Report blames market oversupply as investors stung

Rental yields tumbling

VACANCY rates have increased and rents have fallen at Townsville as an oversupplied market threatens to hit investor returns, according to property consultants Herron Todd White.

In its latest quarterly Townsville in Focus report, the firm said the market has turned from tight to oversupplied in just 12 months.

“Rental vacancy rates in the Townsville market have been steadily increasing as a result of weak demand in conjunction with a large expansion of new rental supply taking advantage of the National Rental Affordability Scheme,” the report said.

“In doing so, the market has swung from a tight to an oversupplied market in the space of just 12 months.” The report says the increase rental vacancies has been

in most noticeable for units, hitting 6.7 per cent in April, down from more than 8 per cent in February.

For houses, the latest cancy rate is 4.5 per cent.

The report says the higher vacancy rates have removed all vestiges of upwards pressure on rents.

Median house rents dropped $ 5 to $ 360 a week in the year to March, while unit rents fell $ 15 to $ 300 a week.

Herron Todd White said it

va- is also seeing increased use of incentives such as competition and rent- free periods to make properties more appealing to potential tenants.

“We continue to be concerned about the amount of forthcoming unit stock of which a large proportion will end up in an already oversupplied unit rental market and potentially impact on the investors’ return on equity equation,” the report said.

On the residential

sales market, the report said recovery is proceeding but very slowly.

It says there have been some “price pulses” in innerbeachside and near- city areas but that the “mortgage belt” remains very much a buyer’s market and where price movement has been minimal.

The median house price was $ 355,000 in March, 2 per cent below a year earlier and 6.1 per cent below the peak of December 2009.

The report said Townsville’s commercial and industrial markets are, at best, biding time.

“There is an air of expectation about the market but it is by no means translating into action,” the report said.

“We would normally expect the commercial and industrial markets to follow the capital city markets, where improvements are now under way, but the ripple effects are not yet flowing through and the market remains slow.”