Spotlight: COOMERA QUEENSLAND

August 22, 2017

 

 

Coomera is a suburb located 20km North of the Gold Coast, and 50km south west of Brisbane CBD. It is part of the Gold Coast City Council and has a population of 13,305 people. Coomera has been receiving investment attention recently, as it is home to a leisure centre used in the upcoming 2018 Gold Coast Commonwealth Games. Capital growth expectations have been increased due to the economic influence of Games. While the economic effect from the Games is positive, a more comprehensive analysis must be conducted.

 

This report will cover the macro analysis of Coomera, QLD, and provide unbiased commentary on the market. The entirety of the 2016 ABS data has not yet been released, in which case, the data from 2006 and 2011 Census has been used.

 

Employment

 

A property market in close proximity to a large Central Business District (CBD) with a diversified employment base is typically a lower risk market. A growing CBD will drive the local economy by attracting a higher socio economic demographic. An increase in this demographic of a market is typically linked to an increase in demand for dwellings and property prices.

 

Located 20km from Gold Coast and 50km from Brisbane CBD, Coomera is regional. Regional areas typically have high unemployment rates as they are located too far away from major developing CBD’s which offer a diverse range of employment.

 

As at March 2017, the unemployment rate of Coomera was 6.2%. While this has improved since the 2011 census (7.2%), it still sits above the national average (5.7%)

 

Over the last 5 years, Coomera’s employment has transitioned from tourism to construction. The major industries in Coomera include a construction (21.3%), sales and rental (13.7%) and professional services (11.7%). While employment is diversified, it has lacked growth. Between 2011 – 2016 incomes have only increased 8%, this a relatively weak trend signifying minimal economic growth. Economic growth is an underlying driver of property prices.

 

Infrastructure

 

In preparation for the 2018 Commonwealth Games, the construction of the Commera Sports & Leisure Centre has recently complete, which is set to host various types of Commonwealth events. To assist with the congestion casued by the Games, a $74.4m redevelopment of the Coomera Exit from the M1 motorway is also currently underway. Outside of the Games, Westfield have begun works on a $1 billion upgrade of the Coomera Town Centre, expected to be finished in 2018.

 

Additionally, the Queensland Government is spending $50 million on a new primary school within Coomera. The above infrastructure projects, are strong economic drivers as they create employment and population growth. This stimulates demand for housing in the area.

 

Ownership

 

A market with a high owner-occupier rate is likely to have a less volatile performance in relation to price movement, and reduced downturn risk. As owner-occupiers are considered less likely to sell their home for a discount, or lower price in times of economic distress, than an investor.

 

According to the ABS, in 2016 Coomera, 38.8% of dwellings are currently owner occupied, while 61.2% are investor owned (rented). The national average is a split of 70%/30 (Homeowners/Investors). Coomera’s ownership balance is therefore well below the national average. It is also important to note, that this equation in fact declined. In 2011, 44.2% of Coomera was owner occupied, that represents a decrease of homeowners by 5.4%.

 

Due to this, Coomera is a relatively volatile area when compared to the average Australian market.

 

Rental Yields

 

Rental yields are an important fundamental, which can have a strong influence on investor demand.

 

Rental yields in Coomera are currently sitting at 5.7% for units, and 4.5% for house. These yields are relatively high and are common in regional areas, which have relatively high rental yields, coupled with relatively higher risk due to lower owner occupier balance.

 

Current Supply & Yields

 

A vacancy rate of 3% is considered a ‘balanced market’ where there is enough supply of rent-al properties to meet demand. Until recent years, Coomera has had a relatively stable vacan-cy rate, however, this has rapidly changed. Since July 2016, a large amount of construction has entered the market. Coomera’s vacancy rate peaked at 8% in January 2017, and is now currently sitting at 5.2% as at June 2017. While the vacancy has decreased sharply, it is currently at an oversupplied level.

 

 

 

 

 

Future Supply of Dwellings

 

As at 2016, Coomera had an average household size of 3.1 people. Between 2011 and 2016 the population of the area increased from 8793 to 13305 or 10.26% over 5 years. If that trend continued that would mean an additional 902 people per year for the next 5 years or a re-quirement 1445 new dwellings. As it stands there are development applications lodged for 3994 new dwellings to be completed between today and the end of 2021.

 

With a surplus of property currently on the market and the future supply expected to outweigh population growth, prices in Coomera are not pressured to increase.

 

Past Growth

 

Coomera’s last measurable growth period was from 2002 – 2008. In this phase, prices grew 149%, much like majority of QLD at the time. Since 2008, prices have been dramatically fluctuating (see below). This is common trend for regional areas and can be largely attributed to its small population size of 13,305. Markets this size are particularly sensitive economic events.

 

This is evident is Coomera’s growth spurts in 2012, 2015 and 2016. It likely this growth was triggered by the demand for construction jobs for the Commonwealth Games. While these construction jobs have generated demand for housing, they are only temporary, and prices are likely to decrease once construction is finished and demand declines.

 

This is evident is Coomera’s growth spurts in 2013 and 2015. The announcement of the Games in November 2011, caused an influx of residential development into Coomera. In August 2013, residential building approvals spiked, and had been on an increasing trend until November 2016. Additionally, the works on the Leisure Centre and road upgrade for the Games commenced in 2015, which coincides with Coomera's most recent growth period. The Games spurred a large amount residential and infrastructure construction and generated a strong demand for housing. However, these jobs are only temporary, and once construction is finished, net migration is expected to decrease and demand for housing will diminish.

 

 

Outlook

 

Being one of the five suburbs that are home to the Commonwealth Games 2018, Coomera is currently in the limelight. The various infrastructure projects in construction will have a positive impact on job growth and the livability of the suburb. While the current infrastructure spending is attracting minimal homeowner demand, Coomera’s strong affordability and rental yields is generating a high amount of investor demand. This has placed upward pressure on prices in recent years. However, there more factors which need to be considered in order for an area to achieve superior long term growth.

 

As outlined in the earlier part of this document, Coomera is a heavily oversupplied market. The Queensland Government is projecting a strong population growth of 8.1% per year. However, this is not enough to overcome the projected supply. Additionally, Coomera is a market dominated by investor owned property, this creates an unpredictable and volatile market, which is evident is Coomera’s price fluctuations over the last 5 years. Moreover, with such a high investor ownership, if there was downturn in the economy, the Coomera property market is subject to increased downturn risk.

 

Events, such as the Commonwealth Games have a strong impact employment levels. However, it is anticipated that following the conclusion of the Games, demand for jobs will contract. It is unlikely the lesser employment industries in Coomera, will be able to sustain as much economic growth in which the Games contributed.

 

In acknowledgment of this, price growth is expected to maintain an upward trajectory up until the Commonwealth games. Conversely, in the absence of further employment opportunities, future growth prospects are expected to dampen over the medium/long term as supply increases.

 

Sources: SQM Research, Cordell Connect, PriceFinder, ABS, Gold Coast City Council, Queensland Government

 

 

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