Cairns property is all about yield
AS someone whose entire career has been consumed by the property sector, it has taken me many years of reflection to get my head around understanding the nuances of the Cairns property market and its cycles.
I have often described the local property market as being “bipolar”; cheaper (on paper) to buy old existing houses compared to the cost of developing new stock.
We have all endured the curse of the local valuers who in reality have a near impossible task of supporting new benchmark values as there is so little depth to this market
SARAH MORT for comparative sales.
This, compounded by the impact of the banking royal commission; tightening of bank lending; rising construction costs and other unavoidable costs to development; plus slower population growth, has seen a total slowdown in new residential construction.
Building permit approval numbers have plummeted since the GFC and there has been virtually no new medium-density housing developed in Cairns over the past 10-plus years.
These factors are causing massive pressure on the availability of housing stock resulting in rental vacancies as low as 1 per cent with little prospect of positive change for a while.
Although Cairns is not growing at the high rates it experienced in the 1990s boom, it still has growth with an approximate 3000 person increase per annum.
In addition, the overall demographic profile is changing with a significant increase in small household occupancy and an ageing population mirroring similar traits of our major capital cities.
These trends impact housing needs.
By the end of 2019, the light bulb literally popped in my head when I finally realised that this town is a yield play rather than the more traditional attraction of capital growth.
Cairns properties do benefit from capital growth, but not to the crazy rates that we are seeing in Melbourne and Sydney.
Sarah Mort is the director of MiHaven.