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
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