Two Airports Call for Townsville; Conflict of National Security for Existing Air Transport Facility

Townsville's real estate industry is an instrument of calibration and diagnostics for the broader economy.

So the current limitations placed on Townsville's most strategic economic asset being controlled by national security interests or constrained by federal budget priorities is a subject worthy of further investigation and reporting in this article because of the impact on property and investment interests in the City.

The real estate industry is one of the most critical arteries that carries the economic life blood of capital and cash flow to the businesses and employees of the City. In fact the real estate, rentals and hiring sector is the highest contributor to the Gross Regional Product (GRP) in the Townsville economy.

As proposed by the Townsville Real Estate Blog (TREB), facilities development will be critical to achieve immediate economic stimulation and sustainable development for the City over the next decade.

The rejection of Townsville's bid for direct international air traffic carrying passengers and goods draws attention to a potential conflict of interest between border protection priorities and Townsville's business and property interests.

Conflicts of interest or fragmented decision making posses a direct threat to the short term creation of jobs and long term growth plans for the City. The security and commercial interests of Townsville's garrison city raises serious questions for town planners and political leaders.

The bid by a fledgling group of local private investors to buy the lease rights to the Port of Townsville under a State government initiative to reduce government debt is an example of the depth of feelings in the community to control such a regionally strategic asset.

As this strategic shipping facility shares parallel commercial and military functions like the Townsville Airport, it too is most likely to have similar uncertainties for investors that are inherent where ring fencing of government and national security interests is a punch line in today's environment of intense governance policies.

For decades the federal government's military and security assets in the garrison City has been attributed to Townsville's reputation for growth, stability and relative certainty. Achieving the status of being the Capital of North Queensland and a legacy of strong population and economic growth over the past 20 years are proud credits for a relatively conservative community in regional Australia.

The findings to the Taskforce on the Development of Northern Australia did no feature Townsville as some people may have expected. The focus of infrastructure and centres of business development instead is directed to a greenfield site in the Northern region of Western Australia.

One of the findings in the Green Paper, Joint Submission to the Northern Australia Taskforce, identified that "Governance arrangements across the various jurisdictions and regions of northern Australia are fragmented and require streamlining and/or collaboration. Land and water use arrangements are crucial examples of these governance challenges which are central to future development opportunities.", the Green Paper considered.

The Green Paper also identified that "Stagnation can only be overcome with new investment targeted at new markets and offering new experiences. Several proposed integrated resorts in the Cairns region (Aquis Resort and Ela Bay Resort) exemplify the type of large-scale investment that may be required to reignite tourist demand.

Townsville Enterprise claimed to be stepping up their lobbying efforts to secure international air services following the Australian Customs and Border Protection Service's decision to reject the proposal by Air Asia to launch direct services from Townsville to Denpasar.

The decision by Customs and Border Protection Services has suggested the rejection of the international carriers proposal was attributed to resourcing of security processing equipment and personnel.

One has to question the viability of strategic national security assets and commercial private sector assets operating in parallel on military controlled land and government controlled transport infrastructure such as the Townsville Airport, and to a less extent, the Port of Townsville.

Tourism has an economic impact less than real estate, rentals and hiring in Townsville. The Australian Customs and Border Protection Service's decision to reject direct services from Townsville to Bali is a massive limitation to the City's ambitions to develop a broad-based economy. Such a decision has heightened sensitivity in a region where unemployment is sitting at record levels, and tourism is a critical pillar in maintaining a comfortable balance for an economy retracting after a recent downturn in the mining industry.

The military priority of the Townsville Airport is a menace to sustainable economic development. For the people of Townsville, leveraging the airport is a passionate interest to facilitate international trade directly into the Capital of North Queensland, especially for the largest City identified in the federally proposed Northern Development zone.

Could the growth of Townsville's air transport economy mean that commercial and military traffic have access to separate dedicated facilities? Does Townsville now plan for an international airport to the west of the City?

During World War II, Townsville accommodated multiple airfields. One of which is still operational today used for amateur aviators near Woodstock only 30 minutes West of the City.

The Australian Defense Force has budgeted for an extension to the Townsville runway to accommodate larger logistic aircraft being added to the Royal Australian Air Force (RAAF) fleet. The extension of the runway could also accommodate larger international aircraft. As the runway extension is driven by RAAF imperatives, consideration for parallel commercial traffic could not be confirmed by local RAAF Command.

Townsville Enterprise confirmed a strong interest by international tourism operators for direct services between Townsville and Bali. Townsville Enterprise Acting CEO said; "This is an issue affecting Townsville North Queensland that will continue to undermine attempts to properly develop the city and achieve the economic potential of Northern Australia. International air services are critical in connecting the north of Australia to a global market which is vital to the growth of the region.

The Acting CEO continued to report that "Townsville residents remain disadvantaged due to the Federal Government’s policy regime that proposes significant additional costs for passengers using Townsville International Airport, which is the 11th busiest airport in the Nation. No such charge is imposed on passengers using any capital city international airport in Australia."

"Townsville Enterprise, Townsville City Council and the Townsville Chamber of Commerce have been leading a united charge on this issue over the past few months. The issue was at the centre of a number of Ministerial meetings in Canberra last month and correspondence is ongoing.", the Acting CEO commented.

In the context of heightened sensitivity for national security, a strengthening global free trade framework with developing countries, and a local economy entrenched with tourism services, could these conflicting elements mean a extended period of frustration and struggle for a clear passage for international traveller markets into the Townsville region?

This potential "Cold War" between federally controlled security assets and local commercial tourism and property investment interests could be the catalyst for broader debate about a second airport with international specifications for the Townsville region.

Townsville's economic ambitions are dependant on the direct link to international trade through increasing air traffic, shipping and ecommerce activity.

A federal government centred over 2000 kilometres from Townsville facilitating a conflict of interest contrary to the interests of the people of Australia's 2nd largest regional economy could again be called to action at the next ballot box should the community find the observations of TREB worthy of further comments and debate.

References:

Townsville Real Estate Blog
Townsville Enterprise website
Townsville Bulletin

Wishing You and Your Family a Merry Christmas and Happy New Year

Reflecting on 2014, the Townsville real estate market experienced significant challenges with record unemployment, higher vacancy rates for rentals than the City has ever experienced in recent history, and a slowing economy with record low business confidence.

Reductions or even a correction in median prices for houses and units available on the rental market has caused anxiety for landlords and investors alike. This year has been a favourable period for consumers, both renters and buyers.

Strata unit median sale prices have reduced by 12 percent while house prices increased by 3.5 percent. Economic conditions contracted to levels of unprecedented low confidence for business while the national fiscal framework left the cash rate on hold at 2.5 percent for record consecutive periods.

The article "ready the spinnaker - the winds of fortune" provided some important insight for investors in the prevailing conditions in the market. For those investors seeking an indication of cycle timing and favourable movement in the market, this article offers some valuable direction.

Townsville Real Estate Blog (TREB) broke a leading story about a Gold Coast based building contractor having their licence withdrawn by the newly established QBCC. Contractors and investors experienced the trauma of financial losses linked to southern spruikers promoting boutique residential investments in the City. The story was picked up by main stream media including ABC national radio.

December 2014 brought the introduction of streamlined legislation for real estate professionals, both agents and auctioneers, that deregulated commissions for residential sales. The Property Occupations Act 2014 brought down the curtain on decades of formulated commissions.  

An opinion piece highlighting the role of residential land and unit development moguls in the City impacting the over supply of housing attracted interest that propelled the readership of the TREB to over 12,000.

The TREB now boasts a profile and position in the content creation community for real estate professionals that is second to none. We are now the most popular independent blog recognised for grass roots research and dependable commentary about the Townsville real estate market.

We look forward to bringing you more facts and opinions about the Townsville real estate market, the players and risks, opportunities and threats that we trust will assist you with your own research, planning and decision making.

Townsville offers an extraordinary opportunity for investors to place their wealth creation assets in the City. Citizens enjoy a tropical lifestyle and family friendly community desired by many people across the globe. We live in a beautiful and resourceful part of the world for which we all can be grateful.

TREB wishes you and your families, friends and loved ones a wonderful Christmas. Be safe if you are travelling over the holidays. We look forward to a more prosperous 2015 for our readers and supporters.

The TREB would like to thank our readers for their support this year and hope for continued support in 2015 with greater interaction and contribution from our readers.

It is a privilege sharing exciting and interesting stories with you about the Townsville real estate market.

Threat to Fixed Fee and Free Advertising Real Estate Agents; Queensland Commission Rates Deregulated

Queensland Real Estate professionals have feverishly been updating their knowledge, systems and processes to transition from the repealed Property Agents and Motor Dealers Act to the new Property Occupations Act, and for agents carrying trust monies, the Agents Financial Administration Act 2014 effective from the 1st December 2014.

The key changes include the replacement of seven separate agent appointment forms with a single standardised form;

• deregulating the maximum commission rates for real estate sales and property management
• removing the requirement for agents to disclose to a buyer the commission the agent is receiving from the seller
• extending the statutory limit on lengths of appointments for a sole or exclusive agency from 60 days to 90 days to better reflect market realities; and
• abolition of a separate Form 30 Warning Statement which will be replaced by a short prescribed statement included in the relevant contract.

The real estate industry has responded positively to the changes because of the reduction of "red tape" with simplified forms allowing agents to spend more time and energy servicing clients needs instead of filling out forms and worrying about paperwork.

Although the Property Occupations Act deregulates commission that agents can charge clients, Townsville Real Estate Blog has observed that agents are not increasing their commission rates for residential sales at this early stage in the new regulations regime.

Instead agents are reluctant to charge higher commissions in the Townsville market due to the strong competition for new listings. So clients, both sellers and buyers, find themselves in a strong position to negotiate with agents on the commission rate and marketing budget.

However, clients are cautioned not to seek open quoting on price. Service-centric agents are unlikely to quote in an open tender process where price is the main driver for the client enquiries because service quality is the corner stone of most agents' reputation in the industry.

When to negotiate commissions with agents is behind closed doors in person. Either as part of the agent's pitch for your service (if you are price or costing saving focused) or after the pitch for your service. Choosing your preferred agent wisely is born from purposeful research of the solutions being proposed by the agents.

To the surprise of some sellers or buyers agent consumers, price cutting is not a solution to the real problem of achieving the highest possible price within a reasonable time frame. Keeping the marketing costs to a minimum such as advertising, communications, etc. is a project specific factor in the solutions package. But marketing should not be associated with the effective management and leadership of the solutions package. The typical analogy described in the service industry for this misunderstanding is that "you pay peanuts and you get monkeys".

Finding the right agent is therefore synonymous with finding the right solution! Selecting the right solution is finding the right leader in the industry of which there are many. The decision is not easy. Recruit the right team of suppliers coordinated by a lead agent and you will give yourself favourable opportunity to achieve your objectives accompanied by personal satisfaction, exhilaration, joy or overwhelming relief when the job is done.

Beyond the appraisal and price prediction phase, asking the right research questions centred around the agents solutions such as the team, suppliers, schedule or time on market, target market reach, technology, innovation examples, and Townsville Real Estate Blog believes perhaps the most important, is the passion, enthusiasm and posture shown by the agent for the product and neighbourhood in which the asset is located.

Ask until you are satisfied even if it takes an hour or more. If you sense the agent struggles to answer  unscripted questions, then perhaps the leadership suitable for your marketing project is unsuitable and the package of solutions is unworthy of your business.

The agent commission rates should be the very last question you ask once you have chosen the right leader for your marketing project. If that means paying a commission above the average commission rate in the market, then take the risk within your appetite (what can be tolerated as an acceptable loss) and make the investment. Remember most agents in Townsville have a 'no sale, no charge' proposal so agents that have a tendency to give their time and wisdom in good faith, are more likely to treat your asset with respect and a hunger for success.

Townsville Real Estate Blog will continue monitoring the prices agents are charging over the coming weeks and years. The commission rates may increase in the short term for projects that are resource intensive such as marital separation matters and other resource intensive projects where a proportionate sale price is less than the viable profit for an agency. Such projects could include land sales, rural and remote properties and low end unit and house sales found in small markets.

As market confidence expands, and niche selling and buying opportunities manifest in the market, commission rates may increase on a project by project basis. By and large most agents will seek to keep their cash flows moving and therefore be open to negotiation on their commissions.

Full fee agents, those agents that have not set their commissions on a fixed price under the old legislation, are likely to fight for commission based on a percentage of the sale between 2.5 to 3 percent for residential sales.

Remote, rural and regional areas are more likely to find agents charging higher commissions because of limited competition between agents and the maturity of the asset price points in these markets. Agents that have positioned their brand and reputation on free advertising could also find greater competition in that alternative agents could simply offset the risk of supplier overhead by increasing their commission rate.

Full service agents may seek to neutralise fixed price and free advertising agents by offsetting agent-paid marketing risk with higher commissions.

Evidence of agents increasing their commission rates cannot be substantiated in the Townsville market at this time. We may see movement in commission rates in the future when the market has an appetite for a change in culture.

References:

Townsville Real Estate Blog

REIQ website

Local Townsville Real Estate Agents

Townsville Citizens Under In-Direct Fire from Residential Development Moguls

Townsville property moguls and inept Councillors (including local State representatives) are
pushing Townsville residential property income into decline, while a higher cost base is impacting on the standard of living for local citizens in comparison to the prevailing Gross Regional Product (GRP) in the overall economy.

"Stuck between the devil and the coral sea", governments and high-end property moguls are unleashing a volley of crazy capital stimulation from the sea-side inner-city unit developments to the outer-urban residential developments.

Meanwhile, second-generation incumbent inner-city unit and urban housing owners are feeling the greatest impact with many investors being pushed to the brink with lower than forecast profit margins.

Factor in acquisition capital, high vacancies and reduced cash flows, and probable losses on distressed sales and mortgagee in possession scenarios have increased substantially in the Townsville region in the past 12 months.

Bungled government tax reform, soliciting middle-class income capital for social housing policy, misaligned climate change policy and an over-supply of new construction housing have by and large triggered structural changes in Townsville's tropical and regional economy.

While the real estate and rentals industry are the highest contributors in percentage terms to Townsville's GRP, it is a sector under enormous pressure from which some businesses and investors have been brought to their knees.

The ABC's David Chen reports that "new figures show Townsville continues to have one of the highest rates of personal insolvencies in the country. Data released by the Financial Security Authority shows for the September quarter, there were 76 personal insolvencies in Townsville. Financial counsellor Saskia ten Dam from the Townsville Community Legal Service said the poor local economy, high rents and increased costs of living were putting pressure on residents. "Well I would say a minimum of one a week of people who [are] walking away from mortgages, surrendering their homes," she said.

Local economist Mr Dwyer said; homeowners in some suburbs may be disproportionately affected by the economic downturn. “... I know from Australian Bureau of Statistics data that there are suburbs really battling substantially higher levels of unemployment compared to the rest of the city,” he said. (Townsville Bulletin, 20 Nov 14)

Townsville needs visionary leadership! Leadership with a desirable political influence in Brisbane and Canberra and connections to new funding and capital supply. Links to new capital raising methods such as 'crowd-funding' initiatives, strategic alliances, joint ventures and networking with large corporations, institutions and consortium.

Spawning new and niche products and services, coupled with incentives for corporations to develop and foster skills and jobs in new and emerging technologies, must be high priorities for government and corporate leaders.

In the face of influential leaders that have built their reputation and wealth primarily on the back of Townsville's traditional real estate developments, enabling new leaders that are connected to the global capital, new age technology and infrastructure is seemingly an insurmountable task. But the Townsville economy, its people and its leaders must adapt or fall behind an increasingly competitive and ascending middle class in Australasia.

Still, traditional skills and networks are essential to attracting secured capital, while engineering and construction expertise is needed to drive facilities developments such as a base load power plant, events and people facilities or government-sponsored infrastructure projects.

Decisions by State and Local Governments to release more residential land while seeking inner-city investment stimulation and more residential unit development is a crazy policy. Especially at a time in our economic and political cycles that Townsville is not winning a fair share of government funding based on the ratio of economic contribution the region provides to the State.

An example of crazy planning is the government sector funding of a combined federal military and private sector housing project at the new Blue Wattle community, a massive residential land release development covering 1500 hectares some 20 kilometres from the CBD. Less than 40% of the land will be occupied by defence personnel.

The non-direct investors, those living and working outside the City's trade zone, investing in Townsville is likely to continue with long term benefits, as direct investors have benefited from the growth of Townsville in the past decade.

But the local investor, many of whom are mature citizens, are needing immediate real economic stimulation from construction in sustainable industries and future growth technologies and trade networks. The City is set to continue suffering in the short term otherwise. Revenues and profits must improve to support personal lifestyles and local economic dynamics for small business and large enterprise in order for the standard of living are maintained based on previous generations.

Governments and corporate leaders must rapidly arrest the losses local investors and citizens are experiencing. The devil in the over-supply of residential property will haunt the citizens of Townsville for many months and years to come.

Townsville's productivity has been relatively stable while the citizens, investors and businesses are reaping less personal income from their labour and profits. Businesses and investors are being forced to reduce costs in order to maintain personal and corporate income, impacting substantially on the quality of life for the people of the City.

From an ear to the ground perspective, Townsville Real Estate Blog has actively reported on the general sentiment in the real estate economy and forecast short to medium-term supply and demand activity accurately. These forecasts have served as lead indicators for not only the real estate sector but the broader Townsville economy.

Rising Property Prices Stumble
http://townsvillerealestate.blogspot.com.au/2014/09/rising-property-prices-stumble-snapshot.html

Real Estate and Rental Industry Highest Contributor to GRP
http://townsvillerealestate.blogspot.com.au/2014/09/castle-rocks-real-estate-and-rentals.html

Boom or Bust? Convergence of Factors Impacting Townsville Real Estate market
http://townsvillerealestate.blogspot.com.au/2014/08/boom-or-bust-convergence-of-factors.html

The extent and depth of the cutbacks occurring in the mining supply chain reducing fly in and fly out employment, subsequent reduction in manufacturing outputs, climate risk insurers driving strata unit and housing costs through the roof, while increased energy prices impacted directly on big industry and small businesses...this translated directly to lower living standards for property exposed citizens.

But the most significant risk element for property investors, apart from unemployment moving forward, is the supply of land assets by developer networks connected to large land release projects.

In a climate of conservative government policy, with construction stimulation a pillar of the State government election platform, combined with a local enterprise and political leadership culture prejudiced in the belief that more residential development means robust economic stimulation, the people of Townsville are being shackled with a tendency for misdirected economic stimulation costing its citizens dearly.

"BATTLERS struggling to pay their rates on time have handed Townsville City Council a $490,000 windfall"

Council figures show 7,785 homeowners and businesses failed to pay their rates on time, up from 7,111 at the same time last year. The financial troubles of those homeowners and business are expected to produce a $490,000 windfall for the council, as the 15 per cent discount on rates no longer applies if payment is late. (Townsville Bulletin, 20 Nov 14)

A change of planning focus and strategic direction is needed urgently, especially as the newly agreed Australia and China Free Trade Agreement rolls into operation in 2015.

Anticipating structural changes in the economic mix, entrepreneurship must become the new apprenticeship and trainee initiative promoted by governments.

The Galilee Basin rail corridor, port expansions in Townsville and Abbott Point, new mining ventures including renewable energy farms, and relocation of government administration to the Capital of North Queensland are critical projects for the City and region.

Traditional jobs are estimated to half by 2035. Progressive solutions such as community hubs for emerging e-commerce, home-based small business networking and building technology enterprises around online retail and content curation services and infrastructure is the future. With base load power on our doorstep, heavy industry and manufacturing could better compete with trading partners.

Once construction is completed, the economic stimulation reduces substantially. Meanwhile more residential accommodation is presented as supply to the property market. This is more competition for existing house and apartment assets impacting the ratepayers of the City.

Paradoxically the real victims of the over-supply of land and residential developments are also expected to shoulder the costs of infrastructure development and maintenance for next generation investors.

These investors then fall victim to the paradoxical cycle unless the political, corporate and community leaders drive a different agenda for the benefit of our property investor citizens, ratepayers contributing over 40% of the revenue to Townsville City Council coffers.

Either tone down the residential construction stimulation or ramp up the infrastructure, facilities or investment in entrepreneurs to ensure the demand for residential accommodation is sustainable for the majority of incumbent citizens of Townsville and the developer moguls of the City.

References:

Townsville Real Estate Blog
Core Logic RP Data Reports
Townsville Bulletin
ABC News
Colin Dwyer, Local Economist

Ready the Spinnaker – Winds of Fortune Turning in the Townsville Market

Townsville property has experienced significant head winds over the past 12-24 months impacting on investor yields, particularly in the apartment market, while lower median prices and valuations have occurred on the back of slowing economic conditions.

Increased holding costs, higher unemployment, government stimulus programs impacting over supply in the new construction sector, and fiscal policy reducing demand for private rentals with tax minimisation incentives for investors, have all been contributing factors as reported by Townsville Real Estate Blog.

It seems many measures and conditions have been unfavourable for incumbent investors while the fundamentals of the City’s broad-based economy have sustained continued interest in Townsville as a solid investment destination.

As the head winds ease and the inevitable turn of momentum comes, events are suggesting the winds could now be moderating to the stern (rear of the ship) offering forward momentum as governments announce publicly at least, sponsorship of capital investment projects such as the Ross Creek Precinct and jobs programs at a local call centre to mitigate the political risk of intolerable unemployment figures, and a growing displeasure with the perception of South-east Queensland-centric policies of the Newman government.

Now the Capital City markets are slowing and rental yields are weakening, as reported by RP Data’s senior researcher, Cameron Kusher. Mr Kusher reported; “With rents growing at their slowest pace in many years we are also seeing weakening rental yields. At a combined capital city level across all dwellings, gross rental yields are recorded at 3.8% which is the lowest reading since January 2011. With the rate of capital gains outpacing rental growth we are seeing rental returns reduce across all capital cities. In fact, over the past year gross rental yields have fallen across each capital city.

Townsville some 24 months ago experienced simular dynamics with an increasing supply of new housing driven by Federal and State government money, cash flow thirsty developers pushing land releases, cheaper housing models on smaller allotment sizes and a highly competitive build market caused yields and prices to ease.

RP Data’s Mr Kusher also commented; “The surge in building approvals over the past 18 months or so is likely to be contributing to the slowing rate of rental growth. With the number of home sales rising, new housing supply rising, more investor owned properties and population growth slowing, those renting properties have comparatively more housing options to choose from. As a result, the owners of these investment properties have less scope to increase weekly rents when renters can find alternate accommodation more easily than in the past”.

Townsville’s rental vacancy rate has reduced from July to August 2014 by 1% as the mid-year seasonal in-flows of people occur. Still less demand experienced in previous seasons as Herron Todd White’s Townsville Rent Roll Report for Oct 2014 identified with total vacancy rates sitting at 4.42%, units are 5.77% and houses are 4.42%.

Compared to Oct 2013, the vacancy rate for Oct 2014 is nearly 2% higher, which does not lead well for vacancy rates and flow on demand of consumer goods and services coming into the Christmas period, which traditionally experiences further outflows of people from the City.

Despite the sustained higher vacancy rates pushing prices for rental accommodation down in both unit and housing, interest in house sales have improved slightly with an increased median price of 3.5% over the past 12 months. Unit prices reduced by 12% with this sector considered a high risk investment in the short term. Houses on the other hand are picking up from the winds of fortune turning and astute investors are heeding the signals.

Local Real Estate Principal and Auctioneer, Aaron McLeod commented; “Our Townsville team has experienced an upswing of buyer interest in properties with value-add prospects. Land where a small subdivision, dual occupancy development is approved within 5 kilometres from the CBD or where properties need minor improvements to generate a positive return in financial or lifestyle terms”, Mr McLeod said.

Self-managed superfunds have been active in the market along with traditional home buyers acting on the purchase of quality homes at fair prices. These buyers along with astute investors have contributed to the transaction volumes and causing a modest upswing in prices off the back of sustained price easing over the past 5 years, Mr McLeod commented.

With government attention being drawn to the North Queensland economy with relatively high unemployment leading up to a State election, the supply of new housing easing as competition and development cost become less profitable, government funding for subsidised accommodation reducing and Capital City yields and prices easing in an environment of low cash rates, Townsville and North Queensland investors should get set as the main sail draws on the tail winds of an improving property market leading into 2015/16.

References:

RP Data Core Logic Report

Herron Todd White Townsville Rent Roll Survey Report

Townsville Real Estate Blog

Rising Property Prices Stumble; Snapshot of Townsville Real Estate June2014

The Townsville property market has experienced an increased median house price across the City since the same period last year up to June 2014, stimulating a modest recovery in a sustained challenging market.

Although the Townsville median unit price has dropped by 1.2% to $266,000, the median house price has increased by 3.5% to $343,000.

A total of 4175 dwelling sales have occurred to May 2014. Of the total number of dwelling sales in 2013-14, 82% are houses and 18% are units sold in the greater Townsville area. The volume of sales have reduced from the previous year by 1% and 3% below the 5 year average.

With a median house price of $343,000, over a 5 year period house prices have reduced by 0.7% demonstrating the housing market has experienced steady house prices for an extended period. 

Calculating the median house price with the median rental price at $360 per week, the indicative gross rental yield sits at 5.4%.

Vendors have been experiencing challenging times with prices being discounted by 8.0% and the time on market sits at approximately 92 days.

While houses have improved in value over the past 12 months, unit median prices have reduced in the same period. But most notable is the median unit price reducing over the past 5 years by 12.2%, demonstrating a material impact from an increased cost base for strata unit owners.

Townsville Real Estate Blog reported in 2013 the "North Queensland Strata Unit Market in Eye of Perfect Storm".

http://townsvillerealestate.blogspot.com.au/2013/12/north-queensland-strata-rental-market.html

Vendors have discounted their sale prices by nearly ten percent at 9.6% with a higher number of days on the market at 127.  With a median rental price of $325 per week, units have produced an indicative gross rental yield of 6.2% in the same period.

Further reading;

Boom or Bust? Factors Impacting the Townsville Real Estate Market

http://townsvillerealestate.blogspot.com.au/2014/08/boom-or-bust-convergence-of-factors.html

References:

Rpdata Core Logic for Business Report June 2014

Townsville Real Estate Blog - http://townsvillerealestate.blogspot.com.au

Rapid Realty Townsville Scorecard - www.rapidrealty.com.au

Breaking Story: Townsville Property Investors Left out of Pocket;Building Contractor License Terminated

The newly reformed Queensland's Building Construction Commission (QBCC) has terminated the licence of an alleged unethical building contractor operating in the Townsville new construction industry, leaving many angry investors in the dark and out of pocket thousands of dollars.

Reports of the contract builder's termination comes as the Townsville property investment and rental market feels the strain of increasing vacancy rates, reported by Herron Todd White in September 2014 to be trending at 6.08%.

Mostly South-Eastern and Western Australian investors who signed up to off-the-plan house and land contracts are impacted by the termination of the builders' license. Most of the 20-30 new investment properties are now abandoned, partly completed like ruined buildings and ghost houses nearing final completion waiting for QBCC assistance, which cannot come soon enough for mum and dad investors across Australia.

Approximately 500 new developer lots were available in April 2014 for purchase in the Townsville market. The scope of impact is relatively minor at this stage in the context of the entire new construction market in Townsville. But this offers no consolation to the many investors committed to the Townsville and Darwin property markets through what is known as the "Base Camp" investment system.

Local estate agents are reporting that unpaid contractors are returning to the properties and removing installed equipment because they have not been paid by the disgraced contract builder. One agent who wished not to be identified said; "we went to the property to check progress of works on behalf of our client and take photos, then found at the next visit that the irrigation system had been stolen or ripped out of the ground".

Ex employees of the contract builder have also confirmed that sub contractors are recovering their equipment from the abandoned buildings in lieu of being paid for their services. Suppliers have cancelled scheduled services on the news of the builder's license termination, and in some cases honestly refunded up front payments to the client on the "smell of a rat".

Townsville Real Estate Principal and Property Management Expert, Aaron McLeod said; Investors must be very careful dealing with venture building contractors especially those engaged by property investment spruikers to build and commission new investment properties. Investors are advised to engage the services of a licensed real estate professional in the location of the project, and work with local reputable builders.", Mr McLeod commented.

Back in 2013, Townsville contractors remember all too well when "Walton Construction (Australia) Pty Ltd and Walton Construction (Queensland) Pty Ltd were placed under administration on October 4 this  year owing millions of dollars to sub contractors across Queensland, NSW and Victoria." (Sunshine Coast Daily, Oct 2013)

Distressed investors are anxiously seeking help from the newly formed QBCC, insurance providers, lenders and the Southern investment spruikers who brokered the investment opportunities in the first place through participating finance brokers, often luring investors through effective telemarketing or property investment seminars in the capital cities.

At least one innocent investor has reported to the Townsville Real Estate Blog that they paid the final payment to the builder, then learned through the developer's covenant inspector that a substantial list of defects needed fixing. Defects such as fences, gates, roller doors, doors, security screens, locks and plumbing services, irrigation, etc. we're found not working at the property.

A practising Townsvilke building certifier reported; "These are components not typically included in the final inspection covered by the statutory Form 21 process. These defects seemed to have slipped through the gap in this certification process because plumbing and drainage is handled by local council inspectors, not the privately contracted and licensed building certifiers."

Perhaps most culpable could be the inspector, believed to be the licensed certifyer, that verified to the Client's lender via the investment spruiker that the building was completed and ready for handover. In addition, the plumbing and drainage final either was not done or was not delivered by the investment spruiker to the Clients lender before the final loan payments were disbursed to the failed builder.

Meanwhile, the builder and onsite supervisor reportedly coerced the investor into paying the final payment before keys could be provided to an independent agent, knowing forewell the property was not satisfactory for handover.

Because the investor has drawn down 100% of the borrowings after the Form 21 final certification form was received by the lender, the undisclosed defects still prevented the building from being occupied and rented so interest payments on the client's borrowings for the project could be serviced from cash flows.

Sources of the Townsville Real Estate Blog believe the Company Directors behind this particular investment scheme are based in Yatala, located between the Gold Coast and Brisbane. It is believed the company, which produces the steel framing for all of the new buildings, has set up a subsidiary contract building company in alliance with investment spruikers, delivering poor quality uninhabitable homes on this occasion to unsuspecting investment clients.

This type of company, setting up intermediary building companies, are taking advantage of the substantial increase in demand from property investors wanting to set up self managed superannuation funds on the back of government legislation reform and taxation changes on private superannuation contributions.

Questions are now being asked how a licensed certifier could complete the final Form 21 when the building was not completed satisfactorily? And the licensed builder, now the subject of QBCC license termination, could get away with causing such financial stress and mounting losses to innocent investors? How could the QBCC issue licenses in the first instance to seemingly unqualified and underfunded intermediary companies?

This property investment scheme debacle is unfolding at a time when Minister for Housing and Public Works, Tim Mander, said a "new early dispute resolution service would make solving problems between builders and families far less stressful than in the past". (Queensland Government and Ministry Director website, 30 June 2014)

"Contract disputes are never pretty but when you're talking about disputes between mums and dads who are making the biggest investment of their lives, and builders whose livelihoods could be on the line, it's only natural that emotions can run high," Mr Mander said.

"In the past there was no assistance fro families, or for builders, until the contract had either been terminated or completed, which meant the process cold drag on for months.

"This new service will significantly reduce the cost that disputes can place on consumers and contractors as well as substantially reducing the time it takes to resolve them, without legal action.

"This free service is part of our strong plan to grow construction, as we promised, and will create a brighter future for the industry."

Mr Mander, said the early dispute resolution service was just one of a raft of measures coming into effect on July 1 which would make life easier for builders and consumers.

It seems the integrity of the Campbell Newman Government's reforms of the old Building Services Authority (BSA) with the reformed QBCC will face its first real test in light of these serious events unfolding in Townsville, Darwin and across Australia.

Innocent investors already caught up in this potentially explosive property investment scheme impacting Northern Australia, could pay a high price in an economy under enormous strain from a government hellbent on centralised procurement in the lead up to the Commonwealth Games on the Gold Coast.

The depth of impact involves a supply chain of property investment spruikers, mortgage brokers, banks, builders, subcontractors, property managers and the government's own construction licensing regime.

Townsville Real Estate Blog reported in August with insight the impact that new construction and property spruikers were having on the supply and demand dynamic of the Townsville property market. (Boom or Bust? Convergance of Factors Impacting on Townsville Real Estate Market, http://townsvillerealestate.blogspot.com.au/2014/08/boom-or-bust-convergence-of-factors.html)

Owners and contractors impacted by failed construction investments can contact the QBCC hotline on 139 333 for help.

References:

Sunshine Coast Daily

http://www.sunshinecoastdaily.com.au/news/state-probe-into-walton-49m-failure/2091194/

Townsville Real Estate Blog

http://townsvillerealestate.blogspot.com.au/2014/08/boom-or-bust-convergence-of-factors.html

Queensland Government and Ministry Directory website, 30 June 2014
http://statements.qld.gov.au/Statement/2014/6/30/building-disputes-to-be-resolved-faster-and-cheaper

Real Estate and Rentals Industry Highest Contributor to Townsville Regional Economy

Townsville's real estate and rental industry including hire services contribute more value-added services than any other industry with 12.3% or $1.41 billion of the Gross Regional Product (GRP) followed by public administration, manufacturing, construction, health care and social assistance, etc.

Townsville is one of the most stable and diverse regional economies as one of the largest in Australia. By 2025, Townsville is forecast to become the 12th largest metropolitan and regional economy across the country.

Regarded as the industrial and commercial hub of North Queensland, Townsville is recognised as Northern Australia's largest economy contributing value-added services to the tune of $11.426 billion per annum. Over 23,000 businesses exist in Townsville.

The North Queensland economy has grown by $1.15 billion in 18 months and $78 billion worth of projects is in the pipeline (TEL Development Status Report, March 2014). Defence contributes $639.7 million or 1.8% of the Townsville economy.

Australia's leading demographer Bernard Salt said, "Townsville's next phase of growth is likely to see it accrue the critical mass in population to transform from a regional centre into a metropolitan centre."

With an average temperature of 29 degrees, 300 plus days of sunshine, a median house price of $345,000, 320 parks including the award wining tropical beach at the Strand and 3 national sporting teams in the North Queensland Cowboys, Townsville Crocodiles and Townsville Fire, Townsvillle is recognised as the most sustainable City by the Australian Conservation Foundation in 2010.

Boasting a world ranking in the top 4% of world tertiary instructions by Shanghai Jiao Tong University, James Cook University is Australia's leading tropical research university in medicine, health, education, sustainablity and marine science. In fact the Townsville hospital is the only tertiary hospital outside an Australian capital city. Townsville has over 60 primary and secondary schools.

Transportation is a critical strategic infrastructure for Townsville North Queensland and Queensland's North West Minerals economy handling $15 billion of goods and 13.6 million tonnes in 2013/2013. Townsville airport services both domestic and defence infrastructure with 1.7 million air passengers per annum and 34 flights per day. The Northern Australian Aerospace Centre of Excellence and Business Park is based at the Townsville Airport precinct.

Queensland's gateway to the vast minerals and energy resources of the North West Minersls Province and Galilee Basin injects $3.41 billion to GRP. The region is recognised globally as a strong and competitive minerals producing region with high quality copper, silver, lead, zinc, gold and phosphate deposits. The Premier of Queensland The Hon Campbell Newman said, "The Galilee Basin has the potential to create lucrative new export markets and generate thousands of new jobs in mining, construction and other supporting industries."

The Townsville Port has recently been upgraded with $80 million of development including a dedicated cruiseship and defence terminal and $1.3 billion expansion project. The Port activities include $8 billion trade value to 241 trading ports and 42 countries and 721 vessel visits. (Port of Townsville Limited, 2014)

Townsville North Queensland has an estimated population of nearly 234,000 people with an average annual growth rate of 2.0% from 2003 to 2013. The projected 2036 population growth is forecast to reach 361,098 with 79 new residents per week moving to the City. The average age of Townsville citizens is age 34 years. Over 1 million visitors to the region spend over $662 million per year to the economy. Over 300 events are held each year including the V8 supercars Townsville 400 and the Festival of Chamber Music.

In the scope of the entire Townsville regional economy, real estate and renting services is the "castle rock" in a housing market that plays a signifant role in the overall economic activity of the City.

From an investment perspective, this economic contribution by the real estate and renting industry is an indication of the depth of resilience for property investors in a vibrant and growing region.

References:

Replan Economic Development Modelling

Townsville Enterprise Limited (TEL)

Herron Todd White Townsville in Focus, February 2014

Port of Townsville Limited, 2014

TEL Development Status Report, March 2014

Rapid Realty Townsville - www.rapidrealty.com.au

Hold on Cash Rate Strength for Townsville Market

"Townsville Real Estate Blog reported in its article "Boom or Bust? Convergence of Factors Impacting Townsville Real Estate Market, August 2014 that low interest rates are strength to the local real estate market. It is one of the top ten reasons for creating positive demand in the real estate market", Rapid Realty Principal, Mr McLeod said.

Today, The Reserve Bank backed up the prediction of most economists by leaving the official cash rate at a record-low 2.5 per cent for the 13th consecutive month.

Reserve Bank Governor, Glenn Stevens said; "In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates."

ANZ chief economist Warren Hogan said the economy had been playing out as expected, with housing doing well and the gradual transition to a non-mining recovery on track.

He also said the Reserve Bank would have derived no benefit from lowering rates because it would have squandered an option “that would be better used if a major problem emerges”.

Commonwealth Bank chief economist Michael Blythe said the Reserve Bank would start a “modest tightening cycle” in February that would eventually lift rates to a ‘neutral’ 3.5 per cent.

Peter Munckton from Bank of Queensland said the Reserve Bank was likely to keep rates on hold for the rest of 2014/2015, but that it would most likely cut further if it did make a change. “The bar for another rate cut is quite high and would require the currency to remain around current levels, the unemployment rate to rise further and momentum in the non-mining economy to stay modest,” he added.

"The Reserve Back decision today to keep rates on hold at .25 percent is critical for the Townsville economy to continue the path of recovery in demand and price growth moving forward.", Mr McLeod commented.

Reference:

Townsville Real Estate blog - http://townsvillerealestate.blogspot.com.au/

Reserve Bank of Australia - http://www.rba.gov.au/media-releases/2014/mr-14-15.html

Rapid Realty - www.rapidrealty.com.au

Boom or Bust? Convergence of Factors Impacting Townsville Real EstateMarket

Townsville's property market is a laboratory of capital, social and policy forces impacting on the supply and demand dynamics for accommodation and housing in Australia's 2nd largest economy.

The 'Capital of North Queensland' has seen steady price movements in both acquisition and leasing markets over the past 5 years.

But now the time has come, or we are on the eve of a long awaited uptrend at least, that investors and accommodation consumers realise the benefits from a convergence of economic, policy and political factors pushing prices to the pinnacle of downside trends in the market.

If Warren Buffett's secret to successful investing in business is to be believed, the underlying value of the Townsville property market is undervalued and primed for valued-centric investors.

In comparison to Australian capital cities, significant regional economies and local trends in prices and values, the 'Greater Townsville Region' is a "hot spot" location for investors in the Australian marketplace.

"The arrival of a new agency in Townsville comes as ANZ chief economist Warren Hogan predicts a revival for the property market. Speaking to the Committee of Economic Development of Australia this week, Mr Hogan said “the housing market is in its early stages of a solid cyclic upswing” caused by low interest rates and market shortfalls. He predicted a 15-20 per cent increase in home values between 2013 and 2015 and said Queensland cities could soon experience growth already seen in southern capitals." Townsville Bulletin, Feb 2014.

Townsville in Focus Report May 2014 identified that; "The median house price stood at $355,000 in March 2014, 2.0% below the $358,000 median house price recorded in March 2012 and 6.1% below the peak of the market in December 2009.

A significant lead indicator for the accommodation and housing market is the demand for residential rental accommodation. The Herron Todd White, June 2014 Rent Roll Survey Report shows vacancy rates have continued to increase to 5.45% overall.

As reported by Herron Todd White, "Median house rents have dropped by $5 a week, from $365 to $360 per week, between March 2013 and March 2014. Median unit rents have dropped by $15 a week, from $315 to $300 per week, over the same period."

Townsville Real Estate Blog (TRB) believes rental prices have eased further in the June 2014 quarter based on 'coal face' monitoring, and forecast prices to steady with less easing in the September 2014 quarter. Prices are forecast to steady in the December quarter at the corrected new medians. It is bold to forecast that the unit median price could dip below $300 per week, but there is anecdotal data showing a subdued rate of enquiry on existing stock from professional and semi-professional occupations on existing CBD stock, a period after EOFY that draws higher inflows of this category into the City.

The Far North Queensland and Cairns market is experiencing a revival in demand and prices. A Cairns and Far North Queensland real estate agent said; “There has been a substantial rise (dwelling prices) on the back of high rental demand, which has increased the popularity of people buying instead of paying higher rents,” he said. “That’s the catalyst for the change in the marketplace and obviously the fact that rents have come up has attracted investors back into the marketplace as well, also with the underlying expectation that Aquis (a Chinese and Hong Kong-based 'super-resort' at Yorkeys Knob) will proceed. So there’s confidence in the housing market from that point of view, not only in current rental returns, but expected future capital gain.”, Mr Sterling from Ray White northern beaches said.

Townsville Real Estate Blog reported in March 2013 (Time to Wake and Smell the Roses Townsville Real Estate; Queen Bees are Being Born) that the optimum market for buyers would be 6-12 month away.

Mr McLeod, Principal of Rapid Realty in Townsville said; "The vacancy rates and supply and demand dynamic in the rental accommodation market is like a "canary in a coal mine" as far as sales are concerned. As is seemingly occurring in the Cairns market, a pickup in rental demand should signal a revival in volumes and prices in the sales market."

Ranked from highest to lowest by TRB in terms of the most influential micro-economic factors impacting the supply and demand dynamic in the Townsville property market are:

1. Higher unemployment from mining, government and small business retractions (demand flat)

The top ranked factor is unemployment and government instability. This factor is creating a negative imbalance of demand inflows for accommodation in the market. Higher vacancy rates have occurred as more people move away from the City seeking employment than an equal volume of people moving into the City. The current unemployment rate is approximately 8.5 percent in the district.

2.1. NRAS promoting false economy in new construction (demand flat/oversupplied)

By design, the previous labour government introduced the NRAS scheme to reduce the price of accommodation and housing in the marketplace, which was deemed to be 'overheating' and unaffordable for ordinary people at the time.

Driven by a consumer-centric society seeking cheaper prices, and adopted by a progressive government, this social policy decision is having a significant impact on rental vacancies in the non-subsidised accommodation and housing economy.

"What can be given by the pen, can also be taken by the pen!" NRAS is creating a false economy in the new construction sector. The Abbott government has budgeted for a termination of this scheme if the Federal Budget is carried in the current parliament.

2.2. Middle income families lured into NRAS homes at significant price discounts (demand flat/oversupplied)

Townsville Real Estate Blog have received reports that eligible NRAS tenants have declared over $100,000 in combined personal income yet were approved for the government subsidised and privately funded NRAS properties.

The attraction of middle income consumers to such a scheme demonstrates the depth and breadth of the demographic supported with government subsidised accommodation impacting the private real estate economy.

If the 'silver bullet' of public housing policy could be manufactured, the NRAS scheme would have to rival all social housing schemes in terms of the structural impact it is having on the supply and demand dynamic in the Townsville economy.

2.3 NRAS demand pool slowing and landlords seeking termination (oversupplied)

In recent times, TRB has received direct enquiries from NRAS landlords asking if they can terminate the NRAS contract early because of extended vacancy periods being experienced. NRAS registered property owners were unable to maintain essential cash flow from the NRAS pool of eligible tenants.

It has become evident that the exclusive nature of the NRAS scheme has itself exhausted qualifying tenants to fill vacating properties. Just as credible, the demand-side of this scheme is not meeting the appetite from investors seeking the lucrative $100,000 taxation rebate over 10 years.

3. Sustained low cash interest rates (demand positive)

Sustained low interest rates have contributed substantially to the demand for mortgages impacting the flow of capital into the property market in Townsville.

Mr Hassan of the Westpac-Melbourne Institute said; “While the Reserve Bank did not cut interest rates over the month, some banks have been lowering rates for new loans, reflecting recent declines in market rates as the slowdown in activity has seen a reassessment of prospects for the official cash rate. In August we saw the confidence of those households with a mortgage jump of 12.8%".

Mr Hassan also said "We expect the bank to again leave rates on hold at its July meeting and through the remainder of 2014 and the first half of 2015,'' he said.

The minutes of the RBA board's June meeting noted there were ''uncertainties'' over what impact the federal budget and expected declines in mining investment would have on the economy. Economic slowdown is 'likely', Westpac-Melbourne Institute Leading Index shows.

Read more: http://www.smh.com.au/business/economic-slowdown-likely-westpacmelbourne-institute-leading-index-shows-20140618-3ae3t.html#ixzz3AGhU9sHF

4. Lack of sustained private and public capital projects (demand moderate)

Townsville's $78 billion capital expenditure programmes have by and large run their course such as the Flinders Street Mall redevelopment, new Cruise Ship Terminal and Port expansion, Port Access Road, Jezzine Barracks, Lavarack Barracks developments and expansion of the Townsville Hospital site.

Townsville Enterprise Chief Executive Officer, David Kippin, said, "the March quarter 2014 DSR shows investors have maintained confidence in the development of Townsville North Queensland with major infrastructure, construction and mining activity stimulated by new ventures. Since the December quarter 2013, more than $65M in projects have been proposed including the $50M aged care facility at Fairfield Waters,” David said. The report shows $9B in projects underway, $35B approved and $33B proposed for the region with more than $150M in projects completed since the December quarter 2013. “A number of significant projects have been completed including the $40M Jezzine Barracks and Kissing Point redevelopment which opened at the weekend with celebrations continuing throughout the week.” (Townsville Enterprise website, March 2014)

Employment from these projects, mining and government operations has caused robust and sustained price improvements to rental accommodation in line with the national consumer price index of 2-4 percent. The convergence of capital project completions, reduced private and government capital flows have been the sharp edge of the economic downturn and higher unemployment in the last two quarters.

5. Abandoned sales pushing into rental pool. Unsatisfactory vendor price to buyer value expressions and mortgagee in possession events (oversupplied)

Townsville properties are sitting on the market for sale for an average 105-110 days, 88 days for houses and 124 days for units. Over 3000 properties are listed on the market for sale in any one month across the City. Approximately 250-275 properties are sold per month. In February 2014, sale volumes were down to 215 for houses and slight increase in unit sales to 55. On average sellers are discounting the price of their properties by approximately 7-9 percent to achieve a successful sale.

Approximately 450 new properties were listed in May 2014 in postcode 4810, which includes suburbs of Townsville City and surrounding suburbs such as South Townsville, West End, North Ward, etc.  The overwhelming majority of properties do not achieve settlement. Approximately 8-9% of all properties on the market in Townsville actually sell per month. Of these sales, approximately 3% have been distressed sales as 'mortgagee in possession' transactions.

Sellers have opted to place their properties on the rental market contributing to the oversupply of stocks because of unsatisfactory price to vendor value. Just as there has been an increase in mortgagee in possession sales in the past 12-18 months, so too the occurrence of abandoned sales.

6. Abandoned sales pushing into rental pool; excessive strata levy increases (oversupplied)

Although both owner-occupiers and unit investors are abandoning sales due to unsatisfactory 'on the market' value/price considerations, it's the owner occupiers mostly contributing to additional accommodation supply and pushing vacancy rates higher each time an abandoned owner-occupier sale occurs.

Strata unit owners have contended with both inflow and outflow constraints. Holding cost outflows and rental income inflows have been unfavourable. TRB reported on the Strata unit market in December 2013 being the eye of the perfect storm.

http://townsvillerealestate.blogspot.com.au/2013/12/north-queensland-strata-rental-market.html

These concurrent pressures have led to 'on the market' decisions by owners generating further supply of units on the accommodation market in Townsville contributing to 7.40% unit vacancy rate.

Coupled once again with investor-driven new construction, reduced natural demand due to higher unemployment, and the influence of NRAS people movements, excessive strata unit supply is a worthy inclusion in the top 10 factors impacting the Townsville property market.

6.1. New construction; property investment spruiker road shows (oversupplied)

As the 2nd largest regional economy in Australia and a reputation as a government hub for defence, education, civil and social services, mining, transportation and tourism, Townsville is an attractive destination for investors from Australia and overseas.

Sydney-based franchise agent McGrath stated "comments came as mortgage broker AFG reported investment activity in Queensland had jumped from 33.5% in January to 38.7% in June. A lot of that activity is in Brisbane but key regional centres are also attracting attention. For example, our office in Townsville estimates that 50% of investment sales are going to North Queenslanders and up to 40% are going to Sydneysiders." McGrath said "investors were attracted to newer houses around $350,000 to $450,000 and small sites with development potential." (Property Observer, August 2014).

"Developer land stocks have tended to increase due to on-going production over recent months, with our latest survey showing a stock of 587 developer lots available for purchase as at the end of April 2014 compared to 424 at the end of June 2013", as reported by Herron Todd White's May 2014 Townsville in Focus.

With the slight downturn in new house constructions since 2013, combined with underperforming government grant schemes and a slowdown in economic activity, many of the new house constructions have been driven by Southern investors contributing further to an oversupply in the rental market.

“A pick-up in the property spruiking business is a signal things may be getting a little too exuberant,” HSBC Australia’s chief economist Paul Bloxham told the Australian Financial Review.

Townsville Real Estate Blog expects a notable reduction in developer land stock over the coming months. This may be a factor in sale prices and volumes in existing dwelling stock moving higher in the coming 6-18 months, setting the scene for more Sydney and southern investors seeking solid returns as the capital city markets cool off and returns ease.

6.2 New construction; State Government "great start grant" funding (oversupplied)

The Newman Government's repackaged "great start grant" targeted exclusively to first home buyers has contributed relatively minor activity in the housing economy. The government has simply rehashed the first home buyer’s grant, which many experts believe has lost its intended impact as an affordable entry incentive to the housing market for first generation home owners. The housing market has in fact experienced a modest slowdown in new constructions since 2013. 

Townsville Real Estate Blog believes the new construction eligibility for this scheme has contributed to the low popularity of an exhausted policy incentive because new house prices are much higher than comparable functional 2nd generation properties.

New construction products in Townsville are generally located 10-30 kilometres from the CBD. Such developments are North shore, Greater Ascot, Blue wattle, Cosgrove, Mount Margaret, etc. Combined with the premium price structure of new homes, first home buyers are opting to live closer to centres of employment, or social support centres, such a schools, shopping and hobby centres like sport and community participation facilities.

Herron Todd White's Townsville in Focus Report, May 2014 identified; "The trend in housing approvals has maintained a general increase over the last three years, most recently on the back of three large scale unit developments (together involving 238 new apartments) that have been approved thus far in 2013-14. However the number of new houses approved for construction has had a mild slowdown since mid-2013, to a trend average of 102 new approvals per month in March 2014."

7. Federal funding commissioning defence housing green acre developments and in-fill stock (demand flat/oversupplied)

Defence housing stock has received a substantial shot with the release of 98 hectares of land, 1300 lots, 430 of which is committed to defence personnel. The Blue Wattle Master Plan Community is 17 kilometres from the CBD in the suburb of Rasmussen.

In addition to this significant green acre development, defence housing is holding new stock in North Shore, Bohle Plains, etc. Anecdotal reports have confirmed that in the absence of sufficient defence customers, 20-30 surplus houses have been released onto the general rental market into Stockland's North Shore development, again contributing to excess supply.

The strategic importance of defence members on the Townsville economy is significant. As reported by Dr Riccardo Welters, School of Business at James Cook University, The Australian Defence Organisation and Tropical Australia: Its Socio-Economic Impact in Cairns, Darwin and Townsville, the following personnel are members of defence across tropical areas.

8. Reduction in immigration and refugee resettlement inflows (demand negative)

As a direct result of government policy, there has been inflows of 500 to 1000 persons per year being new immigration families mostly from North Africa and Central Asia, with this having reduced to negligible volumes in the past 12 months.

A reduction in immigration settlements to the City has been a relatively minor contributing factor. With a preference for affordable units close to Aitkenvale with nearby education, shops and transportation centres, the reduction has impacted the most sensitive strata unit rental market.

Every profit seeking trader wants to predict the bottom of the property market cycle in order to ride the wave of value growth, and then hold until the planned profit outcome is achieved that determines the optimum time to dispose of the asset.

Since the Global Financial Crisis of 2007, astute investors in Townsville have factored into their Return on Investment (ROI) calculations, that property prices have more downside risk then upside opportunities. From a humble 'coalface' perspective, this manifests in investors requests for rental appraisals and a purchase contract consistent with at least 7 to 9 percent ROI on residential property purchases.

We have seen two changes in government at the State and Federal levels since 2013. Continued political and economic uncertainty in this time has contributed to a sustained bottom in the property cycle. Although not defined as a material contributor to the factors ranked in the content of this blog, political supply at a macro level is a credible risk moving forward for the local economy and investor confidence procuring property.

In my opinion, based on daily conversations with buyers, sellers and landlords around the dining room tables of the City, and critical analysis of broader material research, the property market has over-matured like an ancient Chinese cottage cheese.

References:

World's Oldest Cheese http://www.ibtimes.com/worlds-oldest-cheese-found-3600-year-old-chinese-mummies-made-ancient-technology-1558756

Dr Riccardo Welters, School of Business at James Cook University, The Australian Defence Organisation and Tropical Australia: Its Socio-Economic Impact in Cairns, Darwin and Townsville - http://researchonline.jcu.edu.au/30101/7/30101_Welters_2013.pdf

Sydney Morning herald - http://www.smh.com.au/

Townsville Bulletin - www.townsvillebulletin.com.au/

Townsville Enterprise website - www.townsvilleenterprise.com.au/

Herron Todd White, Townsville in Focus Report May 2014 - http://www.htw.com.au/

Herron Todd White Rent Roll Survey May 2014 - www.htw.com.au/

Cairns Post - www.cairnspost.com.au/

Townsville Real Estate Blog - townsvillerealestate.blogspot.com.au/

Rapid Realty Townsville - www.rapidrealty.com.au