Wednesday, August 17, 2011

rental vacancy and dwelling approvals

The Cairns Post has reported on a rental property squeeze in Cairns with declining vacancy rates. Care must always be taken with real estate reports at the Post as they tend to include advertorial content for their real estate advertiser base. However, the following comment did draw some attention:
Tightening rental vacancies, a slump in building approvals in the past 18 months and wary southern investors has left Cairns agents searching for rental properties, in particular, houses.
Building approvals may have slumped, however the seminar presentation last month from OESR seemed to indicate there was still a substantial overhang in the pipeline of approved lots. The presentation on 'Residential development trends in the Cairns and Far North region' has not been posted online and I have sent a query to OESR on this.

My hardcopy of the presentation with vaguely decipherable notes and diminishing recollection shows 'lots within the pipeline' to have declined from the peak in 2008 (7,000) but still around the same level as 2006 (6,000). OESR break up the 'pipeline' into "approvals", "production" (operational works approved, showing serious intent to proceed including Council charges etc), registration. Lots classified in the production phase are similar to the peak in 2008 and actually increased in 2010 from the previous year as new approvals slumped.

I am hardly an expert on the development process but recall the presenter did comment on the previous boom in approvals creating a supply overhang, and whether these would be rolled over by Council in time as they expire? Who knows how many of those approved lots are now locked up with receivers at CEC and Glencorp?

As previously posted a recent study showed CRC had the third highest rate of approvals in Queensland (behind the Gold and Sunshine Coasts?). Council did provide incentives recently to try to progress the approvals process to development.

The post report also refers to rental demand "for four bedroom houses or units seaside of Sheridan St." Even if funding for development was available, the current strata insurance crisis would make any significant unit development in that area difficult for an investor to justify.

Note: From a much lower base the strongest region was Tablelands with lots in the pipeline more than double 2006.

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