The advent of the Carbon Tax, increases in utility prices, increases in body corporate levies, increases in stamp duty charges and skyrocketing insurance charges, all seem to be causing buyer concern. Demand from investors and first home buyers has been very weak and the market for bottom end houses and units and tourist orientated property has performed poorly. Demand for better quality property in good locations is comparatively good.

The Cairns median house price stood at $345,000 in September 2011, down 7% on the $370,000 median house price recorded in September 2010. However property price movements have not been uniform, with property prices typically holding or only mildly reducing in the CBD and adjacent areas, but declining during the last twelve months by up to 10% in many of the outer suburbs.

Difficulties in the market were compounded by two major developers collapsing during the course of the year, these being unit developer Glencorp and land developer CEC, and their stock being sold off under receivership. Though the volume of receiver and mortgagee stock has become a reasonably large force in the market, we do not regard such stock as flooding the market and depressing prices. Instead in our opinion receiver stock is being progressively sold off in a relatively orderly fashion. For instance over the past two years all of the former Hedley Group stock, involving approximately 170 units in total, has been sold off at only relatively minor discounts to their former asking prices.

Vacancy rates in the rental market have moved back during 2011 from the over-supply situation that was previously evident, to sit within the ‘balanced market’ range normally accepted as a 3% to 5% vacancy rate. However rental vacancy rates have tended to increase over the last six months, symptomatic of softer population growth, though with considerable divergence between houses and units. Nevertheless the market generally is expected to come under pressure as time progresses because of the lack of new private rental housing development, particularly for new unit development, and the slow state of the investment property market. The trend vacancy rate for houses stood at 2.5% during October 2011, while units recorded a trend vacancy rate of 4.5%. The overall market vacancy rate stood at 3.5%.

Source: Herron Todd White