Re­gional mar­kets set to fire

Prop­erty ex­pert John Lin­de­man on where he’ll be buy­ing next year

Port Douglas & Mossman Gazette - - FRONT PAGE -

IT’S com­mon knowl­edge that cap­i­tal city hous­ing mar­kets are on the rise, but what’s the point of in­vest­ing in over­heated mar­kets that in­evitably cool down. My pre­dic­tion is that the next hous­ing boom will oc­cur well away from cap­i­tal cities and there are three mil­lion good rea­sons why. That’s the num­ber of peo­ple at or near re­tire­ment age and many of them will be mo­ti­vated by cur­rent price rises to sell their empty nest fam­ily homes and move. Such a huge num­ber of buy­ers will act like a grey tsunami swamp­ing some coastal hous­ing mar­kets and they’ll send prices shoot­ing up­wards – the only ques­tion is where and when.

The an­swer is in the three dy­nam­ics at work in re­tiree mar­kets lo­ca­tion, com­par­a­tive price and the co­hort ef­fect. To­gether they tell us where and when re­tiree booms take place and re­veal where to get in be­fore price rises start, so let’s take a look at how they work. Like pre­vi­ous gen­er­a­tions who cre­ated new re­tire­ment havens such as the Gold Coast, Her­vey Bay or By­ron Bay, the baby boomer gen­er­a­tion will cre­ate their own des­ti­na­tions, but be­cause of their gen­eral cos­mopoli­tan na­ture, they are also likely to live near larger towns with good re­cre­ational, health and en­ter­tain­ment fa­cil­i­ties. The key is that such lo­ca­tions will be pleas­antly sit­u­ated coastal towns with good ac­cess by road, rail or plane to the near­est cap­i­tal city – a few hours’ drive or short flight at the most from the chil­dren and grand­chil­dren. Al­though re­tirees are im­mune from hous­ing fi­nance con­straints, in­ter­est rate rises, un­em­ploy­ment or eco­nomic fluc­tu­a­tions, their largest as­set is likely to be the fam­ily home. Not only must its sale en­able then to buy their re­tire­ment dream home, but they’ll want enough left over for a world trip, new car or car­a­van as well as a re­tire­ment nest egg. This means that the buy­ing price of their re­tire­ment home price needs to be sig­nif­i­cantly lower than what the old fam­ily home sells for. The Global Fi­nan­cial Cri­sis of 2008 knocked the stuff­ing out of many boomers’ su­per­an­nu­a­tion and share hold­ings, and en­cour­aged them to put off re­tire­ment un­til their losses could be re­cov­ered. What we have, in ef­fect is a huge back­log of as­pi­ra­tional re­tirees hop­ing for a fi­nan­cial mir­a­cle and now at last they have one, as the rise in cap­i­tal city houses prices pro­vides them with the mo­ti­va­tion to sell. Once a new re­tire­ment lo­ca­tion be­comes pop­u­lar, more and more re­tirees move there which de­mog­ra­phers call the ‘co­hort ef­fect’. We have wit­nessed this in the past on Queens­land’s Gold Coast, South Aus­tralia’s Fleurieu Penin­sula, Vic­to­ria’s Morn­ing­ton Penin­sula and many other well-known re­tiree lo­ca­tions. Prices shoot up­wards un­til they reach the com­par­a­tive price ceil­ing and then they stop, by which time over half the lo­cal pop­u­la­tion may be aged over 65. Th­ese towns then slum­ber along for many years with a grad­u­ally ag­ing pop­u­la­tion and no house price growth, un­til even­tu­ally the older folk are moved to hos­pices and nurs­ing homes and the in­creas­ing num­ber of homes on the mar­ket sends prices spi­ralling down­wards. The cur­rent gen­er­a­tion of re­tirees shun such ar­eas be­cause they don’t want to be con­stantly re­minded by mo­torised scoot­ers and walk­ing frames of what lies ahead. In­stead, they cre­ate new re­tire­ment lo­ca­tions of their own. The cur­rent rise in cap­i­tal city house process is likely to mo­ti­vate many po­ten­tial re­tirees to make their move and by do­ing so, cre­ate a re­tiree-led hous­ing boom. The three dy­nam­ics of re­tiree mar­kets show us that the high­est growth will oc­cur in well lo­cated, at­trac­tively sit­u­ated towns at low com­par­a­tive house prices, where val­ues have not crashed in re­cent years, but not risen ei­ther. The lo­cal pop­u­la­tion will con­tain only an av­er­age num­ber of older res­i­dents. Such lo­ca­tions can eas­ily be found on the Sun­shine Coast, in South Gipp­s­land coastal towns, some of the south coast hol­i­day re­sorts in NSW and as re­vealed in our Best 20 re­gional re­port for north­ern Queens­land, in Moss­man and Port Dou­glas. Many of th­ese towns have not ex­pe­ri­enced real price rises for over 10 years and there are al­ready early signs of grow­ing re­tiree hous­ing de­mand, with much more to come over the next few years.

John Lin­de­man is the re­search colum­nist for API Mag­a­zine and chief prop­erty con­sul­tant at in­no­va­tive hous­ing mar­ket an­a­lysts Prop­erty Power Part­ners. More in­for­ma­tion: visit www.un­der­stand­prop­erty.com.au

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