Tenant Sub-Letting to Air BnB Accommodation Risks Landlord Properties

Queensland investors with Tenants sub-letting all or part of a dwelling to Airbnb customers could be left exposed unless special wording is applied to Residential Tenancy Agreements.

The issue has become a hot topic in Victoria because the Supreme Court had overturned the tribunal decision.

In the Victoria case, the tenant sub-let the entire premises through an Airbnb rental website. Upon receiving this knowledge, the Landlord served a termination notice on the tenant.

The Tribunal ruled in favour of the tenant, but subsequently the Supreme Court ruled in favour of the Landlord based on the fact that the Airbnb agreement between the tenant and the Airbnb guests was for occupation of the whole of the premises.

The supplier of real estate agent agreements and contracts ADL Forms said; "This may indicate a tenant occupying premises under a residential tenancy agreement in Victoria may be able to license a portion of the premises under an Airbnb agreement without the Landlord's permission."

The Forms and Agent Advocacy service provider together their legal teams, have put their "Tenancy Agreements, Australia wide, under the microscope to ensure they keep landlords protected against a tenant sub-letting and/or licensing all or part of a rental premises without the Landlord's permission."

It's the opinion of ADL that the existing RTA Form 18a does not adequately cover the Airbnb situation. Special terms therefore have been added to better protect the Landlord against unauthorised sub-letting or licensing in respect of Airbnb or similar online service.

In accordance with the ADL special terms:

"The Tenant may not grant other person’s a licence to occupy or use the whole or part of the premises for the Tenant’s commercial gain, whether by written or verbal agreement with the other person/s, without the Lessor’s consent having been first obtained. The Lessor must act reasonably."

Property managers are still advised to take their responsibly seriously and take action where unauthorised sub-letting or licensing by a tenant of one of their managed properties is detected.

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Landlords seeking to managed their own properties are warned of these risks. Especially if adequate general and special terms are not considered and executed in writing in accordance with relevant residential tenancy and/or rooming accommodation legislation.

Although some Landlords seek to minimise their costs to maximise profits, or don't have faith in professional managers, implementing a proper risk management system for your investment properties could save you more money then you could anticipate.

In some instances, damages or losses resulting from a tenancy not subject to proper risk mitigation principals by the Landlord could be jeopardising their insurance policies because of some of the fine print in the insurance policy.

Reserve Bank Interest Rate Announcement Sep 2016

The Reserve Bank of Australia announced today that the cash rate will be kept on hold at 1.50 per cent as many economists had predicted.

Real Estate expert and Rapid Realty Australia Principal, Aaron McLeod commented; "the RBAs decision is positive news for property investors and owner occupiers but regional markets were hoping for further stimulation with a rate cut".

Soft inflation data and a stubborn Australian dollar is the main reason the RBA chose to leave interest rates where they are as they wait and see what happens with the broader economy.

As the RBA likes to link its cash rate decisions to the quarterly Consumer Price Index (CPI) releases, the next rate decision is not expected until October. Even then many industry experts are predicting a steady as she goes approach or even a further drop in the cash rate before Christmas.

Corelogic Head of Research, Tim Lawless suggested that a November cut is likely particularly if inflation remains low. "If inflation was say 1.0 per cent year-on-year, that's a pretty good reason for another rate cut, he told The Adviser.

Although, the RBA had tried to engineer a further rate cut in the hope of reducing the Aussie dollar further to improve the country's balance of trading accounts.

The RBA seemingly are treading on egg shells trying to stimulate the economy yet be uneasy about firing up the housing market.

In the capital cities such as Melbourne and Sydney, lower rates could over cook these markets. While Brisbane, Perth, Darwin and regional areas like North Queensland, could benefit from a further cash rate cut.

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North Queensland Stadium Vision Impaired

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.

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Artist Impression: www.morethanastadium.com.au 

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.html for 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
• Townsville Bulletin - www.townsvillebulletin.com.au
• Sydney Morning Herald - www.smh.com.au
• Integrated Stadium and Entertainment Centre (ISEC) - www.morethanastadium.com.au
• Rapid Realty Australia - www.rapidrealty.com.au
• Herron Todd White, Townsville in Focus August 2016 Report
• Paul Pilzer, "The New Millionaires"
• McLeod investments and Consultancy
• Matching Pear Holidays - travel and tourism data

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RBA Shocks Markets with Cash Rate Cut: Mortgage Relief for Townsville Investors and First Home Buyers

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.

Reference:

Reserve Bank of Australia – www.rba.gov.au/

McINC Investments and Consultancy

Raid Realty Australia – www.rapidrealty.com.au

Townsville Real Estate Blog – http://townsvillerealestate.blogspot.com.au/

Two Airports Call for Townsville; Conflict of National Security for Existing Air Transport Facility

Townsville's real estate industry is an instrument of calibration and diagnostics for the broader economy.

So the current limitations placed on Townsville's most strategic economic asset being controlled by national security interests or constrained by federal budget priorities is a subject worthy of further investigation and reporting in this article because of the impact on property and investment interests in the City.

The real estate industry is one of the most critical arteries that carries the economic life blood of capital and cash flow to the businesses and employees of the City. In fact the real estate, rentals and hiring sector is the highest contributor to the Gross Regional Product (GRP) in the Townsville economy.

As proposed by the Townsville Real Estate Blog (TREB), facilities development will be critical to achieve immediate economic stimulation and sustainable development for the City over the next decade.

The rejection of Townsville's bid for direct international air traffic carrying passengers and goods draws attention to a potential conflict of interest between border protection priorities and Townsville's business and property interests.

Conflicts of interest or fragmented decision making posses a direct threat to the short term creation of jobs and long term growth plans for the City. The security and commercial interests of Townsville's garrison city raises serious questions for town planners and political leaders.

The bid by a fledgling group of local private investors to buy the lease rights to the Port of Townsville under a State government initiative to reduce government debt is an example of the depth of feelings in the community to control such a regionally strategic asset.

As this strategic shipping facility shares parallel commercial and military functions like the Townsville Airport, it too is most likely to have similar uncertainties for investors that are inherent where ring fencing of government and national security interests is a punch line in today's environment of intense governance policies.

For decades the federal government's military and security assets in the garrison City has been attributed to Townsville's reputation for growth, stability and relative certainty. Achieving the status of being the Capital of North Queensland and a legacy of strong population and economic growth over the past 20 years are proud credits for a relatively conservative community in regional Australia.

The findings to the Taskforce on the Development of Northern Australia did no feature Townsville as some people may have expected. The focus of infrastructure and centres of business development instead is directed to a greenfield site in the Northern region of Western Australia.

One of the findings in the Green Paper, Joint Submission to the Northern Australia Taskforce, identified that "Governance arrangements across the various jurisdictions and regions of northern Australia are fragmented and require streamlining and/or collaboration. Land and water use arrangements are crucial examples of these governance challenges which are central to future development opportunities.", the Green Paper considered.

The Green Paper also identified that "Stagnation can only be overcome with new investment targeted at new markets and offering new experiences. Several proposed integrated resorts in the Cairns region (Aquis Resort and Ela Bay Resort) exemplify the type of large-scale investment that may be required to reignite tourist demand.

Townsville Enterprise claimed to be stepping up their lobbying efforts to secure international air services following the Australian Customs and Border Protection Service's decision to reject the proposal by Air Asia to launch direct services from Townsville to Denpasar.

The decision by Customs and Border Protection Services has suggested the rejection of the international carriers proposal was attributed to resourcing of security processing equipment and personnel.

One has to question the viability of strategic national security assets and commercial private sector assets operating in parallel on military controlled land and government controlled transport infrastructure such as the Townsville Airport, and to a less extent, the Port of Townsville.

Tourism has an economic impact less than real estate, rentals and hiring in Townsville. The Australian Customs and Border Protection Service's decision to reject direct services from Townsville to Bali is a massive limitation to the City's ambitions to develop a broad-based economy. Such a decision has heightened sensitivity in a region where unemployment is sitting at record levels, and tourism is a critical pillar in maintaining a comfortable balance for an economy retracting after a recent downturn in the mining industry.

The military priority of the Townsville Airport is a menace to sustainable economic development. For the people of Townsville, leveraging the airport is a passionate interest to facilitate international trade directly into the Capital of North Queensland, especially for the largest City identified in the federally proposed Northern Development zone.

Could the growth of Townsville's air transport economy mean that commercial and military traffic have access to separate dedicated facilities? Does Townsville now plan for an international airport to the west of the City?

During World War II, Townsville accommodated multiple airfields. One of which is still operational today used for amateur aviators near Woodstock only 30 minutes West of the City.

The Australian Defense Force has budgeted for an extension to the Townsville runway to accommodate larger logistic aircraft being added to the Royal Australian Air Force (RAAF) fleet. The extension of the runway could also accommodate larger international aircraft. As the runway extension is driven by RAAF imperatives, consideration for parallel commercial traffic could not be confirmed by local RAAF Command.

Townsville Enterprise confirmed a strong interest by international tourism operators for direct services between Townsville and Bali. Townsville Enterprise Acting CEO said; "This is an issue affecting Townsville North Queensland that will continue to undermine attempts to properly develop the city and achieve the economic potential of Northern Australia. International air services are critical in connecting the north of Australia to a global market which is vital to the growth of the region.

The Acting CEO continued to report that "Townsville residents remain disadvantaged due to the Federal Government’s policy regime that proposes significant additional costs for passengers using Townsville International Airport, which is the 11th busiest airport in the Nation. No such charge is imposed on passengers using any capital city international airport in Australia."

"Townsville Enterprise, Townsville City Council and the Townsville Chamber of Commerce have been leading a united charge on this issue over the past few months. The issue was at the centre of a number of Ministerial meetings in Canberra last month and correspondence is ongoing.", the Acting CEO commented.

In the context of heightened sensitivity for national security, a strengthening global free trade framework with developing countries, and a local economy entrenched with tourism services, could these conflicting elements mean a extended period of frustration and struggle for a clear passage for international traveller markets into the Townsville region?

This potential "Cold War" between federally controlled security assets and local commercial tourism and property investment interests could be the catalyst for broader debate about a second airport with international specifications for the Townsville region.

Townsville's economic ambitions are dependant on the direct link to international trade through increasing air traffic, shipping and ecommerce activity.

A federal government centred over 2000 kilometres from Townsville facilitating a conflict of interest contrary to the interests of the people of Australia's 2nd largest regional economy could again be called to action at the next ballot box should the community find the observations of TREB worthy of further comments and debate.

References:

Townsville Real Estate Blog
Townsville Enterprise website
Townsville Bulletin

Wishing You and Your Family a Merry Christmas and Happy New Year

Reflecting on 2014, the Townsville real estate market experienced significant challenges with record unemployment, higher vacancy rates for rentals than the City has ever experienced in recent history, and a slowing economy with record low business confidence.

Reductions or even a correction in median prices for houses and units available on the rental market has caused anxiety for landlords and investors alike. This year has been a favourable period for consumers, both renters and buyers.

Strata unit median sale prices have reduced by 12 percent while house prices increased by 3.5 percent. Economic conditions contracted to levels of unprecedented low confidence for business while the national fiscal framework left the cash rate on hold at 2.5 percent for record consecutive periods.

The article "ready the spinnaker - the winds of fortune" provided some important insight for investors in the prevailing conditions in the market. For those investors seeking an indication of cycle timing and favourable movement in the market, this article offers some valuable direction.

Townsville Real Estate Blog (TREB) broke a leading story about a Gold Coast based building contractor having their licence withdrawn by the newly established QBCC. Contractors and investors experienced the trauma of financial losses linked to southern spruikers promoting boutique residential investments in the City. The story was picked up by main stream media including ABC national radio.

December 2014 brought the introduction of streamlined legislation for real estate professionals, both agents and auctioneers, that deregulated commissions for residential sales. The Property Occupations Act 2014 brought down the curtain on decades of formulated commissions.  

An opinion piece highlighting the role of residential land and unit development moguls in the City impacting the over supply of housing attracted interest that propelled the readership of the TREB to over 12,000.

The TREB now boasts a profile and position in the content creation community for real estate professionals that is second to none. We are now the most popular independent blog recognised for grass roots research and dependable commentary about the Townsville real estate market.

We look forward to bringing you more facts and opinions about the Townsville real estate market, the players and risks, opportunities and threats that we trust will assist you with your own research, planning and decision making.

Townsville offers an extraordinary opportunity for investors to place their wealth creation assets in the City. Citizens enjoy a tropical lifestyle and family friendly community desired by many people across the globe. We live in a beautiful and resourceful part of the world for which we all can be grateful.

TREB wishes you and your families, friends and loved ones a wonderful Christmas. Be safe if you are travelling over the holidays. We look forward to a more prosperous 2015 for our readers and supporters.

The TREB would like to thank our readers for their support this year and hope for continued support in 2015 with greater interaction and contribution from our readers.

It is a privilege sharing exciting and interesting stories with you about the Townsville real estate market.

Threat to Fixed Fee and Free Advertising Real Estate Agents; Queensland Commission Rates Deregulated

Queensland Real Estate professionals have feverishly been updating their knowledge, systems and processes to transition from the repealed Property Agents and Motor Dealers Act to the new Property Occupations Act, and for agents carrying trust monies, the Agents Financial Administration Act 2014 effective from the 1st December 2014.

The key changes include the replacement of seven separate agent appointment forms with a single standardised form;

• deregulating the maximum commission rates for real estate sales and property management
• removing the requirement for agents to disclose to a buyer the commission the agent is receiving from the seller
• extending the statutory limit on lengths of appointments for a sole or exclusive agency from 60 days to 90 days to better reflect market realities; and
• abolition of a separate Form 30 Warning Statement which will be replaced by a short prescribed statement included in the relevant contract.

The real estate industry has responded positively to the changes because of the reduction of "red tape" with simplified forms allowing agents to spend more time and energy servicing clients needs instead of filling out forms and worrying about paperwork.

Although the Property Occupations Act deregulates commission that agents can charge clients, Townsville Real Estate Blog has observed that agents are not increasing their commission rates for residential sales at this early stage in the new regulations regime.

Instead agents are reluctant to charge higher commissions in the Townsville market due to the strong competition for new listings. So clients, both sellers and buyers, find themselves in a strong position to negotiate with agents on the commission rate and marketing budget.

However, clients are cautioned not to seek open quoting on price. Service-centric agents are unlikely to quote in an open tender process where price is the main driver for the client enquiries because service quality is the corner stone of most agents' reputation in the industry.

When to negotiate commissions with agents is behind closed doors in person. Either as part of the agent's pitch for your service (if you are price or costing saving focused) or after the pitch for your service. Choosing your preferred agent wisely is born from purposeful research of the solutions being proposed by the agents.

To the surprise of some sellers or buyers agent consumers, price cutting is not a solution to the real problem of achieving the highest possible price within a reasonable time frame. Keeping the marketing costs to a minimum such as advertising, communications, etc. is a project specific factor in the solutions package. But marketing should not be associated with the effective management and leadership of the solutions package. The typical analogy described in the service industry for this misunderstanding is that "you pay peanuts and you get monkeys".

Finding the right agent is therefore synonymous with finding the right solution! Selecting the right solution is finding the right leader in the industry of which there are many. The decision is not easy. Recruit the right team of suppliers coordinated by a lead agent and you will give yourself favourable opportunity to achieve your objectives accompanied by personal satisfaction, exhilaration, joy or overwhelming relief when the job is done.

Beyond the appraisal and price prediction phase, asking the right research questions centred around the agents solutions such as the team, suppliers, schedule or time on market, target market reach, technology, innovation examples, and Townsville Real Estate Blog believes perhaps the most important, is the passion, enthusiasm and posture shown by the agent for the product and neighbourhood in which the asset is located.

Ask until you are satisfied even if it takes an hour or more. If you sense the agent struggles to answer  unscripted questions, then perhaps the leadership suitable for your marketing project is unsuitable and the package of solutions is unworthy of your business.

The agent commission rates should be the very last question you ask once you have chosen the right leader for your marketing project. If that means paying a commission above the average commission rate in the market, then take the risk within your appetite (what can be tolerated as an acceptable loss) and make the investment. Remember most agents in Townsville have a 'no sale, no charge' proposal so agents that have a tendency to give their time and wisdom in good faith, are more likely to treat your asset with respect and a hunger for success.

Townsville Real Estate Blog will continue monitoring the prices agents are charging over the coming weeks and years. The commission rates may increase in the short term for projects that are resource intensive such as marital separation matters and other resource intensive projects where a proportionate sale price is less than the viable profit for an agency. Such projects could include land sales, rural and remote properties and low end unit and house sales found in small markets.

As market confidence expands, and niche selling and buying opportunities manifest in the market, commission rates may increase on a project by project basis. By and large most agents will seek to keep their cash flows moving and therefore be open to negotiation on their commissions.

Full fee agents, those agents that have not set their commissions on a fixed price under the old legislation, are likely to fight for commission based on a percentage of the sale between 2.5 to 3 percent for residential sales.

Remote, rural and regional areas are more likely to find agents charging higher commissions because of limited competition between agents and the maturity of the asset price points in these markets. Agents that have positioned their brand and reputation on free advertising could also find greater competition in that alternative agents could simply offset the risk of supplier overhead by increasing their commission rate.

Full service agents may seek to neutralise fixed price and free advertising agents by offsetting agent-paid marketing risk with higher commissions.

Evidence of agents increasing their commission rates cannot be substantiated in the Townsville market at this time. We may see movement in commission rates in the future when the market has an appetite for a change in culture.

References:

Townsville Real Estate Blog

REIQ website

Local Townsville Real Estate Agents

Townsville Citizens Under In-Direct Fire from Residential Development Moguls

Townsville property moguls and inept Councillors (including local State representatives) are
pushing Townsville residential property income into decline, while a higher cost base is impacting on the standard of living for local citizens in comparison to the prevailing Gross Regional Product (GRP) in the overall economy.

"Stuck between the devil and the coral sea", governments and high-end property moguls are unleashing a volley of crazy capital stimulation from the sea-side inner-city unit developments to the outer-urban residential developments.

Meanwhile, second-generation incumbent inner-city unit and urban housing owners are feeling the greatest impact with many investors being pushed to the brink with lower than forecast profit margins.

Factor in acquisition capital, high vacancies and reduced cash flows, and probable losses on distressed sales and mortgagee in possession scenarios have increased substantially in the Townsville region in the past 12 months.

Bungled government tax reform, soliciting middle-class income capital for social housing policy, misaligned climate change policy and an over-supply of new construction housing have by and large triggered structural changes in Townsville's tropical and regional economy.

While the real estate and rentals industry are the highest contributors in percentage terms to Townsville's GRP, it is a sector under enormous pressure from which some businesses and investors have been brought to their knees.

The ABC's David Chen reports that "new figures show Townsville continues to have one of the highest rates of personal insolvencies in the country. Data released by the Financial Security Authority shows for the September quarter, there were 76 personal insolvencies in Townsville. Financial counsellor Saskia ten Dam from the Townsville Community Legal Service said the poor local economy, high rents and increased costs of living were putting pressure on residents. "Well I would say a minimum of one a week of people who [are] walking away from mortgages, surrendering their homes," she said.

Local economist Mr Dwyer said; homeowners in some suburbs may be disproportionately affected by the economic downturn. “... I know from Australian Bureau of Statistics data that there are suburbs really battling substantially higher levels of unemployment compared to the rest of the city,” he said. (Townsville Bulletin, 20 Nov 14)

Townsville needs visionary leadership! Leadership with a desirable political influence in Brisbane and Canberra and connections to new funding and capital supply. Links to new capital raising methods such as 'crowd-funding' initiatives, strategic alliances, joint ventures and networking with large corporations, institutions and consortium.

Spawning new and niche products and services, coupled with incentives for corporations to develop and foster skills and jobs in new and emerging technologies, must be high priorities for government and corporate leaders.

In the face of influential leaders that have built their reputation and wealth primarily on the back of Townsville's traditional real estate developments, enabling new leaders that are connected to the global capital, new age technology and infrastructure is seemingly an insurmountable task. But the Townsville economy, its people and its leaders must adapt or fall behind an increasingly competitive and ascending middle class in Australasia.

Still, traditional skills and networks are essential to attracting secured capital, while engineering and construction expertise is needed to drive facilities developments such as a base load power plant, events and people facilities or government-sponsored infrastructure projects.

Decisions by State and Local Governments to release more residential land while seeking inner-city investment stimulation and more residential unit development is a crazy policy. Especially at a time in our economic and political cycles that Townsville is not winning a fair share of government funding based on the ratio of economic contribution the region provides to the State.

An example of crazy planning is the government sector funding of a combined federal military and private sector housing project at the new Blue Wattle community, a massive residential land release development covering 1500 hectares some 20 kilometres from the CBD. Less than 40% of the land will be occupied by defence personnel.

The non-direct investors, those living and working outside the City's trade zone, investing in Townsville is likely to continue with long term benefits, as direct investors have benefited from the growth of Townsville in the past decade.

But the local investor, many of whom are mature citizens, are needing immediate real economic stimulation from construction in sustainable industries and future growth technologies and trade networks. The City is set to continue suffering in the short term otherwise. Revenues and profits must improve to support personal lifestyles and local economic dynamics for small business and large enterprise in order for the standard of living are maintained based on previous generations.

Governments and corporate leaders must rapidly arrest the losses local investors and citizens are experiencing. The devil in the over-supply of residential property will haunt the citizens of Townsville for many months and years to come.

Townsville's productivity has been relatively stable while the citizens, investors and businesses are reaping less personal income from their labour and profits. Businesses and investors are being forced to reduce costs in order to maintain personal and corporate income, impacting substantially on the quality of life for the people of the City.

From an ear to the ground perspective, Townsville Real Estate Blog has actively reported on the general sentiment in the real estate economy and forecast short to medium-term supply and demand activity accurately. These forecasts have served as lead indicators for not only the real estate sector but the broader Townsville economy.

Rising Property Prices Stumble
http://townsvillerealestate.blogspot.com.au/2014/09/rising-property-prices-stumble-snapshot.html

Real Estate and Rental Industry Highest Contributor to GRP
http://townsvillerealestate.blogspot.com.au/2014/09/castle-rocks-real-estate-and-rentals.html

Boom or Bust? Convergence of Factors Impacting Townsville Real Estate market
http://townsvillerealestate.blogspot.com.au/2014/08/boom-or-bust-convergence-of-factors.html

The extent and depth of the cutbacks occurring in the mining supply chain reducing fly in and fly out employment, subsequent reduction in manufacturing outputs, climate risk insurers driving strata unit and housing costs through the roof, while increased energy prices impacted directly on big industry and small businesses...this translated directly to lower living standards for property exposed citizens.

But the most significant risk element for property investors, apart from unemployment moving forward, is the supply of land assets by developer networks connected to large land release projects.

In a climate of conservative government policy, with construction stimulation a pillar of the State government election platform, combined with a local enterprise and political leadership culture prejudiced in the belief that more residential development means robust economic stimulation, the people of Townsville are being shackled with a tendency for misdirected economic stimulation costing its citizens dearly.

"BATTLERS struggling to pay their rates on time have handed Townsville City Council a $490,000 windfall"

Council figures show 7,785 homeowners and businesses failed to pay their rates on time, up from 7,111 at the same time last year. The financial troubles of those homeowners and business are expected to produce a $490,000 windfall for the council, as the 15 per cent discount on rates no longer applies if payment is late. (Townsville Bulletin, 20 Nov 14)

A change of planning focus and strategic direction is needed urgently, especially as the newly agreed Australia and China Free Trade Agreement rolls into operation in 2015.

Anticipating structural changes in the economic mix, entrepreneurship must become the new apprenticeship and trainee initiative promoted by governments.

The Galilee Basin rail corridor, port expansions in Townsville and Abbott Point, new mining ventures including renewable energy farms, and relocation of government administration to the Capital of North Queensland are critical projects for the City and region.

Traditional jobs are estimated to half by 2035. Progressive solutions such as community hubs for emerging e-commerce, home-based small business networking and building technology enterprises around online retail and content curation services and infrastructure is the future. With base load power on our doorstep, heavy industry and manufacturing could better compete with trading partners.

Once construction is completed, the economic stimulation reduces substantially. Meanwhile more residential accommodation is presented as supply to the property market. This is more competition for existing house and apartment assets impacting the ratepayers of the City.

Paradoxically the real victims of the over-supply of land and residential developments are also expected to shoulder the costs of infrastructure development and maintenance for next generation investors.

These investors then fall victim to the paradoxical cycle unless the political, corporate and community leaders drive a different agenda for the benefit of our property investor citizens, ratepayers contributing over 40% of the revenue to Townsville City Council coffers.

Either tone down the residential construction stimulation or ramp up the infrastructure, facilities or investment in entrepreneurs to ensure the demand for residential accommodation is sustainable for the majority of incumbent citizens of Townsville and the developer moguls of the City.

References:

Townsville Real Estate Blog
Core Logic RP Data Reports
Townsville Bulletin
ABC News
Colin Dwyer, Local Economist