How do you lose $160,000 over 15 years? Buy a Noosa apartment.
Savagely discounted prices fetched by receivers for apartments previously owned by former Sunshine Coast tourism boss Phillip Harding has sent shock waves through Noosa with some estimating the state of the market is now as bad as the Gold Coast.
Over the past few weeks receivers have sold 27 of Mr Harding’s units in the Noosa Blue complex for about $4.5 million, implying a price of about $166,000 each.
Fifteen years ago, the same properties sold for about $320,000, sources said.
Analysts estimate Noosa’s property values have fallen by 40 per cent since the peak of the market.
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Mr Harding, who is the former head of Tourism Noosa and a former chairman of Tourism Sunshine Coast, has also lost control of a Noosa Heads development site and his farm.
These have been sold by receivers at severely discounted prices. Debts of about $15m were owed to Bank West on his property portfolio.
Demand remains weak in the Sunshine Coast holiday destination for beach properties that typically sold for between $1m and $4m at the peak of the market.
One market source estimated that there was currently one buyer for every 50 properties available in Noosa, saying property values had “fallen off a cliff”.
“It was a special market and went up every year for 18 years or so, this is the first dramatic downturn,” the source said.
I have talked about this before , 15 years of 5-10% inflation followed by 10 years of credit expansion have created an environment of what seemed to be “never ending growth”. But it is all coming to an end because the RBA is targeting inflation and credit expansion has reached it limits without a sudden influx of rich migrants or more government stimulus. Places like Noosa and the Gold Coast are leading the pack down because their markets are heavily driven by local and overseas “investment”.
As the Unconventional economist and I have been explaining the demographics of the boomers is now against housing and areas with high levels of investment properties will be the first to suffer. However it must also be mentioned that the high Australian dollar is adding significant stress to these areas in 3 ways.
- Something I have mentioned previously. The high AUD is keeping foreigners from making new purchases.
- It is also encouraging offshore investors to attempt to sell, as any capital losses could be recouped by the Australian dollar appreciation. Obviously any capital gains would also be magnified.
- The same dynamic works for ex-pats. Their foreign currency earnings would have been losing value recently so there is certainly no driver to return to Australia, and secondly any ex-pat expecting to stay overseas for more than a year would be encouraged to sell up, convert the money to their local currency and return at a later stage when the AUD has depreciated.
You can also see these dynamics in some of the population data I have posted recently.
I was about to suggest that Noosa is the new Gold Coast, but it seems that it is doing its best to keep up.
Racing car driver Max Twigg is tearing up more than $10 million and wearing one of the biggest losses ever on a Queensland property, four years after he bought the Gold Coast beachfront house in a market distorted by a secret and elaborate price-fixing scam.
An investigation by The Australian has previously highlighted how side-agreements, including “put and call” options, had artificially inflated the prices of beachfront properties in a strip along the Gold Coast’s famed Mermaid Beach.
Mr Twigg is now selling his house at 199 Hedges Avenue for less than $8m after buying it for $17.5m — with a further $1m-plus in stamp duty and other taxes — in 2007, meaning his investment has fallen in price by about $50,000 a week for four years.
The huge loss is the result of a bust in Gold Coast beachfront property since the global financial crisis, compounded by the unravelling of the price-fixing scam. Hedges Avenue properties have dropped by significantly more in percentage terms than other markets.
Mr Twigg — who lives in Melbourne, where he made his fortune in waste management — has broken his silence, telling The Australian he did not know when he bought that the market in Hedges Avenue properties had been fuelled in the boom by unusual and hidden deals.
Former Queensland fair trading minister Peter Lawlor has previously said the deals “stink to high heaven” and called on police to investigate alleged fraud in a number of the transactions.
It’s funny how no one ever complains about fraud when prices are going up.