Cairns Property Watch Q2 2011

For the purposes of this report, the Northern Cairns Area encompasses the suburbs highlighted orange in the map within the report. This area stretches from Kewarra Beach in the north and Redlynch in the south.

Area Characteristics
The Northern Cairns Area belongs to the regional city of Cairns, situated in Far North Queensland, approximately 1,700km by road from Brisbane. It serves as the base for those who want to explore Cooktown, Cape York Peninsula and the Atherton Tableland. Tourism is the largest industry for the region with the Great Barrier Reef less than an hour by boat and many other natural wonders such as the Daintree National Park and Cape Tribulation, approximately 130km north of Cairns. Cairns operates as the major commercial centre for the Far North Queensland and Cape York Peninsula Region with access to various amenities including primary and secondary schools, the Cairns Campus of James Cook University at Smithfield and the Manunda TAFE college.

Demographics
The Northern Cairns Area is rapidly expanding, with a population of 80,825 residents according to the Australian Bureau of Statistics Estimated Resident Population at June 2010. This equates to a population growth of 2.5% from June 2009. A high portion of the population is under 15 years of age at 21.6% with only 8.3% of residents aged 65 years and above. Around 70% of the demographic in this region belongs to a family household, indicating that the Northern Cairns Area is a family oriented region. The region is primarily made up of freestanding houses accounting for 71.9% of the total dwellings, with 43% of households earning an income between $500 and $1,199 per week. Households are predominately owner occupied, with 61% of dwellings either mortgaged or owned outright, leaving a considerable 39% of the market as rental premises. This proportion of rental properties to owner occupied dwellings is symptomatic of a lively tourism centre, with a heavy investment market driven by strong rents.

Housing Market
The Northern Cairns Area house market appears to have stabilised since the effects of the financial crisis experienced during 2008. Despite an initial decrease in activity in 2008, settled sales have been stable averaging 603 per six month period. Considering many property markets across Australia are still experiencing declining levels of sales, this is a positive sign for a local economy which is heavily reliant on tourism. A total of 604 settled sales were recorded for the second half of 2010, equating to an increase of 14.8% from the first six months of 2010.

The overwhelming majority of house transactions occurred in the $300,000 to $399,999 price bracket, with 43% of total sales in the December 2010 half year period. Activity trends over time have been stable, recording only minor shifts within the price brackets. This equates to a market that is steady, neither growing nor declining and follows a trend from the Greater Cairns Area of soft demand for new houses, coinciding with a declining trend in new house construction. The Greater Cairns Area is reportedly at the bottom of its property cycle, news which might interest counter cyclical investors.

Looking closer into the Northern Cairns Area house market, the suburb of Redlynch has encountered the most activity during the six months ending December 2010 with 75 (12.4%) of the total 604 settled transactions. This was followed by Kewarra Beach with 66 sales (10.9%). The most affordable suburbs by median price were Manoora ($292,000) and Manunda ($305,000), while the highest medians were sustained in Whitfield ($482,500) and Machans Beach ($467,000). The suburb to experience the greatest increase in activity was Kanimbla, increasing by 62.5% (26 sales), followed by Smithfield at 22.2% (44 sales).

A resale analysis was undertaken to ascertain the average annual returns received by homeowners who exited the Northern Cairns Area house market over the six months to December 2010. On the whole, the Northern Cairns Area market sustained an average annual capital growth of 4.4% per annum with an average holding period of 5.2 years.

Unit Market
The Northern Cairns Area unit market has continued to experienced softening in activity during 2010. For the first time in just under a decade, the unit market registered activity well below 400 sales per six month period, with both the first and second halves of 2010 recording 311 settled sales each. This equates to a significant decline from the December 2009 six month period at 30.6%. The majority of sales in the six months period ending December 2010 occurred either in the $200,000 to $299,999 or the $100,000 to $199,999 price brackets, with 34% and 32% respectively. When analysing the Greater Cairns Area unit market, demand for new units is fairly soft, with a declining trend in new unit construction.

Looking closer into the Northern Cairns Area unit market, the suburb of North Cairns has encountered the most activity during the six months ending December 2010 with 57 (18.3%) of the total 311 settled transactions. This was followed by Trinity Beach with 44 sales (14.1%). The most affordable suburbs by median price were Manoora ($162,500) and Manunda ($178,000), while the highest medians were sustained in Yorkeys Knob ($300,000) and North Cairns ($280,000). A resale analysis on unit stock sold over the December 2010 half year period has yielded an annual average capital growth of 3.2% per annum, with an average holding period of five years.

Rental Market
There appears to be an underlying trend of a tightening rental market. During the most recent March 2011 quarter, rental bonds for standard three bedroom houses increased in both the 4878 and 4879 postcodes by 28% and 12% respectively. Median asking prices have also started to increase with a 3% increase over the quarter to $340 per week. Standard two bedroom units in the 4878 and 4879 postcodes have received fairly steady levels of demand from the previous quarter, with the 4879 postcode increasing its median rental price by 4%.