RBA Governer Philip Lowe, 2017 Image: Thanks to The New Daily
The financial markets and all economists had predicted the Reserve Bank of Australia (RBA) would keep the cash rate on hold and that's exactly what the RBA board did today.
The cash rate remains unchanged at 1.5 percent because of the strength in the national housing market over the second half of 2016. A consistent increase in investment projects since the rate cut in May and August last year was also a major factor in the RBA board retaining the current interest rate.
For Townsville, any further increase in the cash rate would be unwelcomed. Housing market conditions have been weak in North Queensland for the past 5 years. Darwin and Perth markets have also seen dwelling values drop since 2014, which as capital cities, were material factors in an unlikely rate increase.
It is likely the momentum in the housing market is one of the primary reasons why the Board did not jump on a rate decrease in an effort to stimulate spending and risk pushing inflation higher. Inflation has been tracking lower than the RBA's target range for just shy of 3 years.
CoreLogic reported; "capital city dwelling values were 10.7% higher over the past 12 months, which is a substantially higher growth rate than the 7.4% recorded over the same period a year ago." As a measure of contrast, the Townsville housing market saw a 8% decrease in dwelling values in the past 12 months.
Housing market conditions have pulled back on par with the previous rate reductions and the repetitive rise in investor involvement due to the accelerated pace of capital gains in the major capital cities. However, housing conditions vary considerably across the country.
Mr Philip Lowe, Reserve Bank Governor, said; "Growth in rents is the lowest it's been in eastern markets for a couple of decades." Despite slowing rent growth, lending for investors has picked up. Lenders are cautious about lending in some sectors with a stiffening of supervisory measures being applied in these higher risk markets.
Still, the cost of debt remains historically low which should see demand for housing remaining strong from owner occupiers and investors, despite the cash rate staying on hold and some lenders making subtle increases to their mortgage rates.
Improvements in the global economy have provided a boost in commodity prices resulting in better than expected trade conditions for Australia. China's investment in infrastructure and construction contributed higher spending and stronger growth over the second half of 2016.
Financial markets have performed effectively. Most global stock markets have risen. Inflation is quite low and under control at 1 1/2 percent. This is expected to continue as labour costs will remain low moving forward.
OPINION: Townsville's future as a sports, entertainment and events centre for North Queensland has been secured with the announcement by all levels of government that the North Queensland Stadium will proceed to construction as early as May 2017 with expected completion before the 2020 NRL season.
The campaign by local leaders has been relentless over the past couple of decades. Without question, the will and energy of the City, depicted by local sporting and arts personalities such as Country Music Legend, Adam Brand and sporting legend, Johnathon Thurston is infectious as illustrated in the following promotion video.
The North Queensland Cowboys NRL Grand Final victory in 2015 certainly did the "yes" campaign no harm. North Queensland's victory became the catalyst for Prime Minister, Malcom Turnbull to announce a $100 million Federal Government contribution, after NQ Cowboys co-captain, Johnathon Thurston, effectively lobbied the government in his podium victory speech.
"Building a resourceful, resilient and technically superior enterprise culture in the City will ensure second and third tier employment and business growth for decades to come.",
Townsville Real Estate Blog.
Artist Impression: www.morethanastadium.com.au
The Prime Minister commented in the Sydney Morning Herald, that the Townsville stadium will do for Townsville what the Sydney Opera House has done for Sydney. This could bring a massive transformation by the way the rest of the world will view the City, one of the largest regional cities in Australia
Townsville Enterprise, North Queensland's commercial and marketing body, announced: "Expressions of Interest have opened today for principle consultants to put forward their design teams for the North Queensland Stadium."
The Townsville Enterprise press release identified the opportunity for local businesses to tender for the design and construction phase of the project with works estimated to cost $250 million, which will be administered by the office of the Minister for State Development, Dr Anthony Lynham.
Artist Impression: www.morethanastadium.com.au
The construction phase of this new signature North Queensland development is estimated to generate 750 jobs. Of course the local Mayor of Townsville, Jenny Hill is encouraging local businesses to 'strike while the iron is hot' to ensure the jobs and business revenues are returned to the Townsville economy. Yet the vision for global trading in the throngs of the current Information Age has been left out of the specific plans and objectives by the Mayor and State Minister. In fact, no international outputs have been considered despite the Prime Minister's reference to changing the way in which the international community views Townsville as a City.
Based on a revised Integrated Stadium and Entertainment Centre (ISEC) economic impact analysis compiled by Townsville Enterprise, the following estimates were identified:
$1.9B - ISEC will accelerate the development of the planned $1.9B waterfront redevelopment
1,650 jobs created in the construction phase
$130M in wages and salary in the construction phase
$675M in additional economic output in the construction phase
$5M annual gross value add once ISEC is complete
37,000 new visitors to the region each year
$2M annual visitor spend once ISEC is completed
The North Queensland Stadium has a scaled back scope, which will not include the Entertainment Centre, with less than half of the 1650 jobs being created as defined in the above estimates. This being said, an extra $1-2 million annual visitor spend once the project is complete is equivalent to the annual salary package of 50 full-time management employees.
We haven't seen the final designs but the location of the site is positioned on the waterfront of Ross Creek. The site is immediately adjacent to Reid Park, home of the annual V8 Super Cars Event. To the South is the southern access corridor (Saunders Street) into South Townsville and the City heart, and directly across Ross Creek from Honeycombs's Central and Holborn Apartment development on Blackwood Street, which includes a small cluster of existing food and entertainment shops. The head works footprint for the stadium is expected to connect these urban spaces to the stadium forecourts and promenades via a footbridge over Ross Creek.
The estimated 17-hectare parcel of land on the boundary of Saunders Street was owned by QR National, now purchased by the Townsville City Council, is the ideal site for a new international standard stadium. The 30,000 seat stadium would include 100 open-air corporate boxes and 25 enclosed corporate suites.
Of course, the big question for property investors is;
Will this national sporting and events stadium bring economic prosperity, and specifically, increased yields and capital growth to the local property market?
It will create jobs immediately which the City desperately needs. Townsville Chamber of Commerce, Stephen Motti said: "the stadium would boost businesses in and around the CBD" (Anthony Templeton, Townsville Bulletin). Townsville's unemployment reached 13.9 percent in April this year. Due to the number of skilled tradesmen and workers leaving the City for greener pastures, the population dropped in the tens of thousands in the last 12 months since Clive Palmer's Qld Nickel refinery declared bankruptcy. Unemployment dropped sharply this month to 9.7% due to people, skilled workers, abandoning the City. Also, the City has the highest bankruptcy rate in the country. A number of local developers are dusting off their plans for further residential development in and around the stadium site, including Honeycombs, Lancini Group, Parkside and others. For existing property owners of lower yielding apartments in the City precinct, the collateral developments are set to be rolled out by the local movers and shakers.
"This additional residential construction activity will stimulate short-term demand in the City from construction activity, but long term further increase in supply in the City market could keep vacancy rates above the 2-4% threshold. At this range or less, demand driven value increases, filter through the supply chain impacting more favourably on yields", stated Mr McLeod, Director of Rapid Realty Australia.
Mr McLeod also commented; "Unless sustained employment growth and business start-up investment occurs on the back of the stadium development, local business confidence improves and cutting edge innovation and technology developments are leveraged, the stadium development could be an impairment, further pushing steady and even bearish yields for investors."
The momentum risk for the Townsville political and enterprise leaders is that they may get caught up in the media attention and buzz of an unprecedented development for the City. "Group think" among the usual influences, planners and administrators are evident in the stated objectives of the project. Thinking it will be the 'silver bullet' that will solve all of the City's economic adversities is a massive mistake. It is not the be-all and end-all, but still a very positive development in the City which is screaming for real employment, entrepreneurship and economic growth.
Artist Impression: www.morethanastadium.com.au
Existing unit and house owners in the immediate City and fringe suburbs will see increases in rental inquiries, causing a reduction in time on market statistics. But a sustained increase is unlikely to occur with rental prices. Already, suburbs in the immediate area of the site such as Railway Estate, South Townsville and Townsville City have seen an increase in buying inquiries. Immature and even scrupulous investors thinking they will reap rapid capital gains from Townsville's property market are kidding themselves. But a prudent investor, disciplined for long-term returns, and knowledgeable with values and "street to street" targeting in Townsville at a median price of $336,000 compared to the national median of $800,000, is positioning themselves for favourable results in the long term. Townsville's median house price dropped 5.5% since June 2015.
Herron Todd White Townsville in Focus August 2016 Report
Herron Todd White, in their Townsville in Focus August 2016 Report commented that; "There is very little in the way of local stimulus or broader economic drivers that would indicate any short term change from this position". Broadly speaking the sentiment that had been building in the commercial and industrial markets has all but evaporated and these markets remain at the bottom of the market cycle."
The depth and breadth of the broader regional, national and international economic constraints, perpetuated by the conventional wisdom of politicians, economists and Townsville's mastermind groups that base policy on a scarcity of resources is a risk. Although counter-intuitive, this prevailing mindset is economic and political suicide in an Information Age. Leading international economist and author of multiple books including the "The Next Millionaire", Paul Pilzer, says the scarcity model is incongruent with the modern Alchemist Economic approach of accurate forecasting.
This conventional wisdom, in contrast to the Alchemical Economic models, is the belief that the region's resources are limited based the City's industrial niche of education, administration and management, real estate and manufacturing and of course mine processing. These sectors are the top sectors contributing to Townsville's Gross Domestic Product (GDP).
Artist Impression: www.morethanastadium.com.au
Change and innovation in technologies cause the expansion to economic capacity and capability, including infrastructure investment. Instead, state and local planners and policy leaders are seemingly fixated on government investment in "real estate" infrastructure as the treatment for sustained jobs creation. This is a short-term purpose, however, again programmed around a scarcity conscience, political agenda and time frame. This is evident in the constant appeal for government funding by local institutions like Townsville Enterprise, council, politicians and business influencers. Just this week as a case in point, The Honorable Coralee O'Rourke, Minister assisting the Premier, The Honorable Annastacia Palaszczuk said; "In the future, footy fans will come to a North Queensland Cowboys game and stay for a holiday and the North will be able to attract a variety of events that will attract new visitors and investment to the region." Since 1995, Townsville has had an NRL events calendar attracting footy fans to the City. Many visitors stay with family overnight and then return to their home. By definition, this is not a holiday stay.
For property buyers, long-term investment in Townsville is prudent with the City likely to attract further lifestyle capital from the legacy of the principal stadium development, at least in the immediate City fringe precinct. Flow on investments, which will include boutique retail, residential and commercial developments in the City, and could extend South to the Dean Street precinct, including the old industrial railway yards. It too has been earmarked for an Integrated Entertainment Centre, indoor events and transport blueprint because the existing entertainment centre is aged and not certifiable.
Mr Turnbull's vision of a Sydney Opera House concerning the stadium is duplicitous. This vision statement is the type of statesmanship expected of a Prime Minister, but it could be seen as appeasing the Canberra elite. The City's civil leaders working locally but thinking globally is not enough. We need now, more than ever, to have an international thinking and working mindset. This Turnbull vision would be better served in infrastructure that could add profound value to the global and domestic trading capacity of the City. Instead, the Sydney waterfront vision would be better directed to the waterfront at the entrance to the Townsville City port and Strand precinct.
This waterfront vision presents a great opportunity to demolish the "swamp", which is the name given to the ageing entertainment centre and home of the now defunct Townsville Crocodiles Basketball Team and develop an architecturally appealing Commemorative War, Marine Nature and Indigenous Arts Theatre on this Opera House style site. The development would create a monumental signature image, unique in architecture, character and function on an international scale and appealing to our largest trading partners and markets in China, United States of America, Japan and Europe. It would also add attraction demand inflows for the tourism, arts, education and innovation sectors, instead of the narrow events and domestic tourism focus outlined for the stadium.
Sydney Opera House, Australia
The strengths of Townsville's location to the Great Barrier Reef, indigenous arts and heritage, and the strategic importance and operational role Townsville played during World War 2; battles of the Coral Sea, Kokoda and the broader Pacific campaigns is epic in a historical context. Yet this unique North Queensland story is not showcased anywhere in the nation expect the National War Memorial in Canberra, some 4000 kilometres away.
This harbour-side location, which includes the existing "The Ville" Casino, offers a unique and unprecedented opportunity to attract tens of thousands of tourists to Townsville from all over the world, and capitalise on a massive $9 trillion and growing travel industry.
The North Queensland Stadium in good time will be famous for its beloved NRL stars. But more potent would be the stadium's catalyst impact creating an additional lifestyle and functional economic developments with a far-reaching international appeal. A gauge of the appeal of Townsville's military history will be tested on 15th of October 2016 with the Defence Air Show. Below is the objectives on the Queensland State Development website http://www.statedevelopment.qld.gov.au/major-projects/north-queensland-stadium.htmlfor the stadium project.
Queensland State Development Stadium Objectives
Attracting more people to the City to be amused, entertained and educated is fine economic commentary. Building a resourceful, resilient and technically superior enterprise culture in the City will ensure second and third tier employment and business growth for decades to come. Unfortunately, the Queensland State Development Objectives fall short of this bold vision.
Visionary leaders could emerge and flourish in this environment of adversity and infinite opportunity. Following are some of the favourable conditions for Townsville's competitive advantage, including;
Northern Australia development zone investment maturing
Free trade arrangements with China and the United States not long dry completed
Federal Government seeking private capital sponsorship for better terms of trade infrastructure
Scaling back of the Aquis Resort and Casino Development in Cairns due to casino licensing restrictions.
Property investors are encouraged to maintain a diligent lookout for either civil, political or business leaders that have the courage, purpose, plan and associations to leverage the political, trade climate and economics necessary for contemporary infrastructure investment, both digital and "real".
With seemingly impaired vision at all levels of leadership, the Townsville property market is not expected to flourish off the back of a national sports stadium development. By and large, the existing 1300 SMILES Stadium, which hosted concerts and sporting events at Willows, is being replaced. The North Queensland Stadium is far from being a "greenfield" development. Significant value-added trading infrastructure, resources and technologies, combined with innovative digital information and entrepreneurial industries, must be leveraged within the next 5-10 years. Bringing back the 20,000 people that have left the City in the past 12 months, reducing unemployment and cultivating a digital and industrial driven economy is critical. A positive sign for property investors is not government funding program announcements, but the cultivating of more digital business Joint Ventures with international, national players and local business and institutions. This must be acted upon in order for Townsville investors to decide the feasibility of a short to medium term trigger. Otherwise, the Townsville property market long-term investment and holding strategies will continue into the foreseeable future.
References:
Queensland Government Statisticians Office - www.qgso.qld.gov.au
The Reserve Bank of Australia (RBA) has shocked the markets
today with a cash rate drop to 2.25 percent after being left on hold at 2.5
percent since August 2013.
The changing conditions in the housing market across the
country featured in the RBA policy announcement today as a measure to assess
and contain economic risks, typically driven by an easing in capital city
prices.
RBA Governor Mr Stevens said; “Credit growth picked up to
moderate rates in 2014, with stronger growth in lending to investors in housing
assets. Dwelling prices have continued to rise strongly in Sydney, though
trends have been more varied in a number of other cities over recent months.
The Bank is working with other regulators to assess and contain economic risks
that may arise from the housing market.”
The overwhelming majority of economic commentators expected
the RBA to leave interest rates on hold. Based on the finder.com.au survey of
30 economists and commentators, they found that 28 expected the cash rate to
remain unchanged.
Mr McMullen from RAMS said that with consumer confidence and
inflation low, the RBA would cut rates to help boost the economy and depreciate
the Australian dollar.
Consumer confidence has been weaker, cheaper prices in the
global oil market and the weakening of the Australian dollar were major factors
in the decision.
“Market sentiment has fundamentally shifted over the past
two months as oil prices have plummeted and concerns about deflation in Europe
grow. This has led to markets expecting 0.50 percent in the rate cuts in the
first half of 2015, “Mr Caelli from ME Bank said.
Today’s rate cut would normally provide a boost to the local
market and lead to improvements in building starts if it were not for low
business confidence and high unemployment numbers in the local North Queensland
market, Mr McLeod said from MCINC Investments and Consultancy.
Providing cheaper mortgages for first home buyers and
existing mortgage holders on variable rates is a relief for the local market, Mr McLeod commented.
However, in a low confidence market positive downward
movements in cash rates need support by businesses leveraging a lower Australia
dollar to attract export dollars, and more favourable private and government
investment in critical infrastructure and facilities developments to kick start
the economy with more jobs and cash flows, Mr McLeod said.
"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
Townsville and regional economies in Australia have specific and contextual demands impacting on cash flow and capital opportunities, risks and constraints and it must be acknowledged by Australia's political leadership and fiscal policy makers.
In the scope and context of Australia's economic contributions, regional Queensland's economic activity is a significant measure on the Reserve Bank's agenda in setting monetary policy and cash rates that regulate investment decisions and therefore business and consumer confidence.
Townsville Real Estate Blog supports the approach by local Townsville and Regional Queensland economist Colin Dwyer to the Prime Minister, Tony Abbott, Treasurer Joe Hockey and RBA Board to appoint the next Board Member from the pool of capable intellectuals and professionals from our region.
In the words of local economist Mr Colin Dwyer: Regional Australian Member of the RBA Board
It’s interest rate day today, and its time to prosecute a case for a regional Australian to become a member of the Reserve Bank Board. Not one of the nine members of the Reserve Bank board lives in Regional Australia. Not one of the past members of the monetary policy making body has ever lived in regional Australia. How can the RBA board make a decision on behalf of all Australians if they haven’t experienced the conditions in some of those locations?
Regional Australia comprises a third of Australia’s population, contributes most of its exports and many of its tourism destinations. In the past decade regional Australia with its mining industry kept recession and depression from Australia’s door. Its time for some regional Australia recognition.
I first raised this issue in 2010. Next year will be the first chance for a regional Australian to join the RBA board and express regional Australia’s rational expectation regarding monetary Policy and interest rates. In December 2015 Roger Corbett’s position comes up for re-election. Following that Catherine Tanna’s position is available on 29 March 2016, followed by John Akhurst role on 30 July 2016. Two other positions become available in 2017.
In total there are nine members of the RBA board with six non-executive members appointed by the Treasurer. The non-executive members are appointed for terms of up to five years. There is no limit on the number of terms a member may serve.
Are all the previous federal governments saying that there is no regional Australian who has the calibre to be appointed to the board? Next year, surely presents an opportunity for the current federal government to change this value judgement, honour the contribution of regional Australia and ensure regional Australia has a say in monetary policy decisions.
There are many worthy regional Australian contenders for this challenging role and some of them live in Townsville including, Company director Russell Laird, James Cook University Deputy Vice Chancellor Chris Cocklin and Chamber of Commerce president Stephen Moti.
After contributing our fair share over the past half century, its time a Townsville and regional Australian resident was appointed to the Reserve Bank Board. Only this way can a third of Australia’s population be confident that monetary policy decisions are including them.
The economic scorecard for Townsville and much of Queensland's regional economy certainly warrants unprecedented action from our political and business leaders. RBA Board membership is one positive step in a progressive Asian-centric trading zone in which Australia finds itself deeply entrenched.
Townsville is currently experiencing the highest unemployment rate at approximately 10 percent in the State and the property investment and accommodation economy is trending in negative territory with high vacancy rates and a notable decline in new mortgages being written by lenders.
Townsville Real Estate Blog will report on the specific factors our team believes has evolved contributing to the current property investment and accommodation economy in Townsville. Watch this space and visit our previous articles as follows:
North Queensland Strata Rental Market in Eye of Perfect Storm
Townsville and Central Queensland's property market is experiencing significant challenges on the back of high unemployment, mainly due to misdirected, and perhaps in hindsight for the State government, unintended consequences from policy commitments aimed at remedial budget and economic measures. Many proponents believe these measures are excessive! Political judgement in the context of current sensitivities could cause political damage at the ballot box with a change likely in local representation.
Further uncertainty and policy risks to business from political instability is unwelcome developments in light of the most recent Stafford State bi-election in the northern suburbs of Brisbane. The appointment of a Townsville-based Reserve Bank Board Member could bring both strategic and practical benefits to the region where federal policy influence on military, research, education infrastructure is sustained by federal budgets.
Townsville Real Estate Blog supports Mr Colin Dwyer's insights and respect the foresight of such an important appointment impacting on regional monetary policy, which could also influence like never before, the formation of fiscal policy by incumbent and future governments.
