The latest month continued the run of positive signals on the Cairns economy. Combined with anecdotal reports of a busy peak tourist season this year, conditions are indicating growing economic momentum.
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Property sale volumes have begun to taper from the screws being tightened on investment loan eligibility as well as some buyer resistance to increased asking prices. This has resulted in mildly softening trends in house and unit sale volumes, and a slowdown in land sales, during the course of this year.
Recent conditions are suggestive of a transitory ‘correction’ in the market rather than the start of a new trend, with overall demand for housing for either owner occupation or investment purposes still perceived as rising.
The Cairns median house price has maintained a mildly softening trend in recent months, with the median house price trend coming in at $393,600 in July 2015. However a trend rise of 2.6% over the latest 12 months is still indicated. The trend in median unit prices is currently steady, but has increased 2.7% over the latest 12 months. Meanwhile the median land price trend has escalated by 13.2% over the latest 12 months, to reach $220,000 in July 2015.
2015 has been topsy-turvy year for Cairns building approvals. Building approvals normally quieten off in January to March but this year they remained strong. Then when approvals normally pick up from April to July this year they went quiet. The upshot is that even though the building approvals trend is softening there is still year on year growth –the trend in July 2015 is up 6.4% on July 2014 – but the year on year growth rates aren’t as high as they were at the start of the year. The expectation for the coming year is for building approvals to continue generally increasing as economic confidence continues to strengthen.
Rental vacancy rates continue to diverge, lowering slightly for houses but increasing for units. Even so rental vacancies overall remain at levels indicative of a tight rental supply. The trend vacancy rates for August 2015 stood at 2.3% for houses and 3.1% for units. The market vacancy trend overall stood at 2.8%.
Average investor yields on commercial and industrial property have reduced over the past three years due to the clean out of ‘high risk’ assets in the market that has taken place and the flight to quality that is characterising the current market. There is good investor demand for properties that are good quality, well located, well tenanted and moderately priced, but almost no investor demand for lower quality and/or vacant possession stock.
Herron Todd White’s National Property Clock is prepared each month based on the local market perceptions of its Australia-wide network of offices. The Cairns market overall remains positioned at the Rising Market stage of the cycle.
ABS headline figures for the Cairns Region (inclusive of Cairns, the Cassowary Coast, Douglas and the Tablelands) estimate that there were 108,900 persons employed during August 2015, compared to a revised estimate of 111,400 persons employed during July 2015. Trend calculations have been affected by changes in the processes the ABS uses to derive State and national trends (which we emulate to derive the local trend). In our estimation, the Cairns regional employment trend remained static at 109,300 persons employed in August 2015, but has still grown 3.6% since January 2015.
N.B. The ABS Labour Force figures are estimates derived from a sample survey of only about 500 Cairns Region residents, and hence are subject to a potentially large margin of error. Neither the headline nor the trend estimates should be interpreted as precise values.
The Cairns Region’s headline unemployment rate came in at 7.2% in August 2015, an apparent reduction from the 8.7% rate estimated in July 2015. Unemployment trend calculations have become increasingly uncertain following ABS methodology changes. According to our best guess, the trend rate of unemployment stood at 8.2% in August 2015, well above the State and national averages. The trend unemployment rate has also been influenced in recent months by the improving economy encouraging extra people to look for work.
N.B. To be counted as ‘unemployed’ in the ABS Labour Force survey you need to not have a job and be actively seeking work. People who do not have a job and are not actively seeking work are not counted as unemployed, they are regarded as ‘not in the labour force’.
The number of jobs being advertised in The Cairns Post has shown a mildly softening trend over past two years, influenced by changing modes of job advertising from print to on-line media. Meanwhile the trend in internet job ads for the Cairns and Far North region has been relatively flat in recent months, but has nevertheless shown a 10.1% increase over the period from August 2014 to August 2015.
Cairns Airport has just experienced its busiest August ever, the trend in airport numbers overall having increased by 5.4% since August 2014. While the passenger trend at the domestic terminal is not as technically strong as it was earlier this year, passenger numbers at the international terminal continue to build strongly with a trend increase of 20.5% evident since August last year. Strong international growth will be further boosted by new services including Philippine Airlines commencing direct flights to Auckland and Manila in December 2015 and Hong Kong Airlines launching seasonal flights to Cairns in January 2016.
Jason Thomson | Finance Broker and Mortgage Adviser | Smartline Cairns