The Gold Coast may be an example of having too much of a good thing.
Beyond the beautiful beaches and idyllic weather, $20 billion is being spent on infrastructure ahead of the 2032 Olympics and there is more in the pipeline.
An analysis by property firm Colliers paints an “enormously bright future” for the Gold Coast’s $39 billion economy, with healthy population growth, infrastructure investment and a rebounding tourism sector.
But for every silver lining, there is a dark cloud.
The population problem
The Gold Coast’s population is forecast to grow by 145,000 before the 2032 Olympics, 77 per cent of which will be through domestic migration.
According to the Regional Australia Institute, the Gold Coast remains the most popular destination for people relocating from capital cities.
The housing market has been surging for two years, albeit with signs of cooling off.
Rental vacancy rates sit at about 0.4 per cent, well below a balanced market of 3 per cent.
Median house prices have risen by 16.8 per cent and 21.8 per cent over the past two years, respectively, to $940,000.
But Colliers Gold Coast director Steven King says “astronomical rises in construction costs” have plagued the building industry, forcing several major firms into liquidation.
“If costs continue to rise there may be a stall in sites being delivered as project viability is impacted and therefore further fuelling the supply and demand imbalance,” a Colliers report states.
Mr King said people could not be stopped from moving to the region, so the city needed to find a way to house an additional 14,500 people every year.
So why the ‘enormously bright future’?
Given that the supply of greenfield land for low-density housing estates was limited, Mr King said the growing population would drive demand for more units and high-rises.
Median apartment prices have risen 16.7 per cent in the past 12 months to $595,000, but in some coastal suburbs those prices have averaged $1 million.
“That’s where we’re seeing most of the growth happening with development at the moment,” Mr King said.
That is controversial for some locals — especially around the extension of light rail south, which is expected to facilitate high-density developments in previously lower-density areas.
Mr King said suburbs around Southport should take in much of the growth as well, with the CBD attracting $5 billion in private and public investment.
“On a rate per metre for what you’re buying sites for, a rate per metre of what you’re buying houses for, it’s on the cheaper side in comparison to everywhere else on the coast,” he said.
But it is the investment the Olympics will attract that Mr King says is a “major factor for confidence”, with the Gold Coast expected to host multiple major events and an athletes’ village in Robina.
With Robina’s road network already at its limits, the Colliers report states, “These projects are expected to not only accommodate the Olympic Games needs but also the local economy by providing a vastly superior local road network and public transport system”.
But construction uncertainty looms
The construction industry makes up about 10 per cent of the Gold Coast economy.
A January 2022 research paper published by credit reporting firm CreditorWatch estimated that 12 per cent of construction businesses nationwide were “more than 60 days in arrears on their payment to suppliers”.
“[Construction] is in quite a precarious position, more precarious than it has been in a very long time,” economist Anneke Thompson said.
“It’s getting hit basically from all sides — it’s got huge workflows to deal with, lack of labour, and something that is unique is fixed price contracts.”
Ms Thompson said the costs of construction, determined when contracts were signed, had been blowing out with builders forced to absorb the additional expenses.
“When there’s big delays, which obviously there have been because of lockdowns and then supply issues, that payment structure falls apart,” she said.
Ms Thompson said there was a backlog of insolvencies that had been building up over the past two years.
“The ATO and other organisations took a softly, softly approach over COVID,” she said.
Mr King said there was some unpredictability to economic forecasts but “we’ve got $20 billion of forecasted infrastructure that’s going to come to the Gold Coast”.
“That’s a big factor — people look at that,” he said.
