Our CEO Kirsty Chessher-Brown interviewed Antonio Mercuri, Principal of GV Group on the difficulties in meeting the increasing demand for development opportunities on the Gold Coast.
2020 hasn’t been the smooth ride we were all hoping for on a COVID front, but the property market certainly has been a shining economic light, what are you seeing on the ground?
On the ground for the Gold Coast over the last six to 12 months, we’ve had a huge influx of interstate demand but for the first time in a long time, that demand is converting. Over the last six to seven years we’ve always had that interest from Sydney and Melbourne, but now they’re actually buying sites not just asking questions, which is exciting. The calibre of developer on the Gold Coast is very high, and there’s some tough competition on the design front from local groups or Brisbane groups, and it’s bringing a whole new new flair to the coast and even more eyes on the Gold Coast, so it’s great.
What are we likely to see over the next six to 12 to 18 months? Do you think the level of demand you’re seeing on the Gold Coast will continue?
Based on dialogue with our consultants, there’s certainly a backlog from development applications to tendering for construction, and the project sales arm is a key element. What we’re hearing is that they’re selling stock and don’t have enough of it. The Gold Coast is full of different markets from Surfers Paradise to Broadbeach, and then there’s Broadbeach South. In the southern corridor, purely because of the height restrictions and the density restrictions, it doesn’t allow super towers, so that supply chain is really controlled. And that’s why there’s a lot of developments happening but they’re a lot smaller than something in Southport or in Surfers Paradise. I think the Broadbeach market in particular is undervalued.
Over the course of the next 12 to 24 months we hope to see a continuation of what we’re seeing right now, but maybe at a slower rate because of the process of delivering a site and then being able to secure the next site. At the moment we’re trying to put sites together which is a difficult process. But it’s a process you have to run in Queensland 100% of owners must agree to the sale. So, if you’ve got a block of units, or a couple houses, it could be anywhere from two to 22 owners, and they all have to say ‘yes’. It’s certainly a game of patience, but it’s the only way to put sites together, and the Gold Coast is full of those older blocks of units and houses in prime locations. It’s just a matter of making those approaches and running that process and hopefully coming out with a transaction.
In terms of a sweet spot for sites, it’s totally based on frontage and land size and the zoning, but it could be anywhere from 800 square meters to 1,800 square meters. I think the sweet spot would be anywhere around that 1,200 but it’s hard to get that for boutique beachfront sites as there’s a minimum size and a minimum land frontage. We are seeing some developers being creative and getting small sites to work which is exciting.
The market is red hot on the Gold Coast. How are vendors reacting to what’s happening in terms of price?
The retail price for property in all areas of the Gold Coast from apartments to homes over the last 18 months has in some cases, doubled. So, the price shift has made it harder to sell the pitch to clients of achieving a premium price. The expectations certainly have increased and so they should, but that then puts pressure on the acquisition price. To some extent that’s being counteracted from the retail prices that developers are achieving. We do as much upfront due diligence and provide as much information to the developer to ensure their feasibilities are as accurate as they can be.
Stock on the Gold Coast seems to have swung more towards the premium end of the market. What does that do for housing affordability and first home buyers?
I think that’s just a natural reaction to what’s happened over the last 18 months and supply has played a huge role in price growth. The big influx of those boutique developments has occurred, but right now those great sites are simply very hard to obtain, and I think there’s a gap in that missing middle. I remember the UDIA talking about that issue probably 12 months ago, and it still is the case that missing middle is missing!
How does the Gold Coast solve that supply problem?
That’s always going to be an issue, because the sites aren’t available. We have on-sold a few sites with development approvals from local developers to other developers or interstate developers. But in terms of solving the issue of supply, I think we just have to continue to work hard and put sites together, as many as we can to try and fit that demand. We’re lucky to say that our network that we work with are all at a higher calibre and we know they can transact, so it’s just a lot of knocking on doors and I think those conversations are often the only thing that’s going to keep that pipeline going.
Over the years we certainly have certainly had many cups of coffee with many owners. As a business, we have transacted on over 55 sites now, anywhere from one to 22 owners. It’s a numbers game and a process but we love what we do and we’ll keep doing it.
And what do you see as the major current opportunities in the Gold Coast market?
Again, along the beachside corridor, Surfers Paradise has its own market. It’s a different calibre of developer and it does steer towards those bigger projects. We see, and have always seen, a big depth in market in Broadbeach South to Coolangatta.
We’re still getting inquiries for interstate developers and we think that will continue post COVID. Our last eight site sales, six of those were from an interstate developer. So that is putting pressure and creating a competitive market. We just launched and ran a campaign and had eight offers, and half were from interstate groups and half from local. But it is putting pressure locals groups to try and pay more or get more aggressive in their approach to buy the site.
Looking ahead again, do you think the Olympics will play a critical role in positioning the region on the international stage?
We’re blessed to have a global city (Brisbane) located one hour away and then you cross the border to the Northern Rivers towards Byron Bay. When you’ve got heavy rail running from Coolangatta airport to Brisbane Airport, it’s a no brainer that we’re only going to turn into an extension of Brisbane. It’s very exciting!