Treasurer sparks free market concerns over Domain Central $6 million revamp

Image: QIC Domain Central site at Garbutt 

The Queensland Treasurer announced in an official press release that works on a revamp of over 1100m2 of the Domain Central shopping centre car park at Garbutt will create 110 jobs for the City as two new buildings are constructed.

Treasurer Curtis Pitt is being accused of deliberately misrepresenting his directions to the government-owned investment company to the Townsville people as a “vote of confidence” by the global investments entity in the Townsville real estate market.

The $6 million investment by the Queensland Investment Corporation (QIC) subsidiary QIC Properties Pty Ltd (QICP) will accommodate six new retailers.

The retail shopping centre has existing leases in place with national retail brands such as JB Hi Fi, Harvey Norman, Freedom, Nick Scalli, Snooze, Trade Secret and various retailers.

A new convenience supermarket run by IGA will anchor the new development. The project is expected to create employment for approximately 60 people during construction and 50 jobs in an ongoing capacity.

The commercial investment is a welcome relief for Townsville City Council (TCC) and the Labor state government who have come under pressure to arrest the impact of a sustained unemployment rate of over 10 percent, where local businesses have fallen victim to catastrophic bankruptcy, prompted 1000's of residents to leave the city.

Leaders in the North Queensland city have been caught off guard by the depth of the decline in employment opportunities for local workers and business traders.

The Rudd government’s resource rent tax and a crash in global commodity prices contributed to the mining downturn and large industrial employers such as Clive Palmer's Queensland Nickel refineries were faced with increased tax liabilities and declining export revenues.

Local leadership and media narrative

In addition to this investment, the TCC has also approved an application for development of further buildings by QICP on the Duckworth Street site car park area. However, the details of the second project are yet to be released. The portfolio manager for QIC, Charles Occhino, would not disclose which brands would be moving into the shopping precinct.

State Labor MP Scott Stewart commented to Rachel Riley from the Townsville Bulletin that "the best thing about this project is that it's a local business that's involved with building this project."

As the Townsville Bulletin article minimised the entity as QIC, an acronym for Queensland Investment Corporation, no attempt was made by News Ltd's flagship North Queensland paper to inform the readers that QIC is owned by the State government. No comment was sort from an opposition point of view. A fact of interest to the community of Townsville that the Treasurer's official press release had disclosed.

Was this a simple case of mistaken omission or was the acronym left undefined to accentuate the message of the incumbent political interests?

Mayor Cr. Jenny Hill also commented to the Townsville Bulletin reporter that "Projects like these are vital for our community and we're thrilled to see local builders, workers and business owners taking advantage of the opportunities being created through this development", she said.

Domain Central was originally developed in 2007 by local development company Lancini Developments with approximately 1800 car parks included in the plans.

Public disclosure of the sale could not be verified as any media release or local news coverage at the time of the sale could be referenced from inquiries. However, Mr. Pitt said in his press release formally announcing the QIC revamp that "it was acquired by QIC in July 2015."

Is QIC being used for political ends by the Treasurer?

In the Queensland Treasurer's official press release about the significant development, "the new investment was a great vote of confidence in the Townsville region," he said. This is all about Queensland investing in Queensland, and it's great to see the Townsville community being supported by this QIC investment," the Treasurer was quoted.

Image: Queensland Treasurer The Hon. Mr. Curtis Pitt

QIC's Statement of Corporate Intent (SoCI) defines the cost to income ratio (CTIR) as an indication of favourable or unfavourable performance. A lower rate is more favourable. From 2007 to 2015, the CTIR dropped from 88 percent to 74 percent, the SoCI stated.

A review of the SoCI identified two specific real estate assets were erased in the report (understood to be politically or market sensitive). In reference to these investments, it reported the CTIR dropped to 71% for the 2014 to 2015 financial year.

However, QIC forecast that the CTIR will increase to 78% in the 2015-2016 financial year due to a "significant investment".

The QIC property business has been vertically integrated into its Global Real Estate (GRE) business model even though its fee recovery model is vastly different to its core investments business model.

The QIC report said it "does significantly impact QIC's Cost to Income Ratio. By excluding its property management entity, QIC's cost to income would drop to below 70% in the 2015-2016 budget."

The question for the Treasurer Mr. Pitt is; what are the property assets that have been erased? Is Domain Central included in the erased accounts?

If so, why did the Treasurer represent to the Townsville community that the acquisition of a significant asset was a QIC vote of confidence in the City when the Treasurer himself could have directed the GOC to make the investment?

QIC Properties Accountability

The QICP 2016 annual financial statement reported that the company is managed by four non-executive directors. The independently audited report said, "no income is received by any directors".

However, the same report also declared "the company may purchase or provide goods and services to/from entities related to key management personal related entities."

The terms and conditions of transactions that occur between management service entities "were no more favourable than these available or similar transactions to non-related entities on an arm's length basis," the report declared.

The company’s other related parties expenses were declared at $83.7 million in 2016, $20 million more than the company's 2015 financial statement, for property management and other fees.

The purchase of goods and services by the GOC entity was declared as zero or not applicable. However, the state of Queensland purchased $1,015,000 in goods and services through the QICP entity, the company reported.

The company also discloses that "there are no fixed terms for the repayment of loans between related entities and the company and is interest-free. Outstanding balances are unsecured and are repayable in cash." The corporate entity's report went on and said, "All other transactions are made on normal commercial terms and conditions and at market rates".

Audit and Risk Management

The report declared that the financial statement is independently audited by the Queensland Audit Office and complies with the federal Corporations legislation.

QIC's Statement of Corporate Intent from 2015-2016 must be consistent with its 2015-2020 Corporate Plan agreed to by the shareholding Ministers in accordance with Chapter 3, Part 7 of the GOC Act.

The GOC Minister sets the guidelines as subordinate legislation for the QIC Corporate Plan. The QIC Board must comply with the Ministers and Treasurers request or directions urgently, the statement prescribed.

Every director and every officer, employees or agents of the GOC is indemnified and held harmless of the Corporation in pursuing their duties in good faith if they comply with the GOC Act.

The board level Audit and Risk Committee is the oversight "line of defence" attended by KPMG and the internal auditors, Deloitte. External auditors KMPG and the Queensland Audit Office are the 3rd line of defence in QIC's enterprise risk management framework.

The QIC enterprise risk management framework has an oversight expectation, a 4th line of defence, consisting of a Board, 11 committees and a 3^rd line of defence being executive managers, employees, risk management teams, KPI reports, staff and contractors.

So the Audit and Risk Committee and internal and external auditors are the first and last line of defence for GIC and other State GOCs in managing any threats of unacceptable risks.

Each member of the Audit Committee has an entitlement to rely on QIC management and on external professionals and "may assume the accuracy" of such information is correct unless they are aware of any reasonable grounds to question its accuracy.

Auditors of QIC have unfettered access to the Audit Committee via the committee chairperson.

Although directly unconnected to the Queensland GOC's, an Australian Senate Inquiry in 2015 found that multinational corporations were avoiding tax and the "big four" accounting and auditing firms were advising the corporations on the accounting methods.

Jeffrey Knapp, Lecturer in Accounting at the University of NSW said, "In December 2015, the Parliament introduced new laws so that the significant global multinational corporations must henceforth furnish general purpose accounts to the Australian Tax Office (ATO). In effect, the Parliament had to bypass the Australian Accounting Standards Board (AASB) and the "big four" accounting and audit firms; Ernest & Young (EY), Deloitte, Price Waterhouse Coopers (PwC) and KPMG."

The multinational corporations had switched the accounting practices from "general purpose" to "special purpose" which required compliance with five standards instead of forty.

The QIC financial reports confirm that equity accounting practices are applied. The use of general purpose accounting standards could not be confirmed as the GOC did not provide a definition as to whether the equity method it uses is a general, special method or neither.

Nevertheless, QIC applies accounting practices through the AASB and applies an "equity method" of accounting. Accounting fees of $389,603 were accounted for by GIC in its 2015 financial statement.

Commercial property implications

Stockland Limited, owner of Stockland shopping centre at Aitkenvale and Dexus Limited, owner of Willows Shopping Centre at Kirwan, could not provide a comment about the 100 percent government owned entity investing in real estate assets in the same Townsville marketplace in direct competition with its publically listed businesses.

Townsville City Council also announced recently that it has created a new development corporation.

The move by the local government authority said it is willing to exchange the value of the land it owns at Woodstock, 40 klms west of Townsville, for a shareholding equity stake in the United States private investment consortium led by Boston Energy and Innovation (BEI).

BEI is currently investigating the financial feasibility of building a $2 billion Battery Gigafactory on 22 hectares of industrial land.

Townsville's commercial property vacancy rates are hovering around 20 percent. Adding additional supply to an already struggling real estate market could present a further unfavourable risk to the commercial leasing market, unfavourably impacting local investors.

So questions about whether the State government provided requests and directions to the QIC Board to acquire the Lancini Development's Domain Central real estate asset in July 2015 remain unanswered and outstanding.

The inconvenient truth for the State government is that the GIC purchased the premium industrial retail site at the very beginning of the Queensland Treasurer and Premier’s scheduled approval of the five year Corporate Plan and Statement of Corporate Intent.

The GOC Act sets the timeframe for shareholding ministers to approve of the Statement of Corporate Intent and Corporate Plan. Approval must be completed within two months of the beginning of the new financial year.

Due to the coincidental timing of the acquisition, it raises serious questions within the commercial real estate market in Townsville about the Treasurer's press release announcing the “vote of confidence” from the GIC which instead finds the GICP management business a costly and unfitting business for its core investment skill set.

Comparable GOC model

The Queensland government has also been called out recently by Federal Energy Minister Josh Frydenberg, accusing the Labor state government of being the blame for discrepancies in Queensland power prices.

"In Queensland, your state-owned generators - and this is a very strong allegation based on the evidence - have been gaming the system," Mr. Frydenburg said to an ABC reporter.

"What they've been doing is holding back their supply and then late into the period into which electricity prices are set, bidding in artificially high prices." the Federal Energy Minister said.

The Australian Energy Regular has confirmed late price bidding has impacted the energy prices in the Australian energy market.

The state-owned power generators such as Stanwell are regulated and managed within the same governance and risk management framework as the GIC.

Here too the State Treasurer and Premier have shareholding powers to direct and request guidelines be adopted by the Board and management of the GOC that could result in positive revenue opportunities contributing to comparable dividends to the government's treasury, and consequently, creating favourable political perceptions on the eve of a State election.

Construction of the Domain Central revamp is expected to be completed by the end of the year and will include a bus transport hub.

Further reading:

Council chambers development exposes false international bank representation

Townsville sold out by PM Turnbull Smart City Deal

Turnbull Trio Caught with smoking gun – Townsville Smart City Deal’s Catastrophic Legacy

Townsville Smart City Deal Exposed as National Security Threat

Guide to selling a luxury home

Guide to 22 knockout marketing tips to sell a home

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First home buyers grant Pitted by Queensland Treasurer

Image: Treasurer The Hon Curtis Pitt Photo thanks: Courier Mail

Grant announcement

Queensland Treasurer, the Hon. Curtis Pitt has announced in the State Budget that the $20,000 first home buyer’s grant will continue for another six months. The extra $30 million announced in the budget will extend the grant's reach until the 31 December 2017 for properties priced under $750,000.

But the Treasurer is either purposefully misleading young buyers or he is carelessly unaware of the definition of the median house price statistics in the property market across Australia including Queensland. Median house price statistics do not include the price of new building sales and house and land packages.

In the Townsville Bulletin today, Mr. Pitt was quoted "this grant can have even greater effect in regional Queensland, where $20,000 maybe more than half of the 10% deposit for a median priced house."

Mr. Pitt went on to say “it's an initiative that will continue creating jobs and helping more Queenslanders into homeownership."

Of course, the Treasurer wants more people buying house and land packages. The grant is designed to cause unsuspecting buyers to invest in the building industry in order for new jobs to be created through construction activities. This is fair enough because the appeal of a new home is warranted.

Innocent mistake?

Townsville has some excellent builders and tradesman.

It could be construed from the Treasurers statements that buyers are getting a good deal with the free $20,000 handout. However,  the truth is that the buyers are left with an equity-to-value black hole in their financial commitments immediately upon taking possession of the keys to a new home.

Real estate agent Karen Voevodin from McGrath Estate Agents said, "If buyers are quite savvy, they can save a lot more by buying an already established home." Perhaps some people might see this as an agent serving their own interest but this statement has a moral truth.

Yes, the first home buyers grant is to stimulate building and to help first home buyers into the property market.  A $20,000 grant contributing to the deposit and loan-to-value ratio criteria set by the bank helps buyers qualify for a new home. It is a genuine attempt to help first home buyers enter the market. However, it is less favourable than what a buyer may think and what a flippant Treasurer may say in the emotion of selling his third budget.

Wisdom of experience

New home buildings render an immediate value reduction upon the purchase being completed, unlike existing second, third, fourth, etc. generational homes that have already been washed through the property market and not the retail construction market.

Buying a new home is still a good decision if the home is being held for the long-term and real socioeconomic realities are known. But what many new buyers have come to realise after buying and living in the outer suburbs of Townsville's sprawling housing developments, is that they soon struggle to come to terms with the inconvenience,  financial and relationship costs of having to travel to and from fulfilling social, shopping and income precincts in the City.

Where the buyer's location of employment, demands of children going to school, playing sports or visiting friends means an extra 30 minutes in travel per day, the outer suburban new home soon becomes a cost too much to bear. The vast majority of new home developments are 15-30 minutes drive from the strand or city centre.

Of course, we want to help our building and construction industry friends but the families of existing investors equally deserve sale contracts just as much as a local builder contributing to the growth of the property footprint of the City. The property moguls have had their fair share of buyer money over the years.

A buyer's decision to enter the property market in the outer suburbs or closer to popular facilities is a gift for the people of the City. Either way, it is looked at as being good for the community overall.

Oversupply risk

Nevertheless, the fact is the housing market in Townsville has an oversupply of land. There is also more existing houses for sale then there are buyers wanting to purchase. It is what the industry calls a "buyer's market.", with the federal and state governments pledging millions of dollars for affordable housing and more land releases. This information has become even more valuable to first home buyers and mature buyers more broadly.

Young buyers would be advised to take advantage of the buying opportunities in existing housing before taking the Treasurer's direction on taking the $20,000 cash hand out for a new home.

Land in Townsville is also in oversupply right now but the price has dropped less than the value of the depreciated improvements builders construct on the land, which was evident in the questionable 1% drop announced recently by the State Government statutory land valuations (these are the values that impact council rates).

Retail in new home building

It only stands to reason that when you buy a new home, the builder is supplying materials and labour at a cost. The builder is adding his own value, time, skills and materials and selling the home for a profit.

Effectively, the builder is a manufacturer of homes. The building materials, including the builder's cost of the land, are calculated as an expense to their profit after cost of sales. This is how the retail price is established.

Existing homes, on the other hand, do not have a retail factor built into the price unless the seller is overpricing the home to profit from the market's value perception or price conscience.

This means the price of an existing home is based on a more realistic "market value" or "median price" assessment which the banks, insurance companies, governments, and courts use valuation science to conclude a residual value at a specific time. They then calculate risks to their own assets such as money. Divorced properties and deceased estates are valued this way also.

Getting a loan

The banks factor this immediate market value adjustment into the mortgage you purchase from the bank or through a mortgage broker. That's why the contract price loan-to-value ratio is 80% loan and 20% buyer deposit for the residential property, which the bank knows and on many occasions do not share unless you fail to qualify or you ask. Commercial transactions are less again with that 60% in loan and 40% is deposit because the banks carry more risk to then the buyer.

If the buyer cannot raise the 20% deposit, the banks will offer a mortgage insurance product priced at thousands of dollars extra. The insurance controls the risk, and in some unethical situations, targets the buyer with higher "book risk" meaning a higher loan-to-equity ratio.

This way,  the insurance instrument will cover the cash flows and balance of equity as collateral to the bank. Should the buyer not pay the loan out within the terms agreed or not make the required payments, the property could be sold to another buyer and capitalised. At which time, the liability is disposed of by lender and the bank and buyer go their separate ways.

Value vs Price

Back to the market value point, this is a critical concept for buyers to understand. It is a real money figure that determines the debt to equity ratio you are accepting when purchasing a new or existing home. Whether buying a house, vehicle, business or investment, this is the financial measure applied to any asset purchase decision.

Capital, cash flow, and equity or debt are the real measures of wealth. If you have more value in assets like a house than you have in loan liabilities on your assets, you are technically free of incumbency and bank security. This is what most people strive for, but savvy investors are aiming for independence and freedom of wealth where the mortgage becomes redundant in your life.

It's important to understand the real value of housing, rather than price, because it is more meaningful in terms of what's in the buyer’s interest than gaining a $20,000 grant for new homes only.

The grants serve as a selling tool, like the "prices are down" advertisement by Coles in the food market, for builders and governments to grow their business profits or politicians attracting voluntary supporters for their policies going into the next election.

Image: Typical first home buyer family

Road to freedom

Buying any property should be about your wealth and freedom to eventually do what you want when you want with whom you want. Taking a money deal and not a value deal will guarantee young buyers will be a slave to the mortgage system unless they learn the point of value concept instead of seeing the deception of the price.

Always remember this! The original definition of the word "mortgage" comes from the Latin word "mortuus". Later the French language adopted the words "mort" and "gage", which means "death pledge" in French.

It's a simple fact that value-conscious buyers win. Money conscious buyers on the other hand lose. From the most ancient text and for any of the biblical observers with us, "money is not evil, but the love of money is evil". Get away from focusing on the money and pay attention to the value instead.

Investing for the long-term is the best way to see the biggest purchase decision in our lives. 

Therefore, rational, smart, wise research and advice is very important.

Better solution

The truth of the matter is that new home sales are neither measured nor treated in the median house price statistics. So comparing a $20,000 first home buyers grant to existing median property price data is misleading and harmful to our young people.

Educated property investors will see the double standards in the home owners grant in its current structure, luring young people into an unnecessary, government manufactured sales pitch. Now, we can certainly see through the Treasurer's mistaken use of the money incentive in the budget.

If the Hon. Mr. Pitt would like to reference median house prices in promoting new building supply, he might consider applying the first home buyers grant across all residential property products that would benefit first home buyers. Why not reduce the grant to $10,000 and broaden its application?

However, I suspect the real focus for the Treasurer is on stimulating the economy and creating jobs for the building industry and therefore claiming the short-sighted jobs that are created from construction.

Such behaviour of deceptive and misleading announcements have been unlawful in professional services industries for many years. Marketing that is intentionally deceptive is unethical and certainly illegal in Queensland. Let's call it out for what it is and then we can proceed with what can be done now to be better prepared.

What first home buyer can do now

Young buyers who subscribe to our TREN News and eMagazine service will be better informed and even protected with expert wisdom and opinion.

The news and special guides and expert contributions are often provided for free.

Next time an irresponsible leader or an innocently mistaken politician, or commercially conflicted professional, seeks to sell ice to an Eskimo that takes for granted our young people starting out in the property market, they could be seen for what they really are promoting.

We provide a platform to ask questions, share comments and stories for everyone to benefit from the "real values" of intellectual property. Get educated and don’t become a victim of the money system.

How to stay up-to-date

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Further reading:

Guide to 22 knockout marketing tips to sell a home

Guide to selling a luxury home

Real truth about negative gearing changes in Morrison budget

Reserve Bank June 2017 Rate Announcement

Top Price Property of the Week

Turnbull federal budget could wipeout Townsville property owners

Image: Cartoonist, Dave Pope

The Turnbull-Morrison federal budget could wipe out many property owners who are hanging on to their investment properties in the Townsville district by the skin of their teeth, enduring sustained cash flow and equity declines over the past 5 years.

Not to mention the property owners (investors and owner-occupiers) whose fate has already been determined, falling victim to the steepest economic and property decline in financial terms in local recorded history.

Many are local residents that have lost their jobs or businesses, foreclosing with the banks or filing for bankruptcy. The highest occurrence of bankruptcy across the entire country has been experienced in Townsville.

Significant numbers of property owners are living from hand to mouth constrained by the debt imbalance. They are incurring losses from which negative gearing and a reliance on taxation refunds are their only salvation.

Despite the Property Council of Australia's (PCA) influence on this budget, the threat at the next election of a more extreme left-wing policy of reducing or eliminating negative gearing, has become a haunting possibility as the country strives for more revenues.

Green and left-wing extremism are likely to swing ordinary voters against the rise of Trumpism and Turnbullism. More anti-business and anti-corporate campaigns like Getup's malicious campaign against Adani coal is an ideology with heavy domestic and international support.

Although a seemingly senseless policy to any economist, a change of government, could be the armageddon for property owners if the Townsville economy continues to dance so far out-of-step with national economic trends and federal fiscal policy makers.

Also, Townsville governance organisations threaten the investment pipeline of the City in the short term, as the Turnbull government has a deep thirst for the "City Deal" mega data deposits from the Internet of Things (IoT) system. Under the contract by Mayor Jenny Hill, the "no data, no deal" is setting Townsville Enterprise up for restructuring or imminent redundancy.

The federal budget announcements targeting big-ticket infrastructure and taxation concessions using superannuation and negative gearing for managed funds to address housing affordability in Sydney and other capital cities is a dumb policy. This is really irresponsible on Townsville North Queensland given the recent and ongoing pain and suffering.

Despite Townsville Enterprise foolishly appealing for more new housing development to meet projected population growth, in other words increasing supply, North Queensland and Townsville districts do not need a housing affordability policy at the forefront of the public agenda when business investment and jobs are what is needed the most.

Instead, a more prudent priority for Townsville district is to seek microeconomic solutions such as the Tax Increment Financing (TIF) scheme, as proposed by the PCA. This is backed up by the Northern Australia Development Facility, with strong and robust relationships, with leading boards and executives of large enterprise both domestically and internationally.

Apart from births, migrations, and immigration, the focus on value-add industries securing property for development in Townsville's Council district, is Townsville's only leverage under the "City Deal" contract, to attract significant federal and state government investment.

The New Residential Land Sales and Supply chart clearly shows the surplus land stocks in Townsville districts.

In his address to the media, the Treasurer Scott Morrison said, "it's not a silver bullet – nor is it intended to be", referring to his federal budget and the media anticipating a fix all budget.

Ironically, this is exactly what this budget is. A silver bullet for property owners being put out of their misery if these measures strike to achieve more housing affordability in a market plagued by asset value declines.

Unemployment rates in Townsville are at 11 percent and the broader economy of regional Australia is hurting from the downturn in mining activity and substantial increases in energy prices.

The centre-point of the budget, being that it addresses housing affordability, could move the sentiments of distressed property owners and buyers to protest and disrupt the political will of what is perceived to be a puppet's play.

This federal budget reaffirms the concerns of local representatives that the Federal and State governments are capital city-centric. They are driven by votes instead of delivering "a fair go for all Australians", which Mr. Turnbull promised in his preamble to this budget.

The Turnbull-Morrison federal budget will go down as the most politically safe budget in coalition history. In fact, many commentators are saying it is a labor policy budget with terms like "centralist budget" and "not traditional liberal".

The Liberals are fully funding social programs such as the National Disability Insurance Scheme (NDIS) and increasing taxes on the banks.

The banks, of course, have already said they will pass on the cost increases to every mortgage holder in the country. As the big four banks have done in recent times, they are well within their rights to act independently to raise their interest rates and fees.

Once again for Townsville North Queensland, the people are being asked to pull up the smelly socks of bad government leadership. Meanwhile, a liberal government slips into their fresh uncharacteristically labor-like federal budget cotton socks to attract votes from the capital cities and the left-wing media establishment driven by ratings and polls.

Even financial and taxation professionals are labeling the budget as a "good strong budget" as there are no additional personal or small to medium size enterprise (SME) tax increases announced. Superannuation by and large has been untouched. 

Just as the people have grown to expect smoke and mirrors from a political funding announcement, the Turnbull-Morrison duo is being socially responsible and hitting the big end of town just like the Labor opposition policies were proposed to target.

By design or coincidentally, it is likely Bill Shorten has been taken out of play in this budget. Not only in policy terms. But it is effectively the "Bill Shorten execution budget".

Shorten's electability, not just as an opposition leader but Labor candidate in the seat of Maribynong, has taken a direct hit with 127 hectares of defense land in his own electorate in Victoria being made available for 6000 new affordable homes under this budget.

Is Mr. Shorten's political career finished? Mr. Turnbull would hope so, if the cold shoulder he gave him in front of the media the morning of the budget announcement is any indication.

Putting the political undertones aside, what if Sydney, Melbourne or Brisbane had an unemployment rate of 11 percent with a median house price of $337,000 for houses, and $272,000 for units? Would the federal budget be focused on housing affordability? Absolutely not!

The House and Unit Prices chart below demonstrates the decline of values and stable affordability environment in Townsville districts. 

Economic stimulation with tax breaks, grants, and infrastructure investment spending in the regions would be high on the agenda. But not this politically and socially sensitive government.

Its focus is on self-preservation. Obviously seeking to secure the next election with capital city and regional Victoria and New South Wales voters, who are set to benefit from the new $20 billion rail corridor from Melbourne to Brisbane.

With a consolation prize of relatively minor funding, allocated to repairs and maintenance to the Bruce Highway and disaster relief from cyclone Debbie, nothing positive from a Townsville perspective can be said about this budget.

When we look at the median property price for rentals in Townsville, it makes the federal budget's focus on affordable housing look like a joke.

For example, a three bedroom house in Townsville is currently being rented for $290 per week. This is a decrease in the housing price of 6.5% in the last 12 months, with the housing price already starting from a low base and dropping consistently from nearly $400 per week in 2012.

Considering the massive uncertainty in the superannuation sector over recent budgets, the mobile and rental accommodation being so affordable in regional Australia, the elderly are anticipated to snap up the $300,000 per person superannuation top-up option in this budget.

Once again in a Sydney context, this policy might make sense. But in Townsville, adding more supply to an already distressed housing market is like igniting high octane fuel in a fire of despair.

Unless local governments and marketing experts in Townsville and North Queensland target the elderly in the capital city markets by offering comparable or upsize value strategies such as a clean, affordable and healthy tree-change lifestyle, this budget measure is more likely to be detrimental to Townsville's property market.

The likely result is more housing supply as our elderly residents will seek to cash in. This breeds more unhappy owners because the further downward pressure will be put on median house prices.

In addition this budget also, the federal government will establish the housing finance corporation (HFC). From July 2018, the HFC will offer long-term, low-cost finance to community affordable housing providers. Investors are assured to get rental payments from the government with direct deductions from welfare payments transacted to investors.

It's the $1 billion National Housing Infrastructure Facility (NHIF) that is of particular concern in the hands of an inept local government being charged with developing business cases, to win funding and then administering the funds through community housing contractors.

Desperate for new home developments that attract increased revenues, council rates and economic stimulation, the NHIF program in Townsville will have Mayor Jenny Hill and Townsville Enterprise salivating at the mouth.

However, this social housing initiative will be disastrous for incumbent property owners in Townsville based on the accumulated evidence from the NRAS (National Rental Affordability Scheme). The now abolished Labor government NRAS program was a disaster back in 2013, its legacy is still being felt across the City.

Then, NRAS was the catalyst for the sustained fall in rental prices and subsequent fall in sale prices across the City. This combined with softer global commodity prices and carbon tax policies, Townsville's property economy has been impacted by catastrophic losses ever since.

Furthermore, affordable housing investors are being offered a possible 60% discount on capital gains if they build new housing projects with the condition of pricing the accommodation below market prices to low-income tenants managed by a community housing provider.

This is NRAS rebadged! All be it with a 40% less capital write-off, but with a more favourable incentive to control rental cash flow directly from welfare payments or employer direct contributions.

NRAS created a false economy and drove free market prices down just as the combined housing affordability initiatives are now likely to do.

The NHIF is based on the UK model aiming to assist local governments to develop new homes and apartment blocks. For Townsville North Queensland, the combined measures of NFIC and NFC are unfavorable with property prices already falling substantially over the past 4-5 years. NRAS Mark II is what this federal budget is delivering.

But that is not all, a separate Trust is being established by the federal government to encourage both foreign and domestic investors to invest in affordable housing in Australia. 

On one hand, foreign investors leaving properties vacant are being penalised $5,000 in capital gains in this budget, while on the other hand, the government opens up a larger pie for taxation write offs by directing their attention to public housing infrastructure.

In principle, this is a smart measure if it were applied to foreign investors directing their capital into regional manufacturing and new enterprise initiatives that create "value-add" to Townsville's enterprise infrastructure. 

Knowing the influence of Townsville's infamous property development moguls with land to burn (as shown in the New Residental Land Sales and Supply chart above), and a local council habitually grovelling for new subdivision applications, the depth and intensity of the housing affordability measures in the federal budget are bewildering.

To drive the nail in the coffin even further, property owners who claim travel expenses on their tax returns for inspecting, maintaining or collecting rent on their rental properties will no longer be allowed after July 2017.

Consider the fact that over 40% of Townsville's total housing supply are rental properties owned by investors, many travel to Townsville to check on their properties.

With current property yields declining and debt-to-equity ratios increasing, the federal budget is indirectly targeting the 3rd largest contributor to industry output in Townsville's $30 billion economy, this being the "Rental, Hiring and Real Estate" sector at 9.4% (Source: REMPLAN: Dec 2016). This is an industry contributing $2.8 billion per annum to the Townsville economy.

Under prudent management rationale, this budget would normally bring opposition kicking and screaming. But not a whisper from the incumbent Labor representatives in all local, state and federal seats across the Townsville districts.

Patricia O'Callaghan, Townsville Enterprise (TEL) CEO, confirmed in a statement to the Townsville Bulletin that the budget did not address any of the priority initiatives outlined by TEL in their pre-budget wish list. Yet she praised the Smart City Deal initiative and pledged to work with the federal government. 

The property owners and investors of Townsville North Queensland have been left with more questions than answers from this federal budget. With this fresh analysis undertaken by TREN, the property owners and stakeholders of Townsville North Queensland can forge a conclusive understanding of the impact from the federal budget on local real estate investors and owner-occupiers. 

Do you have an opinion about the federal budget? The TREN community wants to hear your story.