Northern Queensland is synonymous with rainforests, reefs and rugby. But although you won’t see it mentioned on any tourist brochures, the region is now also becoming recognised for another trait – rental shortages.
Northern Queensland is synonymous with rainforests, reefs and rugby.
But although you won’t see it mentioned on any tourist brochures, the region is now also becoming recognised for another trait – rental shortages.
As pressure mounts on locals seeking accommodation in cities such as Cairns and Townsville, with vacancy rates of 0.6 and 0.8 per cent respectively, investors from within and outside Queensland are pouring into the market.
They are being lured by rental yields of up to 6.5 per cent, coupled with the relative affordability of quality properties compared to prices in the state capitals and major southeast Australian regional centres.
Often regarded as the unofficial capital of northern Queensland, Townsville is home to more than 180,000 people, with a young population that is growing steadily.
Todd Pearce, principal of real estate business Page and Pearce, said the younger demographic was finding it increasingly difficult to buy or rent in the regional city because of reduced listings and an influx of investors.
“Our office has seen an increase of 200 per cent for the July-Sept quarter compared to the corresponding period last year and we believe investors are seeing great value in regional areas for return on their investment,” Mr Pearce said.
“The investors we are seeing are from interstate and intrastate, which is forcing first home buyers to make prompter decisions to purchase rather than take their time.
“Clients are experiencing difficulty in finding properties advertised under $320,000 within a 10 kilometre radius of the CBD/The Strand precinct, making it a tough market for those trying to get a foot on the property ladder.”
The region has appeal to those looking for a cheaper entry point into the investment market. Brisbane’s average price of $800,000 is far more daunting than Townsville’s, where $350,000 to $400,000 will buy a decent-sized family home.
Real estate agents in the area report investors being so desperate to secure a property, they were making an offer despite not setting foot in the state.
Estimates from agents suggest anywhere up to 60 per cent of buyers were from New South Wales or Victoria, with technology providing prospective owners with a good look at their intended purchases.
The price increases in Townsville are only beginning to compensate longer-term owners who experienced an extended falling market from from 2012 until the end of 2020, with values stalling until a year ago.
Since then, Mr Pearce said they’d seen an increase in sales volume of around 30 per cent and seen stock levels drop by a quarter.
“We now see potential growth for the entire Townsville region, which is at the start of a rising market and is providing abundant opportunity to buy in our region before we get to the peak.
“We expect available stock levels to continue to fall, with 2,188 properties for sale in the Townsville region compared to around 3,000 this time last year,” he said, adding that average days on market for his office’s properties had more than halved in a year to 49 days.
He said high building costs, especially in steel and timber supplies over the past six to 12 months, had led to a high level of enquiries from buyers looking at the established property market.
About 350 kilometres up the Bruce Highway, Cairns is a major tourist hub and regional commercial centre that is home to just over 150,000 people.
Real Estate Institute of Queensland (REIQ) revealed Cairns saw its already tight 1.2 per cent vacancy rate of February 2021 fall to 0.6 per cent by September this year.
According to Urbex Realty General Manager, Craig Covacich, the rental crisis in Cairns has created an unprecedented incentive for southern investors to redirect their investment portfolio and build new for rent in the city.
“The Cairns market is hungry for good quality rental occupancies but the options are not keeping up with the demand,” Mr Covacich said.
“The market is at a historic low, so there is a fundamental investment opportunity on the cards for buyers to build brand new quality homes for immediate rent.
“The vacancy rate has continued to drop significantly since March 2020, with rental rates increasing by six per cent, which has made it extremely difficult for prospective tenants to find a new home.
“One of our core shifts is looking at how we can create solutions to meet this demand with the land available within proximity of the city’s CBD.”
Urbex sales consultant Leigh Martin said land prices started at $235,000 for a large 764 square metre lot, up to $250,000 for 834 square metres.
“This option gives buyers the versatility to build an investment portfolio that will see good return, whether it is a two storey or a single,” she said.
“The rental appraisals we’ve seen for a two-storey home came in at $800 per week, with a gross rental yield of 5.3 per cent.”
Real Estate Institute of Queensland Far North Queensland zone chair Tom Quaid has said the rental market in Cairns was “approaching a crisis point”.
“The only real solution is the introduction of new supply, and that’s going to take government support to both encourage a more orderly release of land and provide incentives for people to invest in residential property, particularly when catering for the lower end of the market which has been priced out of the majority of homes,” he said.
In nearby tourist haven Port Douglas, the situation was not as dire for renters but supply was still low. There are 45 properties listed for rent in Port Douglas starting as low as $235 per week.
The average weekly rental fee for two-bedroom units is around $380 – $420 per week and four-bedroom houses are currently renting for $550 – $600 per week.