Time to Wake up and Smell the Roses Townsville Real Estate; Queen Bees are Being Born

Townsville’s Real Estate economy is on the cusp of renewal and regeneration after an extended period of hibernation, passive demand and external uncertainties, a leading independent North Queensland Real Estate Principal said.

Mr McLeod of Rapid Realty Australia and Director of McINC Investments and Consultancy said, “Consumer confidence indices have been improving over many months which suggests that lower prices and retail discounting is stirring the end consumer to feel they have more bang for buck. “This sentiment has been evolving in the non-discretionary spending sector such as accommodation and housing for many months”, Mr McLeod said.

“Leaders in our North Queensland headquarters in Townsville have reported that prospective tenants and buyers for that matter are asking to negotiate prices down more frequently and with more depth suggesting consumers have a higher expectation that prices could be discounted”, Mr McLeod said.

This is also reflected in the Melbourne Institute’s Consumer Sentiment Index which reports that sentiment has increased by 2.0% over the month to 110.5 points which is its highest level since December 2010 (111.0 points). The consumer sentiment index has increased over six of the past seven months and is up by 12.6% over the past six months.

Each component of the index except for time to buy a major household item rose over the month and only the index which measures family finances over the past 12 months is showing higher levels of pessimism than optimism. RP Data Property Pulse, 15/03/2013.

For the first time in nearly a decade, the Townsville rental vacancy rate has bounced over 3% to 3.14% in February 2013, HTW Rental Vacancy Survey, Feb 2013.

For many in the industry this is unprecedented and could typically put downward pressure on rental accommodation prices if sustained. However, Mr McLeod believes this anomaly will be short lived and should improve for investors as North Queensland, and Townsville particularly, traditionally has a seasonal movement of consumers out of accommodation in November and December and January. Accommodation is now being filled with new arrivals and streetscape changes occurring.

"The imbalance in the depth of this movement of consumers through December, January and February 2013 out of the economic zone could have been affected by delays in the State government’s placement of employees in the health, education and infrastructure-related departments, following the Campbell Newman government’s announcement late in 2012 of job cuts in this sector”, Mr McLeod said.

By contrast, the Australian Bureau of Statistics (ABS) released the January 2012 housing finance data this week. The data revealed that the number of owner occupier finance commitments fell by -1.5% over the month with non-refinance commitments falling by -1.9% and refinance commitments -0.7% lower. Year-on-year, non-refinance commitments are -0.8% lower than last January while refinance commitments have recorded a much greater -10.0% fall.

The total value of housing finance commitments rose by 2.4% over the month with investment finance commitments increasing by 4.4% and owner occupier commitments increasing by 1.3%. Year-on-year, the total value of owner occupier finance commitments has fallen by -0.5% however, investment commitments have seen a significant increase of 18.6% as reported by the ABS. The increase in investor finance compared to domestic finance is a significant measure of consumer-centric investors’ finding confidence in a more favorable property market, improving global economic data from the United States, Asia and Europe on our domestic equities markets expanding.

The Melbourne Institute Consumer Sentiment Survey identified 21.3% of respondents felt that real estate was the wisest place, down from 24.0% last quarter to invest over bank deposits, shares, paying down debt, etc. The proportion of loans to first home buyers was at its lowest ever level in Queensland (10.4%) over the month.

“The gestation period for consumer-centric investors as confident buyers has been long coming over the past four years since the housing market peeked, and with a cultural effect from consumers becoming comfortable with retail price discounting, now is the time to “wake up and smell the roses” before the Self-Managed Superannuation Fund and experienced and astute investors pick the early blossom in the Townsville real estate market”, Mr McLeod said.

So when could be the best time to pick the right property?

At a micro level it is impossible to pick the perfect day. The lead indicators are in place to act within the next 6-12 months because the number of competitive buyers with consumer-centric needs (owner-occupiers) should be in less demand. Although not the only lead indicator of owner-occupier buying behaviors, the higher rental vacancies rate over 3% in December 2012 suggests a historical correlation of lower domestic demand by owner-occupier’s could be occurring in the next 6-12 months.

We did see a contrasting behavior by owner-occupiers later in 2012 as Townsville welcomed the 3^rd Army Battalion approximately 6-12 months before as rental consumers. Demand indicators showed lower rental vacancy rate at around 2% during March and April 2012.

A sustained improvement in investor and business confidence could play out in the Townsville economy after the Federal election is held in September 2013, by which time State Government infrastructure spending, institutional, SMSF, private equity and development investor’s may also ramp up the flow of capital on the back of lower domestic interest rates and a global financial recovery.

In the meantime, a residual demand of owner-occupiers seeking to upgrade, downgrade and street change, and those economically resilient consumers with residual wealth and a growing institutional investor market should see property prices be maintained over coming months in the Townsville residential market.

Data Source:

Rapid Realty Townsville Vacant Rates Data, Feb 2013. www.rapidrealty.com.au

Australian Bureau of Statistics
Westpac and Melbourne institute Consumer Sentiment Survey
RP Date Property Pulse, February 2013
Herron Todd White Townsville Rental Vacancy Rate Survey, Feb 2013

Townsville City Councillors Better off Providing Discounts to First Generation Developers

Townsville City Council would serve their community better and leverage rate payer funds more effectively by redirecting money being offered to a City Cinema Developer (see Townsville Bulletin article below) to small and medium size developers because it is more likely a greater short and long term economic benefit would be achieved for the City.

Local Property Investment Consultant and Real Estate Principal, Aaron McLeod said; "Council need to think seriously about turning on small and medium size investors again to the City".

Many small subdivisions and strata developments that were approved before the new Integrated Planning Act was introduced were established by local North Queensland families. This type of small development is now cost prohibitive to local investors. Council has the opportunity to stimulate this market with some initial relief from ridiculous planning and administration costs, Mr McLeod said.

Instead of bowing to large developer’s appealing for reduced planning costs in the City centre where an incentives program already applies of up to 50% on infrastructure charges, the Planning and Development Committee members should seriously question if they are really serving the community interests.

Small to medium size investors have by and large turned off Townsville because of the exorbitant planning costs imposed by State Government and Council red tap to complete suburban subdivisions and community-hub facilities such as local medical practices, corner stores, butchers, bakers and restaurants.

Even the privacy protection legislation is making it more difficult for small investors and developers to simply research investment opportunities in the City, causing many to throw their hands in the air and give up or redirect their attention interstate or overseas.

Just as one example, a local investor and medical practitioner wanted to set up a small psychology practice from an existing residential dwelling, which is located next door to a hotel and across a main road from an existing set of shops neighbouring industrial sheds in a well-established community, and Council planning provided absolutely no encouragement. Not only the investor but the prospective Seller of the residential dwelling is bewildered and frustrated with the system.

These small developments provide direct economic stimulus with construction and operational jobs, but most importantly, it stimulates broader investor confidence and therefore more investor demand for property in the City.

It seems our esteemed Councillors are happy to network and lobby with large corporations in the CBD to facilitate favourable financial outcomes for big business, but they are ignorant to the frustrations and call for help from the network of small to medium size investors local to North Queensland, and the prospective sellers that increasingly under enormous pressure from their banks to sell their properties, simply wanting urgent respite from the intolerable planning and administration fees and charges.

References:

Townsville Bulletin - http://www.townsvillebulletin.com.au/article/2012/11/28/371020_news.html
Rapid Realty Townsville - www.rapidrealty.com.au
MCINC Investments and Consultancy

Government Sponsored Development "The Village" Attracting Robust Investor Interest



"The Village" Development Stage 1 - Idalia Townsville

Rapid Realty Townsville is receiving an increasing number of enquiries from local, state and interstate investors wanting local expert direction, price comparisons and property management quotes on house and land packages in the new "The Village - Where the river meets city living" development.

Rapid Realty Townsville Principal and National Director, Aaron McLeod said; "Investors are seeking reliable, independent and trustworthy information from a local real estate expert as they sum up the ROI opportunities.

 

"The Village" development adjacent to Ross River at Idalia is a new Government Sponsored Urban Land Development Authority (ULDA) initiative only 1 kilometre from Rapid Realty Townsville's office.

 

For more information, appraisals and property management quotes, go to www.rapidrealty.com.au