Give me safe old Ade­laide any time

The Advertiser - Real Estate - - House Hunter - AN­THONY K16E2ANE

WHEN do you think Ade­laide will get its first 70-storey res­i­den­tial sky­scraper? My guess is this will ar­rive at some time be­tween 2050 and when hell freezes over. But big isn’t al­ways beau­ti­ful in the world of prop­erty in­vest­ment, as I dis­cov­ered on a re­cent trip to the Gold Coast.

There, sky­scrapers are sprout­ing like mush­rooms. Not con­tent with build­ing the world’s tallest res­i­den­tial tower, Q1, in 2005, there are two more 60 or 70-storey build­ings un­der con­struc­tion, adding to sev­eral other sky­scrapers built over the past decade.

But all this ac­tion and glam­our masks a sad story for in­vestors in the Gold Coast prop­erty mar­ket, where prices have dropped sharply since be­fore the global fi­nan­cial cri­sis, buyer ac­tiv­ity is weak and re­ceivers are hav­ing a field day.

Many in­vestors who bought off the plan are fac­ing bank trou­bles as their new apart­ments are worth less than ini­tial val­u­a­tions – in some cases hun­dreds of thou­sands of dol­lars less.

Com­pare this with steady-as-she-goes Ade­laide, where prop­erty prices have not done much the past few years but they haven’t gone back­wards.

Ade­laide’s coast­line is dom­i­nated by the Hold­fast Shores de­vel­op­ment, where the high­est build­ing is just 12 storeys. We may not have the sky­scrapers but we don’t have the con­stant boom-bust cy­cle ei­ther.

Also, prop­erty de­vel­op­ment is not a key plank of our econ­omy so when prop­erty prices fall – in the ex­tremely rare oc­ca­sions that they do here – it doesn’t have large flowon ef­fects on jobs and busi­nesses.

In the Gold Coast and sim­i­lar places it’s all about sup­ply and de­mand. Dur­ing boom times too many high-rise apart­ments get bought and built, which ul­ti­mately leads to a painful bust be­cause of over­sup­ply.

Build­ings al­ways de­pre­ci­ate, un­like the land they sit on. If you in­vest in a 60-storey apart­ment build­ing, tech­ni­cally you’re shar­ing that lit­tle plot of land with 60 other in­vestors, plus play­ing hefty costs for main­te­nance of the build­ing’s fa­cil­i­ties.

Also, ev­ery time a new build­ing pops up, yours be­comes a lit­tle bit older and less at­trac­tive. Even Q1’s reign as the world’s tallest res­i­den­tial build­ing is al­most over, with two even big­ger tow­ers – one of them al­most 100m higher – set to be com­pleted within the next 12 months in Dubai.

Own­ing a prop­erty in­vest­ment in a pop­u­lar hol­i­day des­ti­na­tion sounds ro­man­tic but un­less you’re pay­ing cash for it, in most cases you’re bet­ter off pay­ing to hol­i­day at your favourite place when­ever you can.

For me, a nice Ade­laide home on a sub­ur­ban block in a good area wins hands­down in the in­vest­ment game.

TOW­ER­ING: Q1 build­ing on the Gold Coast

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