22 September 2014

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".

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


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

14 September 2014

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.


Sunshine Coast Daily

Townsville Real Estate Blog

Queensland Government and Ministry Directory website, 30 June 2014

05 September 2014

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.


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

01 September 2014

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.


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