CAIRNS PROPERTY REPORT 2017 - MCCARTHY GROUP
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A Property Investor’s Guide | 2017
Cairns
Property Report
2017
A special report on...
Introduction by
Stephen McCarthy
Cairns
By Colin Dwyer
CEO McCarthy Group
Welcome to our investor update on Cairns. This is the The Cairns economy is positioned well to reap the benefits
third in our series of 2017 research reports specially of emerging Asian tourism. The key factors influencing
commissioned for our McCarthy Group clients. With the Cairns economy are the lower Australian dollar and
tourism one of its key industries, Cairns suffered a the infrastructure needed to attract tourists to the city and
setback immediately post-GFC. Fortunately, the area region. A lower Australian dollar makes it cheaper for
has been on a slow but steady road to recovery and foreign tourists to visit Australia and more expensive for
growth, and according to the respected Cairns Watch local residents to travel overseas.
report (produced monthly by Herron Todd White),
Cairns International Airport is a quality piece of
“Cairns overall slowly continues to improve”.
infrastructure in the city’s infrastructure portfolio. The
Cairns is a large, tropical city located almost 1,700 international airport allows local produce to be flown fresh
kilometres from the state capital Brisbane. It is all over the world. International and domestic tourists make
surrounded by world heritage listed assets including this airport the seventh busiest in Australia and the resultant
the Great Barrier Reef and Tropical Rainforests. accommodation demand and retail expenditure boosts
Cairns is a large busy city with significant economic demand for residential and commercial property.
and environmental assets and a growing population.
Cairns is an economic powerhouse of the north with links
Confidence in the local property market is emerging.
to domestic and international mining operations and large
This special report is authored by Colin Dwyer, a agricultural operations. Regular rainfall helps Cairns present
respected economist, and the goal is to give you an itself as a lush, lifestyle location with specialised industrial
independent assessment of the short to medium outlook advantages. The residential vacancy rate is the tightest in
of this key market. Colin is widely regarded as a leading North Queensland (2.5%) and gross rental yields
economist and social commentator by business, the are encouraging.
media and the broader community. We hope it will give
The Cairns residential property market can be described
you fresh insight into the economic and other factors
using production, population, potential growth and
at work in Cairns and give you confidence in the area
comparative price information.
whether you are already a Cairns investor or simply
considering your next investment moves.
Find out more
Production Potential in Projects
Cairns specialises in Tourism, Accommodation Services, Cairns' proximity to the Asian Pacific market is also of Potential in Cairns’ property assets, at current prices, is In addition, sales in the $550 million Nova City
Transport, Construction and Agriculture. Recent data reveals considerable value, supported by the accessibility to an solid. If identified projects realise their full potential they development by World Class Land, a subsidiary of
that Cairns has 38% more workers in Accommodation and international airport for fresh produce export, including are likely to boost economic activity, drive confidence in Singaporean listed company Aspial, have now been
Food Services than the state average. Cairns also has over seafood and tropical fruit. The Cairns region has also grown property, improve the vacancy rate, increase household launched. These developments may be the catalyst the
11.9% of its workforce in the Retail Industry, 11% above the into a major supply and service hub for the resources sector, incomes and improve the ability to afford rental and owner Cairns economy and Cairns property market needs to
state average. with noticeable experience across Australia, including occupier homes. overcome the announcement fatigue created by the
Papua New Guinea and Indonesia. numerous other projects that have not managed to get out
If we look to the recent past, Cairns and the wider region The projects range from various Mining developments to of the ground over the past few years. If successful they
produced around $12 billion. Current official forecasts According to Dransfield consultants, Cairns was the major Tourism developments. Plans have recently been will inject much needed confidence into the city.
indicate that most of the commodities that the Cairns region top-performing hotel market in Australia last year with announced by Syrian billionaire Ghassan Aboud to invest
specialises in will perform solidly in 2017. occupancy rates rising to nearly 70 per cent, and room $200 million to redevelop the Rydges Tradewinds Hotel on
rates rising almost six per cent. This resulted in revenue
the Cairns waterfront and to build a new 200-room hotel at
Cairns region specialises in Sugar Production. Agricultural per available room growth of more than 11 per cent.
the corner of Lake and Aplin Streets in the CBD.
and Resource Economics recently forecast a 20% increase
in sugar prices over 2017 due to the significant depletion of
world sugar stocks. Interestingly, the moderate increase
did you know...
in Cairns property prices in the early 1990’s was
complemented by solid increases in Agricultural income.
Solid increases in Agricultural incomes can lead to
increased investment in property in the Cairns and North
Queensland economy. The Cairns region is home to the
world's longest, single day mail
run. The mail run spans 1450km
and takes over 9 hours with 10
stops flying between Cairns and
Cape York.
Population
Cairns is the second largest city in North Australia. Over
the ten year period from 2005 to 2015, Cairns LGA (Local
Government Area) grew faster than the state and nation
with average growth of 2.3%. The most recent official CAIRNS FORECAST POPULATION
population estimates indicate Cairns has 160,285 residents.
250,000
Official projections over the next 20 years suggest that
Cairns will achieve average growth of 1.7% per annum, 227,542
230,000
leading to an expected population of 227,542. This is an
CAIRNS REGIONAL PROJECTS, VALUE AND JOB CREATION POTENTIAL 2017–2020
increase of over 65,000 new residents. With an average
of around 2.7 people per house, and given other factors 210,000
Project Location Product Start Value $m Workforce
such as rental vacancy rates and steady supply, we expect
Population
around 25,000 new dwellings will be required in Cairns Bauxite Hill Weipa Bauxite 2017 2000 70
190,000
over the next twenty years. Sugar Prices NQ Sugar 2017
Airport Expansion Cairns Construction 2017-18 1000 1000
170,000
Performing Arts Centre CBD Construction 2017 50 100
Bruce Highway Upgrade South of Cairns Construction 2017 464 500
160,285 residents
150,000
Cairns has Chillagoe Mining Chillagoe Zinc 2017 100 1000
130,000
3,614* 2,670 *
with an average growth of 2.3% 2011 2016 2021 2026 2031 2036 Table 1: Cairns Regional Projects, Value and Job Creation Potential 2017-2020 Source QLD Government, Department of Infrastructure
*Estimated by DS Economics
Source QGS, ABS
2 3
Historical Trends Comparative Affordability
In the past 30 years Cairns’ median priced houses have Over the past five years Cairns’ capital appreciation has Cairns is a great place to live with a relaxed reputation. Housing is considerably cheaper in Cairns than our major
grown 6.5 fold. Along the journey there have been booms been smaller than Sydney’s and Brisbane’s, at just 10%. Housing affordability data released by International capital cities, offering a distinct advantage when attracting
and busts. There have been two booms in Cairns in the past This comparative price difference in the past has proven researchers, Demographia, reveals that Cairns has the new workers. There are several leading economic variables
30 years. One occurred in the early 1990’s and the other to be an eventual positive for most North Queensland 32nd most affordable housing (out of 51 cities) in Australia. such as a softer exchange rate and comparative house
in the mid 2000’s. Each had a different intensity. On each cities. Both property booms mentioned above have been affordability that are providing confidence in the Cairns
occasion these booms have been influenced by tourism influenced by this comparative price differential between Cairns median house prices are $110,000 cheaper property market.
and, to a lesser extent, mining upturns complemented by Sydney and Brisbane. than Brisbane’s, $210,000 cheaper than Melbourne’s
strong job creation, but also the difference in comparative and $480,000 cheaper than the median price of
property prices between larger cities. The current median house price difference between Sydney’s houses.
Cairns and Sydney is high, but some of the potential has
Cairns' median house prices
After each of these booms there were economic downturns been absorbed as the exchange rate dropped. There is still
driven primarily by an appreciating dollar but also linked
to drop offs in projects. These downturns have been
characterised by higher vacancy rates, job losses, negative
comparative value in Cairns especially given comparative
price value, multiple local projects, population growth and
job creation.
did you know... $110k< $210k< $480k<
net migration and recoveries. The Great Barrier Reef is one of Brisbane Melbourne Sydney
There is a strong link between Sydney house prices and
Cairns is a growing regional city with a desirable lifestyle.
Housing is considerably more affordable in Cairns than the Seven Natural Wonders of
Cairns house prices, although the delay period can be most other cities in Australia. the World.
years. The Sydney to Cairns price ratio (2.19) is currently
well below long run averages. This means Cairns’ house
prices are less than half those in Sydney. This price
Cairns' median house
x6.5
difference has been evident in previous booms, and it
sometimes leads to a ripple effect. The ripple effect is prices have grown:
where comparative price differences, in part, encourage
investors to buy property in those cities that show better
value than the epicentre of a boom. 10 20 30
years
CAIRNS MEDIAN HOUSE PRICE 1986-2016
$450,000
$400,000
$400,000
$350,000
Median House Price
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Jan-80
Jan-85
Jan-90
Jan-95
Jan-00
Jan-05
Jan-10
Jan-15
Jan-20
Source Corelogic, DNRM
4 5
Houses Land
Cairns’ median house prices are performing better than
other regional centres in North Queensland, although
did you know... Land sales were steady in Cairns for the year to September
2016 with 45 sales occurring, with a median value of
did you know...
there’s been a drop of 1.3% in median values for the year
to September 2016. Reduced confidence in the revised
Cairns was founded in 1876 and $215,000, a rise of 3% for the year.
The Cairns region is a world
named after the Governor of renowned tourist destination
Aquis project, lower population growth driven by negative
net migration and lower demand for houses helped cool
the median price.
Queensland, William Wellington Rentals thanks to the Great Barrier Reef
Cairns. Today it is the 5th Recent data supports the notion that Cairns is a tightening
Marine Park, the Daintree and
The suburbs of Redlynch, Mount Sheridan, Edmonton and
Trinity Beach were the most preferred suburbs, accounting
largest city in Queensland with renters market. The vacancy rate is a firm 2.5% and steady. Wet Tropics Rainforests,
for 106 sales or about a third of demand. The average a population of 160,000, and This is the tightest in North Queensland. Average three and its fabulous tropical climate
annual price performance in each of these suburbs was growing fast. bedroom houses achieve $360 per week. Gross rental
yields for houses are 4.7% and units obtain 6.4%. This and environment.
positive or no net loss. Over the past five years Cairns’
compares very favourably to most other regional centres in
median house prices increased by 10% and most of the
Queensland and outperforms Brisbane.
underlying demand generated from the hype about Aquis
and improved tourist numbers has been absorbed.
Units
Cairns has one of the largest shares of units in its overall
property composition. The median price for units in Cairns
improved 4.4% over the year to September 2016. There
were 270 unit sales, and 25 sales for the September quarter
2016. The annual average performance is reflected in
the improvement in tourist demand for accommodation.
With significant comparative price differences, we expect
median prices to steady in Cairns over 2017-18.
Sources Core logic
REIQ Market Monitor September 2016 Demographia
ABS 3218.0 http://www.afr.com/real-estate/commercial/hotels-and-leisure/syrian-
6 Queensland Government Statisticians Office Regional Profiles Cairns LGA billionaire-ghassan-aboud-snaps-up-cairns-hotel-project-20170131-gu2sr7 7
Conclusion
The softer exchange rate is positive news for the Cairns property
market, economy and general confidence. We expect domestic Cairns
and international tourists to continue to increase visiting Cairns
Townsville
in 2017, subsequently creating direct and indirect jobs in an
Queensland The Whitsundays
assertive economy. International student numbers will continue to
improve with a favourable exchange rate and improve demand for
student style accommodation. We also suspect that the potential Brisbane
comparative price differential correction between Cairns and
capital cities (ripple effect) has not yet arrived.
Disclaimer
While we have made every attempt to ensure that the information contained in this report has been obtained from reliable sources, DS Economics or Colin Dwyer is not
responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of
completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to
warranties of performance, merchantability and fitness for a particular purpose. In no event will DS Economics, its related partnerships or corporations, or the partners, agents or
employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or for any consequential, special or similar
damages, even if advised of the possibility of such damages.
What now? Any questions?
Email us at info@mccarthygroup.com.au
or call 1300 850 318
mccarthygroup.com.au
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