Outside investors have shrunk considerably as a force in the Cairns market.
Here is some analysis from Herron Todd White that I wanted to share:
HTW analysis shows that overall, outsiders buying into Cairns has reduced from nigh on 50% of the market in 2003 down to around 22% of the market today. The switch is especially noticeable for units, where outside buyers have reduced in activity from near 70% in the heyday of the market in 2003 to approximately 36% of a much smaller market in 2015. The flip side is that the Cairns market these days is being sustained primarily by intending occupiers and a smattering of local investors.
Over the same twelve year period, investor yields have improved from 6.3% to 6.8% for units and 3.6% to 4.9% for houses, though it must be said that the increased yield has in many cases been more than frittered away by higher ownership costs, particularly through escalated building insurance charges.
Part of the explanation for the investor slowdown over the period has been the slowdown in new housing construction, especially of units. The absence of large unit developments has seen the absence of new units targeting out of town investors by project marketing specialists. Even though building conditions have improved significantly in Cairns over the past three years, building conditions are still patchy and only a fraction of normal.
Related: Download the free Market Outlook report I’ve provided at the end of this post and read about the under-supply situation of homes in Cairns. There is a need to start building more new homes.
By rights Cairns should be returning as an investment hotspot given its relative affordability, especially compared to investment in the capital cities, and its good prospects as the economy continues to improve on the back of increased tourism. This is evidenced by the Golden Lakes unit development which commenced marketing earlier this year and has seen most of its first stage of 74 units sell to Chinese buyers. In addition the seven-tower Aspial Nova 8 development in the CBD, likely to ultimately consist of over 1,100 residential units, is also poised to commence its first stage development aimed largely at investor buyers.
Jason Thomson | Finance Broker and Mortgage Adviser | Smartline Cairns