Gold Coast outpaces capital city home price growth. Is it sustainable?

Since the pandemic, real estate prices on the Gold Coast have remained high. According to CoreLogic data, the Gold Coast has experienced greater house price growth than any other Australian capital city over the past five years. During this period, Gold Coast house prices have risen by 80.7%, surpassing Brisbane's 71.2% increase, making it the second most expensive capital city in Australia, just behind Sydney.

CoreLogic's research director, Eliza Owen, stated, "It's surprising how strong this market has continued to be...its five-year growth rate is higher than any capital city." So, what factors are driving these figures? Ms. Owen believes that the high concentration of luxury properties on the Gold Coast is one contributing factor. Many luxury properties are still priced lower than family homes in Sydney or Melbourne suburbs.

At the same time, there's been a huge volume of cash purchases in the city. Last year, Surfers Paradise saw $1.4 billion in sales, after the suburb led the nation in cash purchases in 2022. Ms. Owen said, "The luxury, high-density apartment options are very well suited to downsizers who have sold a large family home in a capital city." Additionally, population growth, with up to 15,000 new residents each year, and a shortage of residential land have also pushed up prices.

Real estate firm PRD's chief economist, Diaswati Mardiasmo, said that the growth in the Gold Coast and Brisbane is bucking national trends. "It is absolutely an anomaly. Other capital cities are either flat or experiencing negative growth," Dr. Mardiasmo said. She believes this growth has priced existing residents out of the rapidly growing city. "Especially in areas like the Gold Coast, it's not sustainable," Dr. Mardiasmo said. "They are having to look at housing on the fringes of the Gold Coast and then commute."

Hutchinson chairman Scott Hutchinson said the city remains vulnerable to the boom and bust cycles it has experienced in the past. Mr. Hutchinson is the head of Australia's largest private construction company. He believes the city's properties are a "discretionary spend" for some people. "When [people] feel wealthy, they buy on the Gold Coast, and when things are tight, they sell it," Mr. Hutchinson recently told ABC Gold Coast. While the city is less reliant on tourism than it once was, Mr. Hutchinson said not enough has changed to make it immune to the severe downturns it has experienced in past decades. "Every boom, we hear that the Gold Coast has now reached critical mass, so it won't collapse again, but I think it will," he said. "Well, I'm not an economist, but I've basically lived in Brisbane and holidayed on the Gold Coast for 65 years... what happens is the Gold Coast tends to be a discretionary spend, that's where people go when they feel wealthy."

Dr. Mardiasmo said, "In many ways, yes, but in some ways, no." She said the dominance of luxury properties has created two markets, with the higher end being more susceptible to a crash. "So, in terms of the high end, yes, because there are almost two different market speeds on the Gold Coast." She said properties priced at $2 million and above are "more at risk," while the "mid-market" of around $1 million is less so. "If there is a potential crash, then it's certainly going to happen faster and more ubiquitously in the higher end than it will in the more affordable mid-price market." Dr. Mardiasmo said the city has matured since the 2007-08 financial crisis. "It's becoming less of a mono-city and more of a diversified city," she said.

Ms. Owen said the risk of a Gold Coast market crash is "less severe" because the well-located city has a diverse economic base, "and strong housing lending conditions tend to prevent dramatic booms and busts in east coast property markets." "But there's always a risk that major structural changes undermine that stability - such as extreme weather events, geopolitical risks, a global or domestic recession, or strict return-to-office mandates."