Property investor upside to Gold Coast short-term rental glut

A glut of short-term accommodation on the Gold Coast is having a major impact on affordability and the rental market.

The holiday haven is feeling the pinch of its popularity thanks to an unquenchable thirst for short-term rentals usurping long term rental options, squeezed even further by returning overseas workers and students.

Together, they are painting paradise into a housing crisis corner.

A side effect has been a rush to buy coastal properties as investors look to capitalise on the rising rents and others look to escape the rent hike cycle.

One local real estate expert she could be knocked over in the crowd when selling or renting out a one-bedroom unit.

Debbie Frizelle, Principal, Raine & Horne Broadbeach

“I showed a one-bedroom unit days ago in a six-year-old building in Broadbeach in a really good location, but without ocean views, looked northwest over the casino and river and we had 30 groups through for that $570 per week apartment,” Debbie Frizelle, Principal at Raine & Horne Broadbeach, told Australian Property Investor Magazine.

The median unit rent on the Gold Coast is $741, while for houses it is $1,073, according to SQM Research, up between 10 and 15 per cent over a year depending on property type.

“If I told you how many international people viewed that one bedroom apartment, just the seven or eight groups I personally spoke to, there were four Brazilian couples, a Korean couple, Japanese or Chinese also, and then a Kiwi couple and two or three interstate Australians, and a lot of them are the kind of backpackers we saw three or four years ago, and they work in the food industry or travel Australia doing fruit picking and things like that, so there’s definitely a lot more international people about,” Ms Frizelle said.

How to house the south Queensland city’s growing population and address issues confronting property seekers, owners and investors were on the Real Estate Institute of Australia (REIA) National Roundtable: Gold Coast Housing Challenges agenda on Tuesday (30 May).

Hayden Groves, President, REIA, spoke of 85,000 interstate migrants that chose Queensland as their destination during the pandemic.

“Of course, with this has come many housing challenges for both renters, home buyers and homelessness, which has impacted housing and rental affordability, and the Gold Coast has also become a prime destination for short-term and holiday accommodation.”

Erosion of landlord rights

Ms Frizelle said higher interest rates were driving owners to seek higher rental returns.

“I’d love to say to everyone, look just keep it long-term rental because we need the accommodation, but these are investors that are trying to cover interest rate increases, so how do they survive and keep their investment properties if they can’t get the kind of return they can get through short-stay, so it’s a big, vicious cycle there.”

Another factor pushing investors into the arms of short-term renting is the Queensland State Government’s Stage 2 Rental Law Reforms Options Paper, which closed its community consultation on Monday (29 May).

For a one-bedroom apartment the rental return ended up being about 9 per cent.

- Debbie Frizelle, Principal, Raine & Horne Broadbeach

The Real Estate Institute of Queensland (REIQ) cites their recent Property Investor Survey findings that showed lessors are concerned by what the REIQ describes as the ongoing erosion of lessors’ contractual and statutory rights.

“They are, in the majority of cases, opposed to Stage 2 rental reforms, and while these properties provide homes for tenants, they are ultimately assets owned by lessors, with associated financial, legal and statutory responsibilities and risks,” Antonia Mercorella, CEO, REIQ, said.

“The gradual erosion of lessor rights and asset control increases the risk of withdrawal of investment housing from the property market, so rather than constant legislative reform, the Queensland Government should focus on initiatives to drive housing supply and confidence in the rental housing market to maintain and grow private investment in Queensland.

“It is widely accepted that our current rental crisis stems from insufficient supply and it will be difficult to address the current supply imbalance in the market if owner rights are diminished any further,” she said.

Rental yields of 9 per cent

Aside from the many challenges there are opportunities for investors, according to Jamie Harrison, Head of New Projects at real estate agency Kollosche.

He said the huge round of net migration experienced so far has boosted the restaurant and café cultural scene on the Coast.

“We’re seeing strong demand for beachside suburbs and a lot of people are moving here because of those lifestyle drivers, so any of your beachside suburbs, such as Main Beach, has been a big one for retirees or that more mature demographic looking to downsize.

“Broadbeach is obviously a really popular one for people who still want to be involved in the hustle and bustle and it’s got a very strong rental market because you’re very close to your retail amenity, city centres of Southport, out through Robina.

“Your southern Gold Coast suburbs are also extremely popular because of that lifestyle and real standouts are Rainbow Bay and Bilinga, which is a big one as a future opportunity as more restaurants and cafes and amenity comes into that pocket, which will happen over the coming years, so we’re seeing that as a real opportunity in that southern pocket,” Mr Harrison said.

Ms Frizelle said she continues to receive heavy interest from investors, particularly in the Broadbeach area.

Jamie Harrison, Head of New Projects, Kollosche

“Broadbeach is way up there because it’s that attraction to the kind of vibe you get at a place like this with its proximity to the arts centre and cultural events.

“People gravitate there because they think it’s a good place to invest, and we’ll have an easy time renting it out because the returns are really good.

“Because of the kind of returns our owners are getting, they’re over the moon.

“For example, there was a one bedroom in an older building, mind you a lovely, bigger than average one bedroom apartment, and the return ended up being about 9 per cent.”

There’s a 30 per cent undersupply for new dwelling demand versus supply, Mr Harrison said.

“It’s a 30 per cent deficit as it stands so there’s a huge opportunity and obviously those net migration numbers are continuing to outperform that as well, so we believe that gap is going to broaden even further.

Mr Harrison identified owner-occupier downsizers, people looking to expand their property portfolios, and those helping kids get into properties as the most prolific moving to the area.

Interstate investors taking a swing

Golf on the Gold Coast is also a drawcard and the RSCV Royal Pines Resort in Benowa features 1,300 homes.

“Demand from buyers both from the Gold Coast and interstate has definitely increased,” Sasan Rahmani, Royal Pines Specialist at Century 21 Central Gold Coast, told API Magazine.

“It’s medium-level luxury, not the Gold Coast prime property of Sovereign Island, Sanctuary Cove or Broadbeach luxury, which is very high end at around $8 million to $30 million; this resort average price is $1.5-$1.6 million and before Covid it was closer to $1 million.

“My last five sales went to a couple moving from Perth, a couple from Melbourne, a couple from Sydney and the other ones are from the Gold Coast.”