Patchy performance for regional coastal property markets

As most state capital cities experience a resurgence in property prices, the performance or real estate in Australia’s regional markets is far more mixed.

Government restrictions and taxes have hit some markets, particularly in Victoria, falling property prices are widespread in the wake of the lockdown-inspired boom times, and population declines are common.

William Clark, Data Analyst, Ray White Group, said some regional coastal suburbs that experienced a surge in holiday home purchases during Covid are now adversely affected by a reverse sea change on the back of rising interest rates and growing restrictions on short term rentals.

Despite the overt caution, he said it was still a good time to buy into the regional short-term rentals or holiday home markets in some parts of the country.

“Price growth is back on the move after reaching its lowest point at the end of last year, but this price growth is not happening everywhere, so looking at suburb level data, we can see that many have gone backwards in price while the rest have moved on,” Mr Clark said.

He said prices are declining in parts of Queensland’s Sunshine Coast north of Brisbane and coastal New South Wales.

The Sunshine Coast suburbs of Minyama, Alexandra Headland, and Sunshine Beach have seen median sale prices fall by 32.8, 28.4 and 32 per cent respectively, dropping median prices in Alexandra Headland from $1.9 to $1.4 million, Minyama $2 to $1.3 million and on Sunshine Beach, $3.5 million down to $2.3 million.

There are however examples of properties in and near Sunshine Beach that have seen more than 15 per cent compound capital growth annually for the last 47 years, since 1973 when Noosa Sound waterfront land sold for $12,000, to recent sales in the $16 million range.

These figures come from Tom Offermann, owner and director of Tom Offermann Real Estate, Noosa, who also told API Magazine that listings are currently static, and his agency is at around 50 per cent normal levels of properties available, down from 150 to 60.

“The likelihood is that the number of listings will increase as interest rate pressures come to bare, however, a shortage of future supply will underpin future capital growth and a good example of this is a luxury apartment currently listed on Munna Crescent in Noosaville that I’d expect to sell in the vicinity of $3 million dollars,” he said.

About 20 per cent of properties are estimated to be permanently available for short term rental and all are subject to the Noosa Shire Council’s Short Stay Letting and Home Hosted Accommodation Local Law, which requires owners to have approval for all existing and new properties operating short stay letting or home hosted accommodation, with a one-off application that requires annual renewal.

Mr Offermann says the rules around short term stays have reduced the number of properties available and in most cases, any properties that are sold with short-term stay approval and not then used for short term stays, lose their status.

“So, unless there are some future changes, we’ll have a dwindling supply of holiday properties, which will put upward pressure on occupancy rates and tariffs on those who have rights to short term leases,” Mr Offermann said.

Regional property's mixed bag

In addition, median prices across Noosa’s localities have dropped 15 per cent compared to two years ago, but Mr Offermann says there’s a lot of anomalies where new price records are being found while other prices have fallen off from what are now seen as unsustainable peaks.

“In my view, the median and long-term prospects for investment in the Noosa area remain among the best in the country, as it is a highly desirable and well-known holiday and living destination with a council that is very strict in its development policies and there is virtually no developable land left and hasn’t been for some years, so effectively someone has to check out of Noosa for someone new to check in.”

Almost 12 hours south by car, investor interest in the short-term/holiday rental property market in Terrigal, NSW, has not waned since the pandemic, says Hans Belle, General Manager, Accom Property.

“For quality holiday homes and apartments with desirable locations and holiday property attributes the market is very healthy, and while the multiple interest rate rises in 2022 and early 2023 did impact the general residential market on the Coast, Q3/Q4 listings are strong,” Mr Belle said.

A three-bedroom, two-bath and two-car penthouse ocean-view apartment sold in 2020 for $3.2 million, and is typical style of holiday property in the Terrigal area.

Mr Belle said the bulk of investors in the Terrigal market are domestic buyers from NSW.

Forlorn Victorian property owners

Lorne, a coastal town on the Great Ocean Road in Victoria, has property owners trying to recoup their property investment dollars through short-term accommodation.

“The Covid period absolutely supercharged our lifestyle market, increasing house prices by 20 per cent for three consecutive years but it couldn’t keep going like that, and that’s exactly what we’re seeing since the end of last year,” Ian Stewart, Director of Great Ocean Road Real Estate, said.

“Volumes of enquiry have just dropped enormously, and volumes of transactions have dropped; it’s just a totally different environment to what it was pre-Christmas last year,” he said.

“A consequence of these Covid price increases is that owners are looking to short term rent to help with costs, just as the shire rate evaluations have gone through the roof with property values, so the site value on somebody’s rate notice equates to a fair whack more land tax.

“All of a sudden now we’re speaking to people who are saying, well, interest rates where they are, consumer confidence not as strong, we’re not even getting as much holiday rental income as what they were now all the borders and everything are open, and we’ve got an increased land tax bill, we think we might sell,” Mr Stewart explained.

In the wings also waits a further 7.5 per cent Victorian state government levy on short-stay accommodation due to start on January 1, 2025, which if applied to a current premium Lorne Airbnb listing would be an extra $490 per month.

Mr Stewart says people are talking about the levy but foremost in their mind is the knock-on effect of land tax calculated on the Covid-era’s unprecedented spike in property values.

“People need to be motivated to want to sell in this current market because there are still a certain number of people that have a Covid expectation with price that just isn’t eventuating, so you’ve got to be motivated and committed to the process, and realistic with your price, otherwise you’re likely to sit among an ever-growing stock list.”