It is common knowledge that the Global Financial Crisis (GFC) has caused a dip in property prices with many thousands of dollars being wiped off the value of the average family home.
The effect of the GFC on prices of 'mega mansions' has quite often been about as huge as some of the mansions themselves!
Especially evident on the Gold Coast has been the ample supply of mansions with only a small market of individuals keen on purchasing. The small market is due in part because businesses and their owners have not had ready cash, or the market confidence, to make such a big move to these mega mansions.
The loss in value to the prices of 'mega mansions' is reflective of supply and demand, whereby there has been a large amount of vacant luxury houses, for sale whereas the average family home has continued to have a relatively large market despite the GFC as there has and always will be more in the market with funds prepared to buy these properties.
Liam Kirby, an experienced business and property lawyer from the Quinn & Scattini Gold Coast office, explains his thoughts on the economic reason behind the decline of mega mansions and what he has witnessed in terms of values.
"Put simply, demand has been low for mega mansions and supply has been high which has resulted in prices for these homes falling dramatically.
To give a few examples, I dealt with the same property both pre and post GFC. Pre GFC the property sold for $18 million. However, two (2) years later I saw the same property sell at auction for $7.5 million. I have seen a similar home sold at auction for $2.3 million after it had been purchased three (3) years earlier for $5.5 million", Liam said.
Similar to the examples offered by Liam is a story which had been published towards the end of July by Alister Thomson and Quentin Tod for news.com.au where a luxury Gold Coast home which cost $21.44 million sold for $5.3 million.
The emotional difficulty felt in having a house sold is reflected in the words of Peter Drake who controlled a global funds manager empire, LM Investment Management. He stated, according to the paper that he was not happy at having every "Tom, Dick and Harry" 'traipsing through the property at open houses'.
An article published in the Courier Mail by Cliona O'Dowd last week mentions how property lending to investors has "soared 28 per cent to $79 billion in the June quarter". Though activity so far has increased primarily to small and medium priced housing it is quite possible that this trend might continue for the higher priced luxury housing.
Also, the number of companies that have been 'going bust' in Queensland (according to latest figures by ASIC as reported in the Courier Mail) has dropped slightly. However , they remain close to their all-time highs.
Liam reflects on the comments of Peter Drake, the increase in investor lending and the small reduction in companies going bust.
"I would suggest anyone looking to get into investing in property take the time to speak with our property and bankruptcy lawyers, and also seek advice from their accountant.
The feelings expressed by Peter Drake are reflective of everyone's emotions when losing a home, irrespective of if it is big or small in comparison.
Investor lending might have increased again and the level of company bankruptcies might be slowly stabilising, however people should not look to just jump in too quickly because they worry how any 'bargains' will shortly disappear.
It might seem like an unnecessary cost which people would rather avoid, however obtaining advice relevant for a purchasers specific circumstances might make the difference between 'losing everything' or having at least something to be able to build themselves back from should things however unlikely go 'pear shaped'."