Regurgitate #2

Last week I outlined how inaccurate suburban based median house values can be.

Revisit here.

For sake of completeness, this missive I look at similar data but this time for apartments.

Apparently the top ten suburbs in Queensland for apartment price growth over the past decade include: Paradise Point, Benowa,East Toowoomba, Coolangatta, Woody Point, Palm Beach, Currumbin Waters, Broadbeach Waters, Tugun and Mermaid Waters.

Note that eight out of ten of these ‘hot’ apartment suburbs are on the Gold Coast.

It has been suggested the median value of an apartment in Paradise Point is currently $576,240 and that apartment values have risen by 44% over the last ten years.

Go here to read the original article.

The apartment growth results are even more misleading than for detached houses.

My approach

I like to answer this question when it comes to apartment price performance and it is one of the more common questions I get when doing site visits with developer clients.  They often point to an apartment complex and ask; “How much have the prices grown in that project since it was developed?”

So, I have done that analysis for apartments in Paradise Point.

Here I have reviewed the 24 apartment resales that have settled in that suburb over the last six months and have compared those values against the original developer sales price.

Below is summary of the results.  I have reported them as a suburb summary rather than by individual project.

Half of the 2018 apartment resales in Paradise Point made a loss.  The headline results for these 12 resales are:

  • Held on average for 13 years between resales
  • Average original developer purchase price was $1,258,000
  • Average 2018 resale price was $1,062,000
  • Average $196,000 loss between developer sales price and the 2018 resale price
  • Average total 15% loss between sales or an
  • -1.3% average loss per annum

Half of the 2018 apartment resales in Paradise Point made a gain.  The headline results for these 12 resales are:

  • Held on average for 12 years between resales
  • Average original developer purchase price was $687,000
  • Average 2018 resale price was $814,000
  • Average $127,000 gain between developer sales price and the 2018 resale price
  • Average total 18% gain between sales or an
  • 2.5% average gain per annum

So, a mixed result.  I would expect such.  And importantly the real results are a far cry from the spruiked performance.

End note

To repeat one of last week’s message – what increasingly gets measured in real estate is the stuff that is easy to regurgitate rather than meaningful measures.

In addition, I would like to see a peer review process for property related analysis.  You won’t stop the real estate spiel but there should be a vigorous publication process that goes through a select panel peer review.  And this work should have its own digital portal.

It is something that is worth serious consideration. It could be done by the PCA or UDIA but better still by the RBA or similar.  Or is it something that the likes of The Urban Developer does?

Gold Coast apartments

So, what do I think has really happened to apartment prices on the Gold Coast over the past ten years?

Our analysis suggests that values have risen by about 18% over the last decade, with about a 0.8% increase during fiscal 2018.

Until next time,

Michael Matusik

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Matusik Missives are free but public support is vital so that I can continue to fund investigations and publish posts which speak reason to the distortion.  Your annual $99 donation helps me, help you!  Click here to donate.

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