Herron Todd White - Cairns 'Year in Review'

Within their national publication Herron Todd White has provided the following review of the Cairns marketplace throughout 2012.

The Cairns residential property market during 2012 has persisted at the bottom of the property cycle with sales rates remaining low and prices weak. Properties that were well located and correctly priced sold reasonably readily but properties that were ambitiously priced or in secondary locations continued to struggle. Even though the overall volume of sales has been gradually increasing, median property prices during 2012 reduced due to property price reductions and higher than normal proportions of low-priced mortgagee in possession sales.

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Our research indicates that 13% of the market during 2012 has been either mortgagee in possession or receiver sales. Property demand from investors and first home buyers has been weak and the market for bottom end housing and tourist orientated property has performed poorly. Demand for better quality houses and units in good locations has been reasonably solid up to around $600,000 but the market then tapered off quickly.

The mainstream residential market, which takes out the top and bottom 5% of the market, currently shows a house price range of about $225,000 through to $595,000. The median house price trend stood at $331,000 in September 2012, a 3.7% reduction since September 2011. The established unit median price has also reduced by 4.4% in the year to September 2012 due to the additional side-effects of greatly increased insurance charges and body corporate levies.

Vacancy rates for rental property have tightened considerably during 2012, especially for houses, moving the current market well beneath the ‘balanced market’ range normally accepted as a 3% to 5% vacancy rate. This reflects a lack of rental availability due to the lack of new rental housing construction and the slow state of the investment property market. The trend vacancy rate for houses was 1.3% during October 2012, while units showed a trend vacancy rate of 2.5% and the overall market vacancy rate stood at 1.9%. As a result of rental property shortages, rents escalated across all categories of housing during 2012, increasing between September 2011 and September 2012 by around $25 per week for houses and $15 per week for units.

Peter Musso licensed real estate agent at Ray White Smithfield selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica, Kamerunga and surrounds.

Multiple Offers on a Property

This isn't exactly a topic specific to real estate in Cairns and Far North Queensland however it is something which I find myself discussing regularly with people; multiple offers on a property.

In the event where a property is listed for sale by private treaty (with an asking price) and more than one buyer expresses interest in making an offer to purchase, each of these buyers will be advised that there will be another offer in consideration and that the offer with the most attractive price and terms to the seller will be accepted.

To maintain fairness each of these buyers cannot know the price or terms of the other offers and must simply make their best offer in hope that it is accepted over all others.

This is at odds with a property which is listed for sale by auction whereby all bids (offers) are made in a public forum and each buyer is aware of exactly how much more they will need to offer in order to purchase the property. This method of sale through the bidding process will almost always produce the highest possible purchase price.

The Real Estate Institute of Queensland (REIQ) recently released a statement discussing this topic and also clarifying the legal obligations of the real estate agent during the multiple offer process:

The REIQ often receives queries from consumers about multiple offers on a property. A multiple offer occurs when more than one prospective buyer makes an offer on a property by submitting a Contract of Sale.

Multiple offers often happen in a seller’s market when competition for residential property is greatest and there are more buyers than there are properties for sale. However, it can occur in any market and especially for properties within an affordable price range.

Occasionally prospective buyers have alleged that agents tell them there is another offer on the property in order to secure a higher price for the seller, when in fact there is no competing offer.

There are heavy penalties for agents who mislead or deceive buyers by telling them there are competing offers when there are not.

When a seller is to be presented with multiple offers, a prudent agent will inform prospective buyers of that fact in writing and obtain a written acknowledgement. This gives potential buyers an opportunity to submit an offer if they have not already done so, or to revise an existing offer that has not yet been accepted by the seller.

Real estate agents have an obligation under the Property Agents and Motor Dealers Act to submit all offers that comply with the seller’s instructions to the agent.

Exceptions occur when, for example, the seller instructs their agent not to submit offers under a certain dollar figure.

Agents also have a statutory obligation to attempt to get the highest possible price for the seller. The law further requires that agents be fair to buyers.

Buyers should also be aware that sellers will examine all the terms and conditions of each offer before deciding to accept or reject any particular offer. The conditions can make certain offers more attractive for reasons other than the proposed price alone.

Some sellers may be prepared to accept a lower price if the offer is unconditional rather than take the risk that a higher offer may not proceed to settlement, because of the special conditions required by a buyer.

Statement posted by the REIQ on the 13th of August 2012.

Peter Musso licensed real estate agent at Ray White Smithfield selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica, Kamerunga and surrounds.

Cairns Post: Bungalow Tops List for Rental Returns

BUNGALOW has topped the list for the highest rental yields for units in the Far North.

According to RP Data figures, released this month, Bungalow in Cairns, recorded a 7.7 per cent gross rental yield in the past year.

Properties at Manoora and Cooktown outperformed the rest in the housing market revealing an average rental yield of 6.2 per cent.

LJ Hooker Edge Hill property manager Amanda Boccalatte said she was initially surprised Bungalow recorded the highest return but narrowed it down to the large number of units in the suburb.

"Sale prices are low but the rents haven't dropped," she said.

"You could buy a unit (at Bungalow) in 1998 for low to mid-$200,000s and you would be getting $220-$240 in rent (weekly)."

Ms Boccalatte said unit sale prices were now $50,000 to $100,000 less but rents were still the same.

With two-bedroom units in demand, Ms Boccalatte believed it was a good time for investors to enter the market.
"It's a great time to invest, prices are low and you are getting a great return," she said.

"Body corporate fees are high but really when you look at the rental return (7.7 per cent), you wouldn't have seen that for the last 10 years."

But Kylie Fullerton, of Taylor Jones Property, said it may not be the best time to rush out to buy a property based on positive rental yields.

While the rental market appeared to be tightening, she was wary to generalise because of a lack of consistency around statistics.

"The rental pool is shrinking," she said.

Ms Fullerton said while interest rates and property prices remained low, investors needed to factor in high insurance premiums and body corporate fees.

"There is a demand for four-bedroom houses with two bathrooms (and) we are finding people are wanting relatively new houses," she said.

Indicative gross rental yields are based on the average annual rent divided by the median sale price in each suburb in the past year.

THE TOP 10 RENTAL YIELDS

UNITS
Bungalow - 7.7 per cent
Woree - 7.2 per cent
Parramatta Park - 7.2 per cent
Port Douglas - 7.1 per cent
Edge Hill - 6.9 per cent
Yorkeys Knob - 6.6 per cent
Holloways Beach - 6.6 per cent
Mooroobool - 6.5 per cent
Westcourt - 6.5 per cent
Manoora - 6.4 per cent

HOUSES
Manoora - 6.2 per cent
Cooktown - 6.2 per cent
Caravonica - 6.1 per cent
Manunda - 5.9 per cent
East Innisfail - 5.9 per cent
Babinda - 5.8 per cent
Bungalow - 5.8 per cent
Cardwell - 5.7 per cent
Craiglie - 5.7 per cent
Westcourt - 5.6 per cent

Article printed by The Cairns Post - 24th July 2012
Writer: Bianca Keegan

Peter Musso licensed real estate agent at Ray White Cairns Beaches selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica and surrounds.

HTW Review the Cairns Residential Sales Market

Herron Todd White Cairns provide their analysis of the residential sales market within their national 'Month in Review' publication:

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The Cairns market remains at the bottom of the cycle. That said, the market appears to be consolidating from a dismal 2011, with sales volumes so far this year creeping up and prices at least for houses steadying. Our latest figures indicate a median house price in Cairns of $343,000 during February 2012, only marginally different from the $345,000 median house price recorded in August 2011 but still a sizeable drop compared to the $364,000 median house price recorded twelve months ago in February 2011.

The unit market also appears to be lifting in volumes though prices are being affected by higher strata insurance costs. Investor buyers in particular appear to be factoring these higher costs into the rental return equation and continuing to drive prices lower in order to maintain yields.

"...the market appears to be consolidating from a dismal 2011, with sales volumes so far this year creeping up and prices at least for houses steadying..."

The land market in recent months has been influenced by a large volume of receiver sales of both developer and consumer stock, selling at up to 30% discount to their former list prices. According to our Residential Land Survey, the number of new residential allotments sold in Cairns totalled 249 during 2011, a drop of 41% compared to the 420 lots sold during 2010, and 84% compared to the 1,583 lots sold at the peak of the market in 2007. Our belief is that Cairns land market volumes have reached bottom and are due to slowly recover, but that land sales for 2012 will still be relatively low.

View the full publication HERE

Peter Musso licensed real estate agent at Ray White Cairns Beaches selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica and surrounds.

Keeping Momentum on Strata-Title Insurance Inquiry

A formal parliamentary report on insurance costs was recently submitted to the government detailing a series of recommendations in response to the inquiry meetings held throughout Far North Queensland. Very interesting was the final recommendation which calls for the government to "outline the plan of reforms it will undertake with the Queensland Government to establish a competitive and affordable insurance market for residential strata title insurance, with a focus on North Queensland..."

Insurers Face Fresh Scrutiny

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The Cairns Post - March 23rd 2012

THE pressure must stay on insurance companies and government if recommendations to address the spiralling costs of body corporate insurance are to have any chance of success, Far Northerners say.

Late Wednesday, the Federal Government’s Social Policy and Legal Affairs Committee released a series of recommendations in response to the inquiry that visited Cairns and Port Douglas in January.

Yesterday, chairman Grah-am Perrett said the committee had heard stories of "heartache, stress and despair".

Mr Perrett said a number of factors did not add up when looking at the increases, from the insurance industry’s claim reinsurance was to blame, to body corporate manager commissions, to the fact building codes had improved in the past 30 years yet a massive leap in premiums had taken place.

Leichhardt MP Warren Entsch, who pushed for the inquiry along with Cairns-based Queensland Senator Jan McLucas, said the recommendations "were not a silver bullet".

"I have been dealing with property owners who are struggling to keep their homes after being hit with strata title insurance increases of up to 1000 per cent," he said.

"Some people have had to borrow just to pay their insurance and if they’re faced with the same premiums next year, it’ll tip them over the edge."

Cairns Chamber of Commerce president Anthony Mirotsos said it was encouraging that the committee had put forward a substantive action plan with "tangible outcomes and deliverables".

"It puts insurance companies on notice that this is being investigated and we’re not just going to continue handing out cheques," he said.

Sue Chapman, manager of Verandahs Boutique Apartments at Port Douglas, said it was important to keep the pressure on.

"They’ve gone out and sourced information from a huge area, they’ve come to us, they’ve actioned it very quickly so now it’s absolutely vital that we keep the momentum going," she said.

Cairns unit owner Ian Jamieson saw nothing to alleviate the hardship people were facing.

"I can’t see the insurance companies reducing their prices so the crisis remains, it’s just bad news for investment in Cairns for people on fixed incomes."

Peter Musso licensed real estate agent at Ray White Cairns Beaches selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica and surrounds.

Cairns Beaches Video Market Update

Short video update on current market activity experienced in Cairns northern beaches.
Presented by Peter Musso - Ray White Cairns Beaches - 0425 713 700
Location: Coral Sands Resort - Trinity Beach QLD 4879

Subtitle: Hi everyone, welcome to my first video update for the year, we've been very busy so I'm happy to be able to report on healthy market activity throughout January and February. Buyer activity remains strong following on from the spike in activity that we saw late in 2011, typical for that time of year but good nonetheless that it has remained.

A change that we have noticed is fewer properties coming onto the market which will help to bridge the gap between supply and demand that we have seen in recent times. The majority of buyer enquiry is circulated around the affordable housing segment, between the $250,000 and $350,000 level, with demand for units slightly less however good for those that are priced to represent clear value within the marketplace and of course auction properties with no advertised price.

As predicted we are continuing to see strengthening rental market conditions with tightening vacancies and increasing rents, something I heard a buyer say last week was "with rents expected to increase further why shouldn't I buy?" This was music to my ears as it is the message that we have been trying to get across to the marketplace for quite a while now. Hopefully we see and continual shift in buyer perception in that direction.

If you would like a quick discussion regarding local market activity feel free to call me directly at any time, have a great day and thank you for watching.

Peter Musso licensed real estate agent at Ray White Cairns Beaches selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica and surrounds.

Recovery Plan Sought for Local Construction

The conditions of property markets in Far North Queensland are perfectly typified by the relative health of the local building and construction industry. Following the effects of the global financial crisis in 2007 the rate of new dwelling approvals in Cairns urban area took a significant hit. Despite a slight recovery in approvals experienced during 2009, throughout the past 12 months approvals have remained at a virtual standstill.

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As illustrated by the graph opposite, the current trend number of new dwelling approvals in Cairns urban areas sits well below 50 per month with almost no new units approved. Industry analysts assert that a minimum trend of 50 approvals per month is required for the region's building industry to prosper.

The Cairns Post recently reported on publication by the Urban Development Institute of Australia (UDIA) showing that $318 million has been wiped off Far North Queensland's economy in the past three years from the downturn. The UDIA also outline within their report critical actions required in order to return prosperity to the building sector.

Roadmap for Recovery in Cairns' Construction
The Cairns Weekend Post - 25th February 2012

A DEVELOPMENT hit-list has been drawn up to turn around a $300 million downturn in the Far North's construction industry.

A report by the Urban Development Institute of Australia shows that $318 million has been wiped off the region's economy in the past three years from the downturn.

UDIA Queensland president Matthew Wallace said the institute had 16 critical actions which it considered pivotal to restoring the prosperity of the sector.

"They include an overhaul of the prevailing planning culture and review systems in Queensland to deliver quicker and less costly outcomes, short-term removal of stamp duty on off the plan sales, greater leadership in the delivery of infrastructure and a senior government taskforce to undertake a training strategy to grow the construction workforce," he said.

"We now need decisive action from the incoming Queensland government to turn industry conditions around and harness the economic potential of the sector.

The report found that there had been a 26.4 per cent decline in construction in the Far North in the past three years – double that of the state decrease.

It said in the last financial year 846 dwellings were approved in the region, less than a third of the total in 2007-08 of 2994.

Despite the downturn, the region's industry remained a major employer, accounting for 10 per cent or 12,300 jobs.

Far North UDIA president Gerard Obersky said the Government had created a system that was "inefficient, prohibitive and layered in overlapping departmental assessment or consideration".

"As a result, the costs from these problems are continually spiralling. The planning process has been complicated to a point where delays, taxes and the subsequent cost of this process are making housing unaffordable," he said.

LNP candidate for Cairns Gavin King said the party had elevated the property and construction sector as "one of our top economic priorities".

"Many of the recommendations by the UDIA have been adopted and released as part of the LNP's property and construction strategy," he said.

Labor candidate Kirsten Lesina said Queensland had the lowest standard transfer duty rates of any mainland state and the Building Boost was having a direct impact on the new housing market which included a $10,000 grant for all new homes under $600,000, plus the $7000 first home buyers' grant.

Peter Musso licensed real estate agent at Ray White Cairns Beaches selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica and surrounds.

North Point Estate Sold to Local Developer

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The future for Smithfield's North Point Estate is now a little clearer with local developer and builder John Richardson fighting off interstate and foreign interest for the purchase. The residential subdivision is a key development site on Cairns northern beaches opposite the Smithfield shopping centre and part of the originally planned Smithfield Town Centre.

The site was originally pegged to carry an extension to the Smithfield shopping centre, including a theatre complex and unit development, until plans were blocked following the collapse of owner Capital Globe Group in 2010.

John Richardson's company has in the past been a strict housing construction business so it is easy to assume that this will too be the future for North Point Estate ...however watch this space as further details are clarified...

Smithfield North Point Sale Coup

Article printed in the Cairns Post - Wednesday 15th February 2012

LOW-profile developer and builder John Richardson has beaten off strong competition to acquire the strategic North Point Estate residential subdivision at Smithfield.

His company Richardson Plant Hire has bought the 18.4ha property alongside the Captain Cook Highway for $3.7 million plus GST.

The northern section of the property once formed part of the $500 million Smithfield Town Centre project proposed by developer Steve Pellegrino.

However, the Cairns Regional Council blocked the centre in March last year.

Northpoint has existing development approval for residential sub-division with mixed zoning, including residential 2 and 3.

A two-level display home is included. A section of the land is south of Stanton Rd while the bulk of the property is north of the road.

Mr Richardson, who owns David McCoy Homes, Ken Frost Construction and Cairns Key Real Estate, said he had yet to decide what he planned for the property.

He said he would meet Mr Pellegrino to discuss what options were available with the northern section.

Mr Richardson is also involved with the development of the Seaside at Kewarra 56-lot residential estate off Poolwood Rd, the 19.5ha Half Moon Bay Estate at the end of Reed Rd at Trinity Park and the Smithfield Village master planned community, also at Trinity Park.

Urban Development Institute of Australia Far North branch president Gerard Obersky said Mr Richardson was long established as a quality contractor in civil and building construction as well as a leading developer with a proven record.

"Never scared to have a go, he has been innovative and progressive," Mr Obersky said.

"John’s recent acquisition in North Point Estate is the strongest possible endorsement in the area by a local developer."

The property was sold through an expressions of interest campaign by Colliers International Cairns for Brisbane-based McGrathNicol receivers.

Managing director Stacey Quaid said there was keen interest in the property from throughout Australia, China and New Zealand.

He said the property was very strategic with a handful of short-listed offers considered by the receivers on behalf of the National Australia Bank.

Mr Quaid said Mr Richardson was an ideal buyer with many years’ experience in putting together house and land packages.

He said there was a shortage of residential land on the northern beaches and this would help meet demand.

"It’s fantastic that a local buyer is the new owner," Mr Quaid said.

The prominent development site was associated with murdered businessman Shaquil Haque.

The sale follows the collapse of the Capital Globe Group, the company headed by Mr Haque.

In February last year, McGrathNicol was appointed receivers by the National Australia Bank.

Mr Haque and his financial adviser Charles Young were shot dead in the Pakistan capital Islamabad in 2010.

View the Cairns Post article online here

Peter Musso licensed real estate agent at Ray White Cairns Beaches selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica and surrounds.

National Housing Shortage to Fuel Unit Demand

A recent report produced by the National Housing Supply Council (NHSC) has reaffirmed signs that Australia’s chronic property shortage is set to be one of the key issues underlying the real estate market for years to come.

The NHSC’s report titled the ‘State of Supply Report 2011’ shows that Australia's overall shortage of dwellings currently sits at 186,800 and is projected to hit 640,000 by 2030.

In terms of sheer numbers, the largest housing shortfalls are in NSW and Queensland, says the report, with shortfalls of 73,700 and 61,900 respectively.

Key factors behind Australia's national housing shortage include:

• The country's high rate of population growth;
• A weak post-GFC construction market;
• Australia's ageing population;
• Significant growth in the number of lone-person households; and
• Significant growth in the number of households containing couples without children.

The report states that as a result of these underlying factors, the NHSC expects higher density housing to increase in popularity in the coming decades.

"Most regions are projected to see a greater relative increase in demand for flats, apartments and townhouses than for detached houses," says the report.

Far North Queensland is one of the fastest growing regions in the State. Between 2001 and 2006 FNQ had the third highest growth rate and absolute growth outside South East Queensland. This growth has largely been driven by net migration, with natural increases remaining relatively steady.

Current population projections for FNQ to 2031 are shown in the second graph. High, medium and low series projections have been prepared to consider a range of potential future outcomes.

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Key finding of the recent NHSC 'State of Supply Report 2011' report include:

• Despite weaker market conditions, the housing shortage continues to widen.
• Underlying demand for housing grew by an estimated 159,200 dwellings in the year to 30 June 2010 – slightly more than the 156,500 forecast in the 2010 report.
• Net additional housing supply  increased by 131,000 dwellings over the same period, below the 140,700 projected in the 2010 report.
• The gap between these measures of underlying demand and supply increased by 28,200 to 186,800  over 2009-10.
• The largest housing shortfalls in numerical terms are in NSW and Queensland, with shortfalls of 73,700 and 61,900 respectively.
• Relative to the size of its market, the largest shortfall is in the Northern Territory, where the Council estimates the shortfall to exceed 10 per cent of total underlying demand.
• Data from the states and from the Council’s analysis of recent building approvals data suggest that supply is likely to fall short of the medium-growth projections (meaning a larger gap) in the short term.
• Projections, based on trend building rates and household growth, suggest that this gap could increase to over 640,000 over the next 20 years .
• This growing gap indicates that housing production needs to lift well above trend to reduce the likelihood that housing shortages and poor affordability impact adversely on economic growth and standards of living.

View the full ‘State of Supply Report 2011’ report at the NHSC website HERE

Peter Musso licensed real estate agent at Ray White Cairns Beaches selling property in Cairns' beautiful northern beach suburbs including Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach, Caravonica and surrounds.

STRONG AUSSIE DOLLAR TO SLOW ECONOMIC RECOVERY IN TROPICAL NORTH QUEENSLAND

With the Australian dollar recently reaching a 27-year high, not seen since the currency was freely floated in 1983, heavy costs are expected for local tourism and export industries.

Cairns was hit hard by the global financial crisis due to its high reliance on international tourism, and local businesses are still struggling to recover. Early indications of a strengthening economy in the north have just started to show yet these are now overshadowed by the sky-rocketing dollar bound to deter international expenditure in the region.

Interest rate rises are being viewed as too much too soon while local property markets are still finding their feet, and of longer term concern is the slowdown in residential development. It is the hope of local business leaders that the reserve bank decides to leave interest rates at current levels or lower for the time being with political figures calling for it to be allowed to free-fall like in the time of the Keating Government after the early 1990’s recession (Courier Mail Article).

Australian Tourism Export Council director Ron Livingston said Cairns had suffered because its tourism industry was predominantly based on leisure tourism, rather than business tourism. "If you add the fact that Australia has a high wage base compared to, say, Southeast Asia, we get crucified on hotel costs and tour costs," Mr Livingston said (The Australian Article).

Peter Musso - Ray White Cairns Beaches - Property agent selling real estate in Trinity Beach, Kewarra Beach, Clifton Beach, Palm Cove, Trinity Park, Smithfield, Yorkeys Knob, Holloways Beach, Machans Beach

Local Tradesman Shortage Expected to Slow Growth

Cairns is unlikely to experience a residential construction boom, as occurred before the global financial crisis, due to lack in skilled local tradesmen.

The Urban Development Institute of Australia's president Adam Gowlett, who was re-elected for another 12-month term last Wednesday, said "ideally a home building resurgence would be gradual rather than fast."

Mr Gowlett said the outlook for residential construction for the remainder of 2010 was still quiet, despite promising signs in other areas of the economy.

Read full article