Sea change is nice, but not at that price

Author: Bridget Carter
Date: 31/01/2009
Publication: The Australian

THE sea change stampede for coastal property has been brought to a grinding halt, with hundreds of multi-million-dollar homes sitting empty while developers teeter on the brink of ruin.

Just two years after cashed-up investors were racing to buy straight off the plan, developers are now being forced to spend thousands of dollars on marketing campaigns in a seemingly futile effort to persuade baby boomers spooked by the economic downturn to part with their cash.

David Rothwell's Winten Property Group recently relaunched a marketing push in an effort to breathe life into sales at a development at Kingscliff, on the NSW north coast.

The $1million-plus apartments have informally been on the market since they were completed a year ago but, in the weeks since the marketing campaign kicked in, only one has sold.

Even the biggest names in residential development are struggling to sell. Mirvac will by March have more than 100 units to sell, ranging in price from $500,000 to $2.5 million, at its Magenta Shores golf and hotel development on the NSW central coast, 90 minutes' drive north of Sydney. A total of 76 homes have been sold since the development got under way, but plans for further building -- the original concept was for 490 units -- have been put on hold.

"The hotel is doing very well up there ... but none of the beach homes have sold (off the plan)," Mirvac chief executive Nick Collishaw said. "There is interest, but it is cautious. Today's market can't sell anything off the plan."

Dean Dransfield, director of the consultancy company Dransfield Hotels and Resorts, which offers advice to developers embarking on lifestyle projects, said the downturn would expose any second-rate developments. These would sell, but only if prices were cut by up to 50 per cent.

"I think the good projects will recover, but bad projects have been found out forever," Mr Dransfield said.

"They wouldn't have seen the light of day if it wasn't a bull market."

He added that projects in hard-to-get-to places, or towns without direct air links, such as Port Douglas, were struggling the most.

Among the states, hardest hit appears to be Queensland, where 4000 new apartments are going begging: 1000 on the Sunshine Coast, more than 700 in both Townsville and Cairns, and far more on the Gold Coast.

It is believed many of them have fallen into the hands of the financiers, given that most developers make just 20 per cent profit on a project.

At Kingscliff, where apartments have been on the market for a year, prices have been reduced by 30 per cent, yet only one of the 14 has sold.

Mr Rothwell remained optimistic, saying the discounts would not be maintained when some had sold and that the appetite for a sea change would always be there.

"The ability to produce developments of this kind in a location such as Kingscliff is only going to get harder," Mr Rothwell said.

Sally Manning, the agent charged with marketing the properties, said it appeared no one had the money to buy.

"It has been pretty slow because most people can't sell their own houses," Ms Manning said.

"There are a lot of people who have got their properties on the market and they are sitting there and waiting to see what they can buy; they're in no position until their houses sell.

"This is across the board with a lot of people.

"Everybody is so uncertain as to what will happen so they are sitting and watching and waiting."

The pain from the downturn was not restricted to developers.

"A lot of real estate agents are in financial difficulty themselves," Ms Manning said. "There is nothing much selling ... beyond $300,000 it is very difficult."