However trading conditions for many businesses are still tough with retail, service and construction industries remaining weak. Cairns lags the recovery that is now evident in many other parts of Australia. Soft economic conditions are likely to prevail for the remainder of this year due to the gradual pace of recovery, but things are certainly a lot better this year than last.

Despite the economic situation, the Cairns property market has been showing a good degree of resilience. However little change has been experienced in the market in the first half of 2010, and furthermore, the market appears to be diverging into two parts with reasonably solid demand for well located, quality properties, but weaker demand for secondary properties and/or locations. A continuation of flat to slow growth property prices is expected for at least the remainder of this year. Interest rate rises are being viewed as too much too soon while the local market is still finding its feet.

Of longer term concern is the slowdown in residential development. New house approvals are down to an average of about 50 per month – compared to a long term average requirement of about 100 per month – and new private unit development is at a virtual standstill. This suggests that once the market does start to move, there is the real possibility of supply shortages until such time as construction, especially unit construction, can be switched on again.

Source: Herron Todd White