QUESTION IS, RENT OR BUY

Homes flying off shelf as record low interest rates give buyers confidence

ANOTHER week gone by and another week of strong activity in the market which continues to bode exceptionally well for Cairns.

Interest rates have been cut yet again, making it even cheaper to buy, with borrowing capacity increased as well (albeit only marginally at this point). The RBA anticipates that these low rates will stick around for a few years, too.

The rental market remains as tight as we’ve seen in recent memory, with rents continuing to head upward, which is to be expected.

However, this increase in the cost of renting is placing increased pressure on the housing market as the balance between the cost of a mortgage versus the cost of renting continues to tip in the favour of home ownership. In fact, in many cases today you could own a home and pay it off for less than you would be paying to rent the equivalent property, though job security and a decent deposit are still hurdles for many.

Housing is overachieving in comparison to the market as a whole, with detached homes on big blocks fetching premium prices, particularly those in good condition with nothing to do but to simply move in. The $300,000-$600,000 range of stock remains hotly contested – I haven’t had a home last more than a single week on the market without an offer in the past six months outside of an auction.The consensus seems to be local owner occupiers are the real drivers in the market, which is really encouraging. As much as investors are very much a big part of our dynamic here in Cairns, owner occupiers tend to offer more stability and commitment within the market, promoting more sustainable growth compared to investors who come in and out of a market, as we saw post GFC. That being said, given the high rents being achieved and cheap money, it’s surprising we aren’t seeing more investors coming through than we currently are.

Southern buyers are still a small part of the equation. It’s a cohort tipped to grow as border restrictions further ease, and more people start looking north.

We may be pleasantly surprised by the activity that runs through to Christmas, though I would still encourage serious sellers to be on the market in November. Meanwhile, good land is becoming increasingly rare, with transaction volumes falling as availability irons things out. Units are starting to pick up, though not at the same pace – expect to see changes as Queensland along with our region opens up.