Townsville House Market Overview Q4 2011

Overview
Adjacent to the Great Barrier Reef, Townsville is located in the dry tropics region of the North Coast of Queensland. As the largest urban centre north of the Sunshine Coast, Townsville is considered the unofficial capital of North Queensland. Its diverse economy, which is primarily centred on the citys use as an industrial port, has also begun to incorporate a strong tourism sector. Its popularity with tourists seeking to visit Magnetic Island and the Great Barrier Reef has resulted in a strong diving industry with excellent facilities.

This report will provide an analysis of the Townsville Area house market to ascertain several market trends . The house market accounts for the majority of the Townsville dwelling market, with detached homes at 75 per cent of total dwellings. As there is a significant proportion of the market dedicated to investment, at 39 per cent of total dwelling ownership. It is also important to understand the fundamentals of where demand is originating from, what type of housing stock has been transacted and the historical capital returns that were achieved.

In terms of the real estate market performance, there has been little divergence from the trends displayed across the majority of Queensland's markets, with falling sales volumes and softening capital values. Most of the purchasers in the market originate locally and tend to purchase within the suburb of Kirwan, at 19.4 per cent of total house sales over the first half of 2011. The bulk of houses have been sold in a price segment ranging between $300,000 to $399,999, at 44 per cent of total sales. These homes tend to have three bedrooms, at 53 per cent of the market and reside on a block of land that is in the 600sq m to 699sq m segment, at 30 per cent of total sales. Although there has been a significant decline in house sales over the past decade, the level of new housing stock transacting in the market has increased, to account for 35 per cent of house sales.

House Market
Over the past ten years, existing houses have accounted for an average of 962 transactions per six month period, with the most recent half year period ending June 2011 registering 515 sales. As an average over the past ten years, new homes have accounted for approximately 32 per cent of total market activity, with an average of 450 transactions per six month period. Activity as a whole in the Townsville market has declined since the government stimulus period of 2009, with each subsequent six month period experiencing a decrease in settled house sales. When viewing the House Sales Cycle, it is determined that over the past decade the median price between new stock to existing stock has typically increased at a similar rate of 10.6 per annum. Overall, the price of new stock has increased its price differential from $17,500 to $49,500 over the ten year period. As at the six month period ending June 2011 , new product on the market sold for a median price $391,500, while existing houses registered a median price of $342,000.

Settled transactions have softened consecutively from the June 2009 period, which saw record low interest rates and government incentives driving market activity. Over the most recent half year period, the Townsville Area recorded its lowest volume of house sales in the past decade, equating to 793 transactions. This level of sales represents an annual softening of 11 per cent. Analysis of the most active price points during the June 2010 half year shows 23 per cent of houses transacted within $300,000 to $349,999. This was followed by the $350,000 to $399,999 price point which saw 21 per cent of total transactions. Over the June 2011 half year, the most significant tightening in sales activity occurred within the $400,000 to $499,999 market. This market has accounted for 77 per cent of the total 12 month decrease in sales activity. The premium end of the market at $550,000 plus accounted for nine per cent of the total sales, which has increased slightly over the past two years from four per cent in 2009.

PRDnationwide Research conducted a resale analysis on houses sold within the Townsville Area. To do this, all capital gains achieved from houses resold within a six month period are averaged out to give an annual growth figure for the area. As displayed in the Average Annual Capital Growth graph, those home owners who sold prior to the GFC in 2008 saw greater capital growth than those who held onto their houses and sold within the past two years, as capital values softened. The analysis yielded an average annual capital growth of 5.5 per cent per annum for houses sold within the June 2011 half year, with an average holding period of seven years and nine months.

When the Townsville house market is analysed closer at the suburb level, it is concluded that Kirwan experienced by far the largest amount of sales (154 sales), equating to almost double the amount of the second largest transacting suburb, Kelso (81 sales). The overall trend in sales activity appears to see a decrease in most suburbs from the previous year, with only a few suburbs experiencing an increase in sales. The suburb to experience the largest increase in transactions was Hermit Park, with an increase of 18 per cent from the previous year, followed by Aitkenvale , with an increase of 16 per cent. The largest decline in activity occurred in Mount Louisa, with a fall of 37 per cent to register 58 sales.

A purchaser origin analysis was undertaken to determine where the majority of investors were placed before entering the Townsville market. It has been concluded that for the financial year ending June 2011, most of the purchasers originated within the suburb of Kirwan, followed by Annandale. The far majority of buyers originate locally within the Townsville Area, with the number of investors from Brisbane decreasing by 52 per cent from the previous year.

An analysis of bedrooms per house sale was conducted to determine the size of stock being transacted on the market. The majority of house sales that took place in the first half of 2011 were for three bedroom homes, at 53 per cent of total sales. This was followed by four bedroom homes at 34 per cent of total sales. There was no noticeable shift in sales from the previous year.

The majority of house sales occurred for homes on land between 600sq m to 699sq m of land, with 30 per cent of total sales (down from 32 per cent in the previous year). This was followed by the 800sq m to 899sq m land segment, with 19 per cent of total sales (on par from the previous year). Only ten per cent of the market were for homes on blocks of land smaller than 500sq m (up from six per cent), while 12 per cent of sales were for houses on over 1,000sq m lots (up from 11 per cent).