen a rise from $614,500 to a high of $620,000 - it's not often that Gold Coast apartments outperform houses when it comes to price growth, but lifestyle factors and security would seem to be the drivers for this current trend.
All in all, we believe that Gold Coast property prices are likely to remain stable throughout the remainder of 2023. But for those of our clients who are thinking of selling in 2023, we have suggested that they may want to move ahead with this sooner rather than later. This will reduce the risk of prices softening later in the year because of further interest rate rises and/or a large increase in the number of properties being listed for sale.
If you should have any questions regarding the matters referred to above, or if you would like to have a confidential discussion about your own property requirements, please contact Peter Turner on 0468 350 882 or email him at [email protected].