Give me safe old Adelaide any time
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