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Golf's Property Boom

by Majella Corrigan, Bulletin Magazine. Oct 2002

Australians are flocking to buy homes attached to golf courses. The trend in lifestyle change provides a ready-made community, reports Majella Corrigan.

Australians' fondness for living by the water and the beach is well known, but it appears people are also starting to embrace life beside a golf course – whether or not they play the game. As more and more developers look for sites to capture what they see as a growing market, they say that buyers are seeking not just land near a course, but an opportunity to have a lifestyle that includes membership in a ready-made community and open space that is maintained for them.

Golf is the most played game in Australia. A recent report on the industry by Ernst & Young, in conjunction with the Australian Golf Union, shows social golf in particular to be an important market segment. The report notes that Australia's population profile points towards opportunities for the golf industry as an ageing population puts more people into the age brackets where participation in golf is at its highest levels.

Tony Fehon, CEO of Medallist Golf Developments, a joint venture between Macquarie Bank and Greg Norman's Great White Shark Enterprises, says course ownership in Australia used to be the domain of private clubs or councils. While resort-based developments targeting American and Japanese tourists sprang up in the 1970s and 1980s, golfing communities are relatively new in Australia.

Medallist has undertaken five course projects in the United States and one in Mexico. In Australia, its developments include Norman Estates at Cape Schanck, Victoria, Pelican Waters at Caloundra, Queensland, Brookwater in Brisbane, the Vintage in the NSW Hunter Valley, and a planned development at Schofields, western Sydney. Fehon says Medallist is also looking north of Perth. "All up, Medallist has developed 6500 lots and we think there'll be four to five more such developments over the next few years in Australia."

Fehon says about a third of buyers don't play golf at all, but choose to live on these developments because of the certainty of open space. "What people get is not just a nice house, but well-manicured backyards, well-planted and well-maintained surrounds. In addition, membership gives them privileges and it gives them instant community. They see their neighbours every day and a lot of social things develop from these shared times."

At Medallist's Brookwater, 30 minutes from Brisbane's CBD, the Norman-designed course has been in operation for six months. Medallist says lots in stage one, released in March 2001, had an average price of $135,000, with the most recent release in stage two having an average price of $222,000.

David Domingo, who is handling sales in Brookwater, says an extensive masterplan for the community includes covenants built into the sales contracts. These cover factors such as house size and guidelines on landscaping and environmental soundness. The development features regenerated native bush, making it a natural haven for wildlife. There are water features, wildlife corridors and Possum Creek runs along the entire eastern boundary. "Our market research shows that, financial issues aside, all people would choose estates that provide these sort of settings," says Domingo.

Prices range from $110,00 for 700 to 800 square-metre lots up to $280,000 for 1453sq m of absolute course frontage.

Domingo says the covenants stipulate that building must start within 12 months. "This helps create a community and citizenship for buyers."

Through talking to prospective buyers, he believes most people's concerns when purchasing property include a fear of being built out and fear of surrounding houses not being completed, compromising lifestyle. "These are the fears people have expressed and so we have dealt with these issues in the covenant," he says.

Domingo has found buyers to be late baby boomers and early Generation Xers, with some about to start families. He estimates that about 120 people take a look at the development across a weekend and he sees about 30 families during the week. "The real hunger amongst baby boomers is not so much for postcode as citizenship. They really want their children to enjoy manicured parklands and native bush."

Another developer with experience in golfing communities, the Links Group, has found a similar experience with buyer types. The group is involved in two golf course developments in Victoria (the state with the highest participation in golf). Managing director Stephen Head says that after the first year of sales, about 25% of the lots at its Sandhurst Club at Carrum Downs, south-eastern Melbourne, have been sold.

Sandhurst has two courses (one designed by Peter Thomson, the veteran Australian who won the British Open five times), a lake system and a central core with gym and swimming pool facilities. Head puts the average lot price at $300,000, although blocks can cost between $400,000 and $500,000.

Buyers must comply with regulations on how and what they build on their blocks. This is achieved by making them become club members: as such, they must abide by club rules. And, as a member, they must pay a contribution – Head says this is a couple of thousand dollars a year – which is spent on maintaining facilities and services such as land­scaping and security.

On the other side of Melbourne at Point Cook, on Port Phillip Bay, the Links Group has its first development, Sanctuary Lakes, which totals 460 hectares and was started about five years ago. It includes a Norman-designed course, a 65ha salt lake system with islands and jetties, a tennis court precinct, golf club, recreations sports and waterfront cafe. Blocks range from $180,000 to $600,000 for those near water.

Head estimates that blocks priced at $200,000 three years ago would sell for $400,000. "Two weeks ago, we sold 85 lots in two hours. We've spent a fair bit of time working out the market and it's the same group of people who are buying. It's the baby boomers, the same group that want inner-city apartments and lifestyle properties in country towns. Some baby boomers want to be able to enjoy cafes and all those sorts of things, but still want their own block of land, and they're what's driving all of this. It's a very large market and we are reasonably confident it's going to be reasonably strong for the next five to 10 years."

Head believes threats of a bursting property bubble won't have much of an impact on such a specific market because buyers are usually second and third home owners using their own equity and doing it for the lifestyle. He notes, too, that people buying do have children. "All the research for Sanctuary Lakes suggested very few children so we didn't provide room and space for children's facilities and we've been retro-fitting ever since."

Many buyers are moving from suburbs closer to Melbourne, freeing up equity in the process – and Head estimates only about a third are avidly interested in golf.

Queensland-based property researcher Michael Matusik, who produces Matusik Property Insights, says in a February report that "increasingly the question is which golfing community to choose, rather than whether to just buy into one". He points out that developers will be under increasing pressure to get everything right.

Matusik says golf courses cost about $1m a hole to build and so it is not simply a matter of lodging a development application, paying a pro to design the course and advertising property for sale. With many buyers not golfers, luring members to become purchasers and attracting local players takes more than just buying a golfing brand. Developers need to consider the demographic and geographical location of an estate when choosing a course architect. To be successful, they must be well-planned and researched, making sure they suit the area.

Buyers should do their research, looking to communities where all lots have some view of the course, and should also scrutinise the management. "While a brand name may be appealing initially, long-term performance of the investment depends on good management, particularly of public play. If management doesn't make money from the course, it doesn't get maintained and values stagnate."

Matusik's report says allotments in Queensland's planned golf communities can achieve end values from 5% to 125% greater than those elsewhere in the suburban area. US research shows premiums on developments where brand-name architects such as Jack Nicklaus and Arnold Palmer design a course. But he says one aspect to consider for golfing developments is the uniqueness of the brand. "Not everything can have the same brand."