Cairns August 2017

The month in review: Cairns

By Herron Todd White
August 2017

Investors, especially outside investors, have been progressively shrinking as a force in the Cairns market in recent years.

Our analysis shows that overall, outsiders buying into the Cairns market have reduced from nigh on 50% of the market in 2003 to around 22% of the market today. The switchover 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 34% of a much smaller market in 2017.

Over the same twelve-year period, investor yields have improved. For instance a new 4-bedroom, 2-bathroom house on the northern beaches of Cairns that can be currently bought for around $420,000 would typically rent for $440 per week. Yields for units are even higher, though it must be said that the increased yield is in many cases is 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 absence of new housing construction, especially of units. Even though building conditions have improved significantly in Cairns over the past three years, building levels are still patchy and only a fraction of normal.

By rights Cairns should be an investment hot spot given its relative affordability especially compared to investment in capital cities, and its good prospects as the economy continues to improve on the back of increased tourism. Its rental market fundamentals also remain strong, with a very low vacancy rate, strong yields and low levels of new rental housing construction.

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