Far North begins to stir
As the Brisbane real estate environment strengthens, Northern Queensland remains something of a contradiction as positive and negative market forces match up in a game of tug of war
On a quiet stretch of Cairns walkway, beside the city’s Esplanade, there is a sign advising walkers to be on alert. Pitched beside muddied water that flows under thickets of mangroves, the sign warns of the dangers of stepping too close to a seashore teaming with jellyfish and crocodiles. “You never know what’s underneath the surface”, it says.
It’s a phrase that aptly describes the hodgepodge of activity across Queensland’s northern regions. Dubious forces are certainly at work in some of the area’s property markets. Strong activity is being interspaced with prolonged price falls in markets that have historically been robust and while this isn’t dangerous in itself, it presents investors with an unsettling feeling – uncertainty.
As examples, Cairns and Townsville
offer two startlingly different property experiences, despite the cities sharing certain market drivers, such as the tourism industry and fly-in fly-out workers.
In Cairns it is clear that the property market is still largely being affected by a softer tourism industry dragging down demand. There are one or two bright spots, but on the whole, activity has been depressed, especially in the unit market. Units in Cairns suburbs such as Bungalow, Portsmith, Woree
and Manunda have had among the country’s worst performing property values of late, with all seeing price declines in excess of 20% over 2013.
But here’s where Cairns got interesting last year. Apartment values, which fell across most of the city over 2013, increased by a massive 17% in the CBD. More than that, there was also resilience in rental prices since the average rental yield figure on apartments came in at 6% – an unusually high figure for a city market that has recently benefitted from big capital growth.
It is worth noting that it is not uncommon for once subdued markets to start growing again from the centre outwards. However, the fact that the Cairns economy remains fairly weak and that the employment market is also soft suggests that this might be a bit of a stretch. Still, it should give investors pause for thought: is the market seeing the first green shoots of recovery? It would be very hard to call.
Townsville, by contrast, has more concrete signs of a recovery, but some red flags are emerging too. The city’s biggest markets for detached housing moved little last year. Popular suburbs such as Kirwan, Mount Louisa and Annandale saw growth in values hover at around 1% for 2013 after having seen falls in previous years.
At the same time, the unit market within the more central parts of the city had something of a surge in prices. Apartment prices in Belgian Gardens rose by 30% and by 10% in Pimilco. Garbutt
and Townsville CBD median unit values also showed some strength by each growing 5%.
Unlike Cairns though, the Townsville economy looks to be in a strengthening position. “It’s possibly the strongest regional economy in Australia,” says Hotspotting’s Terry Ryder. “The city’s broad-based economy has allowed it to flourish as it is not dependent on any one sector.”
But it’s not all good news for Townsville. SQM Research reports that the city’s current vacancy rate is 8%, suggesting that the city currently has an oversupply of housing. “If you haven’t been to Townsville for a few years, be prepared for a shock,” says Ryder. “The city has become development central, the skyline festooned with cranes as developers work on apartment buildings and mixed-use projects.”
Suburb to watch
Runcorn has a mix of housing types, ranging from larger three and four bedroom houses to small two bedroom houses, bordering on cottages. This gives the area a diverse resident base and many different demographics call the area home.
Some 19km south of the Brisbane CBD, the area looks likely to record attractive growth over the year ahead – with affordability a significant driver of market activity. At a median price of $440,000, large block sizes and an impressive array of amenities nearby, Runcorn houses offer a considerable value proposition.
Part of the attraction is close proximity to the M2, which connects Runcorn to the Brisbane CBD and puts it within 40 minutes’ drive, depending on traffic. Runcorn also has plenty in the way of parkland and there is small selection of shops and facilities nearby.
Its southern location also puts Runcorn within 30 minutes’ drive of the Gold Coast.
From an investment perspective, the market looks very healthy. The current average rental yield on properties is a handy 5%, while the vacancy rate remains tight and currently sits close to 1%. Meanwhile, little stock is available, keeping the supply of properties in short supply. Just 0.9% of all properties in the neighbourhood are currently on the market – suggesting the interested buyers will face some competition to get the properties they want. This can often aid property price increases.