North Queensland Strata Rental Market in Eye of Perfect Storm

Herron Todd White's Townsville Vacancy Rates Report, November 2013 shows the unit market is under critical strain and worthy of short term intervention from policy makers and general protest from investor groups and many thousands of owner occupiers.

Local, state and federal governments have been acutely aware of the cost pressures being felt by North Queensland property owners, particularly in the strata unit market, who by and large are first home buyers or elders in their twilight years of retirement, due to un-costed climate change policies, back flips and innuendo by previous governments and left wing lobby groups leading to an environment fit for power brokers in the insurance, energy and public taxation sectors to gouge profits.

Could a plan of fleecing struggling North Queensland property owners of their hard earned money while masquerading as energy suppliers, climate protectors, climate risk adjusters and dare I say it humanitarians be the intention of our domestic and global leaders?

It seems the balance of social and economic policy has gone too far and now the North Queensland strata unit market is the warning signal. It is a barometer of market economists and investors tracking the perfect storm hitting North Queensland strata property owners in the hip pocket.

The demand in the strata unit market in Townsville continues to feel the strain of government housing initiatives moving welfare or means-tested battlers into affordable housing schemes such as the National Rental Affordability Scheme (NRAS), defence housing moving to build and acquire more exclusive housing stock for military personal, a crack down on non compliant government funded housing tenants being pushed onto the private housing sector or distressingly into temporary shelters.

In addition, the broad base of demand from government and engineering industries have less economic support with higher unemployment figures which sits at 7.0% in Oct 2013 (ABS Labour Force Survey Data) in the North and North-west Queensland region.

Recent increases in the cost base for strata units such as higher levies driven by insurance, energy and local council charges (mostly driven by justifiable weather event and asset life cycle risks) has caused less discount affordability for owners to reduce rental prices while bearing the loss of more vacancy days at historical prices.

Townsville's rental vacancy rate for strata units stood at over 6.5% in Nov 2013 up from the record high of 5.5% in August based on Herron Todd White's Rent Roll Survey. Although many people have left the city for work, breaking their leases in the process, others have become an owner occupier while mortgage rates are at record lows. But many people are being drawn out of the rental market by the government funded NRAS.

Increasing rental prices therefore have come to a stop in 2013. In fact medium rental prices for houses have dropped by $10 per week while strata unit prices have not changed. Is this steady unit price due to strata unit holders having less timely control on cost adjustments while being impacted by increased costs to insurance, energy and government charges? The evidence seems to suggest yes!

Townsville Real Estate Blog believes the increasing cost base for strata unit owners and dwindling demand driven by unemployment and government funded schemes is creating a challenging period for Investors.

Prices in both the new and existing unit market has reduced over the past 12 months by $15k and $22k respectively. An increasing number of existing units have come onto the market for sale in the past few months suggesting more strata unit holders are exiting the market. The combined price discounting in both units and houses, the market is ripe for buyers seeking an entry point to the market with lower interest rates and capital city prices and demand increasing substantially over the past 12 months.

With approval of the Abbott Point Coal Loading facility by the Federal government and increasing tourism and construction expenditure, Townsville's residential property market cycle is set for recovery with local economists predicting a property "pulse" in 2014.

Townsville Real Estate Blog also believes 2014 should see a surge in demand with further sideways movement on prices early until existing supply thresholds are exhausted and demand again drives price increases off the back of growing capital city confidence, employment improvements and a slide in government funded residential housing initiatives. But the extent and timing of the recovery will also depend in no small part on the policy makers and global climate risk adjusters suspending their appetite for profit making in the strata unit market, which is traditionally placed at the most affordable spectrum in the property market.

Landlords need not be alarmed for the medium to long term as demand should improve driven by government and private investment confidence, capital projects such as Abbott Point, public infrastructure funding, and restructuring of government business models, returning robust economic activity to small to medium size businesses.

For North Queensland property owners, it's the policy makers and influencers driving costs to insurance, energy and government charges that pose the greatest risk to their short term wealth and lifestyle planning objectives.

For specific real estate advice, services and solutions, don't hesitate to contact the author with your comments. Real estate specialist and this Blog sponsor is www.rapidrealty.com.au

References:
Townsville in Focus Report, Nov 2013
Australian Bureau of Statistics Labour Force Survey Data

Local Real Estate Agency Launches National Business with Commemorative Wine Label for Charity

Townsville's own national real estate agency, Rapid Realty Australia, launched a smart and innovative wine label on Melbourne Cup..."the day that stops a nation", in aid of local charity organisation Cootharinga North Queensland.

The launch of Rapid Realty Australia's wine label also commemorates a Townsville founded real estate business with both a North Queensland and national growth strategy. Rapid Realty Australia is seeking to grow its national foot print with a network of affiliates, partnerships and franchise offices starting in Cairns, Townsville and Mackay.

Managing Director of Rapid Realty Pty Ltd and Principal of Rapid Realty Townsville, Aaron McLeod said; "we are proud to launch our new limited edition wine collection in support of a well deserving local North Queensland Charity. The launch also coincides with Rapid Realty Australia's launch of its national real estate business on the Australian real estate scene."

Founded by two brothers in Townsville in 2007, Rapid Realty Townsville has grown to over 200 residential and commercial properties under management and over $20M in sales last financial year alone. The business has grown nearly 40 percent in the past 12 months. The office headquarters is located on Boundary Street, South Townsville. From this office, Rapid Realty Townsville services Townsville including rural areas and parts of the broader North Queensland market.

The business was established in Townsville and grown successfully because of our passionate and skilled staff and the welcome support of our "locally grown" business. Our clients have said how excited they are to support a national real estate brand created in Townsville.", Mr McLeod said.

Each of Rapid Realty Australia offices will be modelled on the Townsville one-stop-shop model to service real estate buyers, investors and sellers from the "cradle to the grave"; Mr McLeod said. Property owners and clients alike trust the professional approach and "real service, rapid results" customer service commitment.

Rapid Realty is seeking the support of the Townsville and North Queensland community as they search more good employees and contractors and leaders and investors to join the company as affiliates, partners or franchisees. Critical to the continued growth of the company is skilled salesperson's, property managers and marketing administrators.

Expressions of interest to join the Rapid Realty Australia business can be done by contacting Mr McLeod at www.rapidrealty.com.au

Townsville Born "My Property Time Blog" Launched for Investors

Townsville's leading independent real estate Principal and Managing Director of Rapid Realty Australia and Trustee of McLeod Investments and Consultancy (MCINC) firm, Mr Aaron McLeod has launched a new website blog called My Property Time.

Mr McLeod said; "the new website will be administered in North Queensland. It will be a public meeting place like the old bookstore and library with a social atmosphere where useful stories can be told and collaborated."

Mr McLeod expects the My Property Time blog reflects the knowledge and experience of his team of business owners and employees including property managers, real estate professionals, financial planners, mortgage brokers, solicitors, etc. to help new and emerging property investors to achieve success and avoid the many hidden costs and pitfalls of property investing.

From the My Property Time Blog:

Welcome to the new My Property Time Blog created to help investors and property owners with the joy, and dare I say it, the sadness of property ownership. We hope My Property Time adds value to our readers' efforts whether you might be researching, observing or actively investing in real estate across Australia and the world.

My Property Time will source pertinent and trending stories on real estate and property markets impacting investors. Whether you are experienced or new to the property investment industry, this blog aims to be useful for all interest groups. However, My Property Time's target audience and focus by and large will be active investors.

Although some of you may never become an active investor, or at least identify yourself as one, it is this group of people who are more likely to benefit from the My Property Time blog.

Being an active investor means you have an acute need for reliable, pertinent, trustworthy, accurate and timely information and facts about legislative changes, niche market trends, hints and tips on selecting a mortgage broker, real estate professional, property manager, conveyance specialist or even building and pest inspection reports.

Investing in real estate for cash flow, capital gains or tax minimization purposes needs to be purposeful, and often most effective when linked to specific goals. The delivery of investment measures and strategies are constrained by various risks while opportunities are realised more often when the investor has clear investment plans and specific goals.

Almost all successful investors understand these risks, opportunities, strengths and weaknesses, often referred to the SWOT analysis. So if you are a first time investor reading this blog on your mobile device or office PC, understanding the keys to successful property investing is understanding your goals, establishing a clear investment plan, identifying your constraints, risks and appetite for loss or gain, and minimising your assumptions while having the courage and decisiveness to secure your first investment property.

As a first time investor, if this is your situation, you can feel a sense of comfort knowing that My Property Time is at the beginning of your journey, just as this blog is at the beginning of our journey. We hope you have discovered this blog and we share My Property Time together.

As an experienced investor, we trust you can make My Property Time one of your favourite sites to gain knowledge and information but also share your extensive knowledge with our supporters and our team.

So as an opening introduction to our purpose, investment planning, risk management and decision-making is a prelude to what our opening series of stories will cover. Once again, welcome to My Property Time and we look forward to making a small difference in your life. My Property Time is your time!

You can visit the new My Property Time Blog at http://mypropertytime.wordpress.com/

LEAD INDICATORS FOR TOWNSVILLE'S PROPERTY MARKET

Herron Todd White's Townsville Rent Roll Survey Report for July 2013 paints a picture of rising rental vacancy rates to 3.75%. The reality of a slowing economy is evident in these figures as Townsville is experiencing a short term oversupply of unit and housing accommodation.

Landlords and investors are advised to factor into their budgets more days on market while their properties are being tenanted. It could also impact on the rental prices in the market as investors compete for lower vacancy time by discounting prices and even offering incentives to customers.

 

Rapid Realty Townsville Principal, Aaron McLeod said "we have planned for a slowing economy by offering higher exposure for our Landlords with feature advertising, more diligent presentation of properties and enhanced focus on "real service, rapid results" in our customer service. Responding quickly to enquiries and receiving owner instructions rapidly is the key to securing desirable customers", Rapid Realty's Principal said.

The increased vacancy rates could be impacted by the supply of new houses on the market continuing while a noticeable drop in demand had occurred leading up to the end of financial year. Lower interest rates on borrowings are making home ownership more affordable, causing some renters to be lured into home ownership by the construction sector offering incentive packages in addition to the State Government's construction home owner's grant.

Rapid Realty's Principal said, "our Townsville office is fielding enquiries from buyers for our newly constructed properties for sale with excellent packages for buyers."

Moreover, Rapid Realty expects the demand for accommodation to increase in August based on seasonal inflows of enquiries to their Townsville office.

If you have an investment property and want expert property management and rentals advice, you can contact Rapid Realty at www.rapidrealty.com.au

RAPID REALTY LEADING "BUSINESS VILLAGE" INITIATIVE

Rapid Realty Townsville invites our business connections, customers and public to the Townsville Trade Show being held at the Heatley Primary School on Fulham Road this Saturday 20th June 2013 at 2pm.

The Townsville Trade Show (TTS) is a compilation of business professionals displaying their services and solutions to clients, customers and acquaintances in a "traditional village" setting. This business village is open to all members of the public.

The TTS is sponsored by Business Network International (BNI) members bringing together essential business services and professionals in real estate, financial planning, loans, accounting, law, construction, insurance, painters, carpenters, electricians, etc. in this relaxing and intimate village environment.

 

With the support of local Members of Parliment, business leaders, existing clients and customers, Rapid Realty is expecting a great launch to this new and innovative way of connecting with the community.

 

"The explosion of social media and mobile technology in a modern community fearful of personal contact on the phone or the traditional door knocking that real estate professionals are used to makes this event unique and non-threatening." Rapid Realty Managing Director said.

 
Rapid Realty Townsville looks forward to seeing our friends on the day. Please register your interest in attending by contacting us via www.rapidrealty.com.au.

Time to Wake up and Smell the Roses Townsville Real Estate; Queen Bees are Being Born

Townsville’s Real Estate economy is on the cusp of renewal and regeneration after an extended period of hibernation, passive demand and external uncertainties, a leading independent North Queensland Real Estate Principal said.

Mr McLeod of Rapid Realty Australia and Director of McINC Investments and Consultancy said, “Consumer confidence indices have been improving over many months which suggests that lower prices and retail discounting is stirring the end consumer to feel they have more bang for buck. “This sentiment has been evolving in the non-discretionary spending sector such as accommodation and housing for many months”, Mr McLeod said.

“Leaders in our North Queensland headquarters in Townsville have reported that prospective tenants and buyers for that matter are asking to negotiate prices down more frequently and with more depth suggesting consumers have a higher expectation that prices could be discounted”, Mr McLeod said.

This is also reflected in the Melbourne Institute’s Consumer Sentiment Index which reports that sentiment has increased by 2.0% over the month to 110.5 points which is its highest level since December 2010 (111.0 points). The consumer sentiment index has increased over six of the past seven months and is up by 12.6% over the past six months.

Each component of the index except for time to buy a major household item rose over the month and only the index which measures family finances over the past 12 months is showing higher levels of pessimism than optimism. RP Data Property Pulse, 15/03/2013.

For the first time in nearly a decade, the Townsville rental vacancy rate has bounced over 3% to 3.14% in February 2013, HTW Rental Vacancy Survey, Feb 2013.

For many in the industry this is unprecedented and could typically put downward pressure on rental accommodation prices if sustained. However, Mr McLeod believes this anomaly will be short lived and should improve for investors as North Queensland, and Townsville particularly, traditionally has a seasonal movement of consumers out of accommodation in November and December and January. Accommodation is now being filled with new arrivals and streetscape changes occurring.

"The imbalance in the depth of this movement of consumers through December, January and February 2013 out of the economic zone could have been affected by delays in the State government’s placement of employees in the health, education and infrastructure-related departments, following the Campbell Newman government’s announcement late in 2012 of job cuts in this sector”, Mr McLeod said.

By contrast, the Australian Bureau of Statistics (ABS) released the January 2012 housing finance data this week. The data revealed that the number of owner occupier finance commitments fell by -1.5% over the month with non-refinance commitments falling by -1.9% and refinance commitments -0.7% lower. Year-on-year, non-refinance commitments are -0.8% lower than last January while refinance commitments have recorded a much greater -10.0% fall.

The total value of housing finance commitments rose by 2.4% over the month with investment finance commitments increasing by 4.4% and owner occupier commitments increasing by 1.3%. Year-on-year, the total value of owner occupier finance commitments has fallen by -0.5% however, investment commitments have seen a significant increase of 18.6% as reported by the ABS. The increase in investor finance compared to domestic finance is a significant measure of consumer-centric investors’ finding confidence in a more favorable property market, improving global economic data from the United States, Asia and Europe on our domestic equities markets expanding.

The Melbourne Institute Consumer Sentiment Survey identified 21.3% of respondents felt that real estate was the wisest place, down from 24.0% last quarter to invest over bank deposits, shares, paying down debt, etc. The proportion of loans to first home buyers was at its lowest ever level in Queensland (10.4%) over the month.

“The gestation period for consumer-centric investors as confident buyers has been long coming over the past four years since the housing market peeked, and with a cultural effect from consumers becoming comfortable with retail price discounting, now is the time to “wake up and smell the roses” before the Self-Managed Superannuation Fund and experienced and astute investors pick the early blossom in the Townsville real estate market”, Mr McLeod said.

So when could be the best time to pick the right property?

At a micro level it is impossible to pick the perfect day. The lead indicators are in place to act within the next 6-12 months because the number of competitive buyers with consumer-centric needs (owner-occupiers) should be in less demand. Although not the only lead indicator of owner-occupier buying behaviors, the higher rental vacancies rate over 3% in December 2012 suggests a historical correlation of lower domestic demand by owner-occupier’s could be occurring in the next 6-12 months.

We did see a contrasting behavior by owner-occupiers later in 2012 as Townsville welcomed the 3^rd Army Battalion approximately 6-12 months before as rental consumers. Demand indicators showed lower rental vacancy rate at around 2% during March and April 2012.

A sustained improvement in investor and business confidence could play out in the Townsville economy after the Federal election is held in September 2013, by which time State Government infrastructure spending, institutional, SMSF, private equity and development investor’s may also ramp up the flow of capital on the back of lower domestic interest rates and a global financial recovery.

In the meantime, a residual demand of owner-occupiers seeking to upgrade, downgrade and street change, and those economically resilient consumers with residual wealth and a growing institutional investor market should see property prices be maintained over coming months in the Townsville residential market.

Data Source:

Rapid Realty Townsville Vacant Rates Data, Feb 2013. www.rapidrealty.com.au

Australian Bureau of Statistics
Westpac and Melbourne institute Consumer Sentiment Survey
RP Date Property Pulse, February 2013
Herron Todd White Townsville Rental Vacancy Rate Survey, Feb 2013

TOWNSVILLE "HOTSPOT" FOR SMSF INVESTORS

Self-Managed Superannuation Fund (SMSF) investors have increased their enquiries and interest in Rapid Realty's new construction and "off the plan" houses and units in Townsville.

Since the property market has shown signs of a turn around and legislative changes to SMSF entities have been proposed pertaining to the discount of capital gains tax, the phone has been ringing off the hook, said Rapid Realty's Sales Representatives.

The main driver for the increased interest from SMSF is opportunistic. The positive buy status in "turnkey" and "off the plan" property, and to a less extent 2nd generation property, is finding the right time to buy.

By and large investors are finding today's conditions that tick all the boxes in terms of more upside then downside risk in the tried and true bricks and mortar of real estate.

The dream of building a retirement nest egg with less risky market conditions in terms of the:

· upside in accommodation demand and relatively low vacancy rates

· favourable lending products in fixed interest borrowings

· likely positive capital growth over the medium to long term

· cash flow performance being favourable, and

· great taxation incentives on capital gains tax

makes the Townsville housing market a "hotspot" for investors.

Aaron McLeod, Principal and Managing Director of Rapid Realty Townsville said; "SMSF Investors are seeking confidence and credible support and service in the research data, purchase and ongoing management of their property asset."

 

Mr McLeod believes semi-retired investors are worried about the financial risks off the back of the GFC and the concerns about having poor quality tenants in their superannuation nest egg investment. It is our job to disclose all the facts and build confidence for investors so they need not worry about finding and retaining quality tenants, Mr McLeod said.

With the "one-stop-shop" of services in buying, asset management and selling, Rapid Realty with its commitment to "real service, rapid results" is attracting serious investors and a loyal client base in this sector of the market, Mr McLeod said.

 

As an active member of Business Network International, Rapid Realty Townsville can assist with bono fide contacts in North Queensland that can provide further information for investors.

http://www.bni.com.au/Member_Details.asp?mem_id=168122

 

Investors are encouraged to seek independent advice from their professional team of financial planners, wealth advisors, solicitors and mortgage brokers.

Go to www.rapidrealty.com.au for more information about specific new and existing investment properties in North Queensland.