Friday, June 14, 2013

Will momentum restart the property clock?

A post today at the RP Data blog on regional property market performance: Largest falls and greatest gains in property values around the country.  Far North units have barely managed to escape the bottom slot for the largest decline from the market peak.

Where's the pain

However, Far North houses have been more resilient and escaped the list altogether. This also appears consistent with the comparative performance between the two sectors based on median prices in the HTW Cairnswatch report. The RP-Rismark data is based on their more sophisticated hedonic index.

Regional unit markets along the Queensland coast stand out among the hardest hit with RP Data commenting:

  • Unit dwellings within the lifestyle regions generally show a larger proportion of investor owners and holiday home / second home owners.  In times of financial distress, the investment property or second home will often be the first to be divested.  A large number of properties were added to the market in these areas at a time when buyer demand was virtually non existent.
  • Additionally, unit dwellings within these markets are often more reliant on short term holiday rentals or long term rental demand from service workers associated with the tourism and retail sectors, both of which have shown weakness post GFC.
  • These markets were prime beneficiaries of the ‘sea change’ phenomenon where retirees or prospective retirees were driving migration and housing demand in these locations.  I would expect that this trend (and hence housing demand) has slowed substantially as many retirees and prospective retirees look to rebuild their wealth post GFC before embarking on their sea change.
  • There’s also the fact that most of these markets recorded a strong run up in values pre-2008 and were arguably overvalued.

  • There has been a more optimistic tone recently to property market commentary around Cairns and  Port Douglas. The Cairns Post has typically been trying to drum up business for advertisers and there was also a positive report yesterday from property analyst Terry Ryder.

    While the outlook is more positive the HTW Cairnswatch property clock for Cairns residential remains at the bottom of the cycle where it has now been for some years. In real terms it is a long way back up for strata unit owners and investors.

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