Investors positive about NQ

Investors positive about NQ

 

For the first time in this whip around the country, we acknowledge the importance of the North Queensland property market and Chris Gay from Cairns gives us his view on why investors remain positive about the north.

Transcript:

Kevin:  We do this every year when we have a look around Australia, and I think this is the first time ever we’ve looked separately at the North Queensland market. So many things happening and Queensland such a big state that we’ve decided to split it up. Joining me to talk about the northern part of Queensland is Chris Gay from Chris Gay Real Estate based in Cairns.

Chris, thank you for your time.

Chris:  Not a problem.

Kevin:  A pretty interesting area, isn’t it, North Queensland? We’ll try and focus, if we can, on Mackay north, but it’s interesting to look around in the Cairns market at whether or not those big developments are going to happen that have been on the drawing board for some time, Chris.

Chris:  Yes, that’s right. There is a little bone of contention with some of them because they have, unfortunately, dragged the chain a little bit, Kevin. There seems to be some renewed interest in the Aquis development with Tony Fung coming up here recently and meeting with our mayor.

Kevin:  Is it going to happen, do you think, Chris?

Chris:  I’m still sitting on the fence, I have to be honest. I’m a realist with these things, and while I’d love to see it go ahead, when they turn soil, then I’ll be a lot happier than I am right now.

Kevin:  How much does it mean to the area to have a development like that?

Chris:  While it would be a very good thing to have, Cairns has a hell of a lot more going for it than just one development such as Aquis. We’ve seen a market turnaround in the last three years with tourism in the town. There’s talk of a substantial increase in the near future with the Navy base. We’ve started to see the odd crane on the horizon with a new $50 million aquarium being built.

There’s talk of a number of other developments going ahead. There have been some large commercial sales. The local DFO has just been sold for about $40 million, I believe, and they’re doing a $10 million upgrade on that, so there’s more than one area that makes me feel very positive about Cairns.

Kevin:  You’ve given us a very good overview about some of the future projects. What’s impacting the market there right now, both from a positive end and a negative point of view?

Chris:  Probably from the positive point of view, it’s the actual affordability of the established market. What I’m seeing is a heck of a lot of the mid-range houses between, say, the $350,000 and $450,000 mark that are selling are still below a replacement cost if you were to go out, buy a parcel of land, and then build yourself a new home. To me, they represent fantastic value.

The unit market, residentially, has copped a fairly torrid time over the last few years with some dramatic insurance increases, which have all, obviously, been passed back on to owners. However, we are seeing the Insurance Council start to come in and downsize some of those costs, which is a plus, which is reducing that again. Our rental return market is, I think, very, very good when it comes to an investor return for your bucks on what you’re buying.

Negatively, as much as anything, probably the turnaround time on financing has seen spectacular growth. What we have seen, however, is a nice, steady, sustainable growth over the last few years. That, to me, is a heck of a lot safer than some of the other areas that have been reliant on mining, etc.

Kevin:  How would you describe investor sentiment in that area right now?

Chris:  I think it’s fairly positive – and it should be because we’re looking, at the moment, on housing at about a 2.5% vacancy factor and on residential units, we’re looking at 2.9% there. That, to me, has always been around a crisis number of available properties to rent, so we’re seeing that rents are certainly doing better than just holding steady; we are seeing increases in them.

We haven’t seen any new unit development in the last four or five years, apart from the bit of government stuff, so that supply and demand situation has basically been very tight over that time.

Kevin:  You mentioned affordability as one of the big pluses, and I would have to agree with you. Where is the best buying right now? Let’s look specifically in the Cairns area. What are going to get for our dollars?

Chris:  On the south side, you have lower prices. When you look at a city like Cairns, you’re talking probably 20 minutes from the CBD, either north or south to the town. Travel time is not a major consideration that comes into it. But on the south side, you’re buying a nice home for around about $340,000 to $350,000.

Coming closer into town, of course, you have some more desirable areas – Whitfield, Edge Hill, Freshwater – and you’re up well over the $500,000s in a lot of those areas. But there is still the odd smaller property that offers some pretty good opportunity for someone who is prepared to take something on and expand a little bit.

Kevin:  The bottom line in closing, if we could, your view about the next 12 months in the Cairns market?

Chris:  I think for the next 12 months, we’ll be steady as she goes. I think we’ll probably see somewhere around about 3% to possibly 4% growth, which once again, as I said earlier, is quite sustainable. It’s the type of market I like to see. There’s no whizbang to it, but it’s certainly sustainable and it’s very viable.

Kevin:  Good on you, Chris. Thank you so much for your time. Chris Gay from Chris Gay Real Estate in Cairns. Thanks, mate

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Kevin Turner
kevin@realestatetalk.com.au
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