Townsville Property Watch Q1 2011

Scope
The following Property Watch investigates the house and unit markets comprising the Townsville and Northern Beaches Area. This report highlights trends influencing these property markets and the factors contributing to its competitive environment. For the purposes of this report the Townsville and Northern Beaches Area encompasses the suburbs highlighted in the map to the right.

Area Characteristics
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.

Increasing densification of the inner city has helped the Central Business District (CBD) develop and gentrification of surrounding areas increase its appeal. One major factor contributing to the development of the CBD was the construction of a new rail passenger terminal, which moved the railway workshops and released prime real estate formerly belonging to Queensland Rail.

House Market
Sales activity within the Townsville and Northern Beaches Area over the six months to December 2010 has recorded it lowest level since the peak of the Global Financial Crisis in 2008. The recent low volumes of sales has followed decreased confidence and lack of active buyers in the market. The household savings rate increased to 10% of annual net disposable income, indicating that uncertainty in the housing market has lead to families opting to save their disposable income and service existing debt, rather than make another large scale financial commitment. However, from a buyers stand point the shortage of active competition is helping generate an environment rife with investment opportunities. For investors to realise strong returns within this subdued market, the holding period of the asset must be longer than before, as previous levels of growth seen during the boom is unlikely to be repeated.

The median house price recorded for the Townsville and Northern Beaches Area over the most recent six months to December 2010 was $400,000. Over the past 12 months the median price has increased 2.3% or $9,000. However, this increase is predominately due to a decrease in sales activity transacting in the sub $350,000 market segment, as opposed to increasing capital values. PRDnationwide Research has undertaken a resale analysis of all houses sold within the six months to December 2010. This has revealed a strong average annual capital growth of 6.6% per annum. This product was held for an average period of just over four and a half years.

After a 6.7% decrease in sales from the six months to December 2009, the Townsville and Northern Beaches Area has recorded 364 settled transactions over the corresponding 2010 half year period. This registers 42 sales below the five year average of 406 sales per six month period. The most active suburb over the December 2010 half year was Mount Louisa with 84 sales. This was followed by the suburbs of Bushland Beach with 75 sales, and Burdell with 46 sales. In terms of growth in sales activity, the suburb of Bushland Beach has recorded an increase of 22 sales from the December 2009 half year to reach 75 transactions. Mount Low and Burdell also recorded increases of 13 and eight sales over the December 2010 half year. An investigation into the price point distributions has revealed that the sub $350,000 market segment has absorbed the majority of the sales softening, accounting for a decrease in activity of 25 transactions.

Unit Market
The Townsville and Northern Beaches Area unit market has recorded a more dramatic softening than the house market, perpetuated by an oversupply of unit product within the region. Over the most recent half year period, this has resulted in the lowest level of sales recorded throughout the past ten years, coming off an incentive driven period which saw strong sales activity. This has occurred in line with falling buyer confidence over 2010 and reluctance from vendors to meet the market, leading to potential purchasers sitting on the sideline. The reality of the current market is that from mid 2010, property has swung to favour the buyer. Rising interest rates (which remain historically low), stricter lending criteria and strong listing activity have culminated to provide a strong stand point for buyers. As a result, vendor expectations must be realistic in order to achieve a sale.

The median unit price recorded for the Townsville and Northern Beaches Area over the most recent six months to December 2010 was $392,500. Over the past 12 months the median price has remained flat, recording 0.6% growth. Given the low level of sales transacting over this period, the slowing in median price is the result of vendors discounting prices to dispose of distressed assets. PRDnationwide Research has undertaken a resale analysis of all units sold within the six months to December 2010. This has revealed a strong average annual capital growth of 4.3% per annum. Units sold had a holding period just over five years.

The Townsville and Northern Beaches Area unit market has recorded a much stronger softening than the house market, with a 28.8% (51 sales) decrease in activity from the six months to December 2009. This equated to 126 settled transactions over the corresponding 2010 half year period. This also registers 96 sales under the five year average of 222 sales per six month period. The most active suburbs during the most recent period was North Ward with 51 sales, followed by Townsville City with 38 sales. In terms of the price points, there have been significant contractions recorded across the board particularly for product priced above $500,000.