Saturday, May 31, 2014

Parrot droppings #n-squared

"Building approvals, tourism figures, unemployment rate, real estate market, private sector investment...all much stronger now than at any point of the past five years ....." - Gavin King, Member for Cairns.

Conus has also run a ruler over the above claims :Gavin King Fact Check

Thursday, May 29, 2014

Land valuation weirdnesses revisited

A positive report at the Cairns Post this week on development proposals for Cairns including what would appear to be a very high density unit development: Deputy Mayor outlines spate of new projects for Cairns CBD

Singapore’s Aspial Corporation’s $200 million project involving seven towers (six residential and one commercial, with 1500 units) in Spence St behind the police station and courthouse.
Aspial Corporation bought the 24,109sq m Spence St property for $18.9 million this year.
At the time the company said it was planning a “mega-integrated development’’.
Chief executive Koh Wee Seng said the land would be used for a mega-integrated development with about 111,520sq m of residential units and offices.

This is the vacant land opposite Cairns Central on Spence St which had been subject to development proposals from HS Vision as far back as 2007 with their most recent proposal including a Woolworths: Singapore corporation buys vacant land in Cairns CBD for more than $18 million after HS Vision receivership. Aspial have been very active in Australia recently including a high profile acquisition at Melbourne's Southbank

However with property valuations still freely available from the V-G including the excellent Globe system which operates via Google Earth I found the official land valuation rather interesting:

81-83 SPENCE ST, CAIRNS CITY QLD 4870408112942.411 HA
SV $1,000,000 SV $1,000,000

This is an extreme difference between the land valuation and this recent transaction for what is vacant land supposedly equivalent to the V-G valuation. Also anomalous with surrounding valuations. The adjacent unit blocks on Spence carry a land value of $653 per m2. Across Spence St Cairns Central is $360 per m2 for 9.429ha. Other side of the rail tracks a 1.4ha block is $187 per m2. The 2.41 ha of this land is valued at just $41 per m2 while the buyer has paid more than $700 per m2. Perhaps they have left out a zero or something?

All these blocks are in close adjacent proximity and subject to the exact same land use zoning and building height code (P2=30m). Perhaps there is some historical reason or characteristic of the land otherwise these variations don't appear to make sense on my understanding of the principles of land valuation?

Note: The land tax estimator at the office of State Revenue provides the following numbers:

Land value          Land tax
$  1,000,000        $  12,500
$18,000,000        $335,000

Somebody tell Mr Strongchoices!

Council Links: Planning for Districts; Overlay Codes; Building Height Overlay
Valuer-General: About statutory land valuations in Queensland

Previous post: Valuation weirdnesses and Yorkeys Knob

Tuesday, May 27, 2014

The emerging Chinese tourism deficit

Aquis approval has moved closer as the expressions of interest for a regional casino licence are reduced to just the two: Cairns, Gold Coast key contenders for new casino licences

This seems to be yet another change of gear as the process moves again onto a faster track. While still subject to such as planning, gaming and environmental approvals it's difficult to see anything standing in the way from here even if there are any valid concerns. The politics and PR remain well ahead of any process.

This reminded me of an intended post on a recent research note I stumbled upon from Macquarie. I have posted recently on the Australian tourism deficit in departures and arrivals related to the $AUD. Macquarie have looked at the emerging tourism deficit in China in the context of their current account:

Although there were several reasons why China’s current account surplus for 1Q14 deteriorated to only US$7bn, one of the key drivers was rising tourism deficit, up from US$18bn to US$24bn. Until 2010, China’s net tourism contribution was relatively minor (and mostly positive). Over the last two years, there was an explosion of deficits, driven by stagnant arrivals, significant expansion of departures (particularly outside “near abroad” – i.e. ex HKG, Macao and Taiwan) as well as rising spending per trip.

There are some assumptions in here of course related to arrivals, departures and spending etc .  Also the 'near abroad' currently comprise a significant proportion but could almost be classified as domestic (with apologies to the Free Taiwan movement). The proportion travelling beyond 'near abroad' has been rising and this trend is forecast to continue.

The potential for inbound tourism growth to China may be more limited and it is not a sector where China is exhibiting rising competitiveness based on the Travel & Tourism Report 2013 from the World Economic Forum.

Perhaps mercantilist tendencies may provoke a response here from the comrades. The growth of Macau has been based on its exclusive gambling franchise in Greater China. A casino (integrated resort) or two in Shanghai perhaps, or Hainan?

Monday, May 26, 2014

Someone give that Judge a Knighthood

A court decision last month has thrown a spanner into the budgeting works of many Queensland councils with differential rating between investors and owner occupiers disallowed: Rates challenge hits council budgets; Councils face huge rates refundsQueenslander tells councils 'they're dreaming'
Budgets about to be handed down in 20 of Queensland’s biggest councils face disarray with a court challenge over their rates policies unlikely to be heard before Christmas.
Queensland Local Government Association this week launched action in the Court of Appeal after the Supreme Court found in April it was illegal for a council to charge investors higher rates than owner-occupiers.
That has become a standard policy in 20 of Queensland’s largest councils.

I previously posted on this last year and fully support the decision: Why should owner occupiers get cheaper council rates?

There is no rationale that stacks up beyond the self-interested politics of being able to vote yourself a benefit for owner occupiers to receive a concessional rate at the local government level.  To our credit Cairns is one of the few large councils not to have differentially rated on this basis, perhaps reflecting our higher proportion of investors and renters.

It has been proposed at times by interest groups and also I believe a few years ago by a councillor with some political profile who is seldom known to let anything rational interfere with a populist policy proposal.

It is interesting that the legal challenge came out of Mackay where rents have been declining for investors as the mining boom recedes at the same time as council decided to hit them with this differential form of rating. What a convenient political confluence of circumstances for Mackay Council, with cheaper rates for owner occupiers and falling rents for renters, now brung unstuck.

A renter is unlikely to be highly aware of council rates unlike an owner occupier where it is likely a key issue at election time. Perhaps renters should be issued with a notice of the rates component implicit in their rent to be able to make a more informed decision?

Meanwhile the Supreme Court Justice who made the decision is now my legal hero for a day!

Arise Justice Sir Duncan McMeekin AK?

Links: Some related thoughts from Catherine Cashmore on housing including how owners are valued over renters.

Thursday, May 22, 2014

April Airport Anomalies

Cairns Airport posted their April traffic numbers today with continuation of the growth trend at the domestic terminal reported while the international remains weak.  An alternative source of information is 24.6% stakeholder Auckland International Airport (ASX: AIA) which reported April traffic data yesterday to the ASX with some differences in the numbers:

Source: Auckland International Airport
The Cairns Airport numbers in this summary table are rounded but they do also provide more precise figures however some differences here are beyond that. I have previously struggled with some aspects of the Cairns Airport reporting related to domestic passengers through the international terminal and presume this may be a source of the difference?
Anyway, Cairns Airport has provided more detailed commentary this month some of which does relate to that issue:
Total passenger numbers for Cairns Airport grew by almost 2% during April despite the impacts of Cyclone Ita which prevailed for 2-3 days of that month.
Domestic passenger numbers showed strong growth, continuing the trend which saw Cairns Airport achieve the fastest domestic growth of Australia’s 8 busiest airports during 2013. Highlights for domestic services included the introduction of Tigerair’s Brisbane – Cairns route in mid April and additional seasonal flights on their Melbourne – Cairns route. Jetstar transferred their Darwin – Cairns service from a T1 (international) to a T2 (domestic) operation.
International passenger numbers continue to be impacted by the contraction of China Eastern’s Shanghai – Cairns route to a seasonal service as well as the move to four Hong-Kong - Cairns direct flights per week, lower capacity on Air Nuigini’s Port Moresby service and the change of terminal for the Darwin – Cairns flights.
An average of 25% of passengers travelling through Cairns Airports’ domestic terminal (T2) are international visitors. This reinforces the case for more direct international flights to and from Cairns. The Cairns Airport aeronautical development team are continually working with airlines, government, tourism and travel industry partners to secure air services from China and throughout South East Asia to convert some of these passengers to the Cairns international route network and provide more aviation access to help grow international visitor numbers for the region.

Note: The AIA numbers copied above also include Queenstown which may be an interesting comparison with Cairns and where international growth has been above 20%. I presume that would overwhelmingly be from Australia. AIA also reported strong April growth in numbers across the Tasman into the Auckland facility, again attributed to the later Easter. 
Update: Nick Dalton has two days later in the Weekend Post: Overseas passenger numbers plunge at Cairns Airport in April due to Tropical Cyclone Ita. This yarn nicely rewrites the summary from the airport posted above but there is something curious about the numbers:
Passenger figures fell by more than 12,000 to 29,290, a 29.2 per cent fall, compared to 41,391 in April last year.
Yes, these are the numbers released to ASX by Auckland International Airport posted above and not the numbers from Cairns Airport. A visit from the News Ltd server was noted at 11:07:23 yesterday morning.

Tuesday, May 20, 2014

$7 million compensation paid to clients of Cairns financial planner

The Australian Securities & Investments Commission (ASIC) announced on Friday the imposition of licence conditions to force the Commonwealth Bank to reopen the compensation process related to inappropriate advice from two financial planning divisions. The Sydney Morning Herald / The Age (Fairfax) has reported that $7 million has to date been paid to clients of a Cairns financial planner: CBA told to reopen compensation for advice victims.
Commonwealth Bank has been forced to reopen its compensation process for victims of shoddy financial advice provided by two of its planning businesses.
More than 4000 customers of Commonwealth Financial Planning (CFPL) and Financial Wisdom will now be able to apply for compensation under new licence conditions imposed by corporate watchdog the Australian Securities and Investments Commission.
The decision comes after a joint Fairfax Media and Four Corners investigation into the two groups revealed that compensation payments to customers of planners in both divisions were not given the same treatment. 
ASIC has also admitted giving inaccurate testimony to a Senate inquiry into its performance over the financial planning scandal.
In a statement, ASIC blamed the bank for leading it to mislead the Senate, saying it sourced its information from CFPL's submission.
The CBA said that on Friday it gave the senate committee ''additional clarity on its submissions''.
The bank previously told the inquiry that compensation of $51 million was paid to victims but failed to make it clear that, in addition to CFPL customers, that number also included $7 million paid to customers of Financial Wisdom planner Rollo Sherriff.

This is quite significant action from ASIC and one would think the Cairns Post would report at least something of this as a matter of community interest, but apparently not? Previous reports by Fairfax:

Rollo Sherriff and Meridien Wealth: How a rock-solid institution backed impenitent maverick;
ASIC to feel heat over 'star' financial planner;
CBA facing $200 million class action;

Meridian Wealth in Cairns was also previously known as Irwin & Sherriff Investorcoach prior to 2005.

Friday, May 16, 2014

Airport numbers, and freight

I had hoped that Cairns Airport would have updated their traffic stats for April by now but it looks like this will have to wait until next week. There were some interesting reports this weeks from the key capital city airports on April traffic: Melbourne trumps Sydney, Brisbane for airport traffic growth

Melbourne achieved 16 per cent growth in international passengers in April, which was well above the 6.6 per cent growth reported by Sydney Airport, albeit from a larger base. Brisbane Airport reported robust 11 per cent growth in international passengers.
In the domestic stakes, Brisbane Airport was in first place with a year on year increase of 3.9 per cent due in part to new flights from Tigerair Australia, followed closely by Melbourne with 3.2 per cent growth. Sydney Airport's domestic traffic grew by a slim 0.3 per cent.
Interesting point here: Growth in all three is being driven by international rather than domestic which is the opposite of Cairns Airport. Also of interest that they are reporting strong April numbers attributed to the later Easter coincident with school holidays which has recently been suggested at Conus for the volatile ABS stats in March.

A previous query to Cairns Airport suggested Airport Traffic Data from the Department of Infrastructure and Regional Development as an alternative source of statistics. I gather this is sourced directly from the airlines rather than through the airports so may vary while being consistent.

Cairns Airport has made much recently of the potential of air freight and the DIRD data does actually provide annual freight numbers here back to 1985 (tonnes):

This pretty much correlates with the number of international flights also from DIRD. Note: coincidentally flight movements and tonnes can be easily graphed on the same scale!

I will await with interest the Cairns Airport numbers for April. Also noted at my last post from Reef Casino was that direct flight from China Eastern had already gone into seasonal hiatus? Apart from that we should expect generally good numbers in April going by the results from the capital city airports.

Reef Casino trading update subdued

The Reef Casino AGM this week will most likely be the last as reported at the Cairns Post: Cairns Reef Hotel Casino sale now odds-on. Acceptances for the takeover by Aquis are actually proceeding quite slowly after almost two months and now stand at 77% with 90% required for compulsory acquisition of the remainder. This isn't a surprise as holders wont get paid anyway until all the approvals are completed and the offer becomes unconditional. This may take some months yet.

However most interesting was actually the trading update for the first four months of the year which was rather subdued with softer visitations reported.

Update for 1st 4 months 2014 and brief outlook

The rentals paid to the Trust for the first 4 months were 3.2% above last year. Another excellent Chinese New Year and growth in electronic gaming revenues has countered the impact of softer visitations. Costs remained under control.

Electronic gaming:  With a reduction in government red tape including a reintroduction of $50 and $100 note acceptors for slots machines and a planned introduction of “card based play” in addition to existing cash play, the outlook is positive.

Table games:  Chinese tourists to Australia continue to grow and Cairns remains a popular destination. Chinese New Year during January/February this year produced another excellent ‘busy’ season. Direct flights from Shanghai to Cairns have now been cancelled and along with the new travel legislation in China, could have a dampening impact on growth rate. Short term fluctuations in premium win rate are not unusual. Overall, the outlook is still slightly optimistic.

This updated report itself is not as informative as usual and appears even disinterested. Perhaps they are all just waiting around for the fat lady to sing in Vertigos Bar?

Thursday, May 15, 2014

Cairns employment: participation rate remains the killer

The monthly employment Keno numbers from the ABS are out, and actually mostly more benign than usual volatility for most of regional Queensland if anything, except the headline Cairns unemployment rate. A media hyperbole watch is issued with the headline unemployment rate for Cairns doing a typically volatile swan dive down to 7.2 % from 10.1% the previous month.

Note again that these regional numbers from the ABS are neither seasonally or trend adjusted and these raw numbers in Cairns should if anything be improving at this time of year. Note that both the seasonally adjusted and trend rates for Queensland from the ABS increased in April while the raw numbers fell.

However, the Conus seasonal and trend numbers do suggest at least stabilisation and possibly modest recovery: Big improvement in Cairns jobs data

The big statistical issue remains, as also suggested at Conus, the participation rate where the chart below is looking rather sad.


Wednesday, May 14, 2014

Your 2014 Budget Reader

Here are some links to Commonwaelth budget commentary. The only interesting aspect for FNQ really came from a few items and stray cash for strata insurance analysis of buildings and a website, to which I will return ..... one day!

For dedicated wonks: Budget 2014-15 Tables and Data

Superannuation and retirement guru Trish Power has gone in surprisingly hard with a blast: Adieu Mr Abbott: 10 super ways to lose the next election.

John Quiggin nothing surprising: Hockey's mean budget is full of contradictions; This budget is a clear victory for Australia's 1%

ACTU economist Matt Cowgill has a really good post I think on 'budget emergencies' and 'black holes': How Joe Hockey concocted a budget emergency

A cross-section of responses at the Conversation: Federal Budget 2014. This also includes a comment from Sinclair Davidson which is just as well because I otherwise can't find anything from the lunar libertarians at Catallaxy even worth a glance! As far as I can make out Sinclair is pissed off about the deficit levy.

Gene Tunny at Queensland Economy Watch: Good Budget strategy, but a mix of good and bad policy measures.

Veteran Ross Gittins at the SMH: Tough and unfair, it's business as usual

Steve Keen with some heterodoxicity: Why Clive Palmer speaks budget sense

Annabel Crabb with a perspective on some prominent conservative commentators: Whatever happened to 'without fear or favour'?

Monday, May 12, 2014

Poor response to regional strongchoices forum

This was the Twitter photo attachment today by Treasurer Tim for his "Strong Choices" forum in Townsville. Empty seats apparent. I registered online for the Cairns forum where I was advised there would be subsequent notification by email. Nothing.

Until subsequently an email the day before to which I didn't click respond so didn't link to the 'ticket'. Oh well, nothing missed.

 Embedded image permalink

Links: Failure of Strong Choices now obvious – missed chance to persuade on asset sales; "Strong Choices" backfires

Update: Guardian Australia has jumped on the bandwagon with an interactive feature to enable you to fix the national "budget emergency". I didn't have any problem coming up with a substantial surplus without any GP fee or deficit levy, although don't expect any of my measures to be in tonight's budget: Budget 2014: how would you cut Australia's deficit?

Sunday, May 11, 2014

Valuation weirdnesses & Yorkeys Knob

Belatedly today I sat down to pursue my long neglected campaign project of land valuations and strata council rates in Cairns. Which is when something interesting emerged at Yorkeys Knob.

The Valuer-General provides a general overview by suburb: Cairns Regional Suburb Tables. These are regional tables and the change in Yorkeys Knob was 0% which is a median. Overwhelmingly there was almost zero change in the Cairns region except for select suburbs which excluded Yorkeys Knob.

This may be interesting in itself as Yorkeys remained such a laggard on the median despite an announcement during the year of the massive Aquis proposal. When one looks beyond the median the valuations along the premium Sims Esplanade at Yorkeys actually plummeted by about 15% on the previous year! Why so?

Well this could be because Yorkeys missed out in the previous year when valuations fell by similar amounts in comparable locations such as Vasey Esplanade at Trinity Beach and Cairns Esplanade. So it could be catch up as Yorkeys doesn't seem to have copped the declines the previous year, but why?

Either this is evidence of a flawed valuation system (my preference) or some other abnormality? Are we really to believe that the Yorkeys beachfront alone in Cairns maintained valuations in the previous year and then did a big catch up (downwards) this year after a multi $billion proposal was announced?

Saturday, May 10, 2014

Queensland Master Builders maintain perfect record of wrong forecasts

The Queensland Master Builders survey of industry conditions for the March quarter passed me by when it was released last month. I previously took issue with some aspects of this regular quarterly survey which was posted now three months ago at Loose Change: Master Builders wage concerns not on the level?
Yep, on their index scale the forecasts are wildly wrong and consistently over-estimate by between 12.7 and 21.2, with an average of 16.2! On that basis the next conditions outcome is unlikely to exceed 48 or so rather than the 59.9 survey outcome? The slope of the upward curve could be telling indicator? It was extremely erect in September!

So it was pleasing to see in this latest survey that the actual result came out at 47.6 (residential) just below my forecast upper limit of 48, and way below the 59.9 forecast by the builders themselves for their own business.

However, to their credit this is actually the closest they have ever achieved to their forecast which is actually for the coming quarter presumably already commenced at the time of the survey for the recently completed quarter.

One would have thought it disturbing for most people that somebody could so easily forecast their own business more accurately than themselves? I remain of the opinion that the builders complete their responses to this survey down the pub on a Friday afternoon?

Friday, May 9, 2014

International arrivals & departures

The international arrivals and departures numbers for March from the ABS were out this week. Trend growth in short-term visitor arrivals continues, now 9.8% higher than in March 2013 according to the ABS summary. Also, growth from China now appears to be recovering from the downturn in 2H2013 around regulatory changes to package tours.

However, the more interesting story is probably around the slump this month in short-term departures by Australians which appears almost to be now rolling over in trend terms. Although there is also a suggestion of some seasonal variation around Easter so will keep a watch on the extent of any rebound next month:
Short Term Departures

The result is a further contraction in the 'Tourism Deficit' (arrivals - departures) which was subject of a recent post on tourism and the exchange rate.

Further links: Conus: International arrivals up, but departures fall; Macrobusiness: Tourism deficit improves on falling bogan exodus

Wednesday, May 7, 2014

Building approvals: Tully goes off!

The ABS released building approvals data for March this week. The numbers were weaker than expected for Queensland but more positive for FNQ without being outstanding: Building Approvals weak in QLD but the Far North bucks the trend.

The Conus Trend there stood at 52 for Cairns in March. Note also that the ABS data for Cairns LGA still includes Douglas.  With 3 months to go Cairns LGA has now gone past total approvals for FY2013. Down the road in Townsville the Conus Trend has been weakening and down to 121 although that remains a long way above Cairns despite an (almost) comparable population.

Conus was pleased to note a big spike in Tully (which includes Cardwell and Mission Beach) with 10 approvals for the months. The SA3 level data in Cairns continues to be geographically skewed with 75% of approvals this month in Cairns North.

That is the highest proportion in the last few years and wouldn't even surprise me if it was some kind of record for houses (ex-unit approvals which remain moribund). Cairns North is Brinsmead/Redlynch/Freshwater/Stratford and out to the Beaches. Cairns South is everything else down to Gordonvale.
The HTW Month in Review as usual provides some interesting perspective on Cairns property markets including this month the first home buyer market which may be relevant to the southside approvals. It suggests investor activity is not at a level which will crowd out first home buyers who are displaying a preference for existing property closer to the city rather than a new outer suburban home.

Saturday, May 3, 2014

Crook Media and Aquis

Behind the Aquis Casino caravan, and the glossy shopfronts, there has always been the Crook Group of PR consultants. Proud purveyors of services to luminaries such as Professor Clive Palmer.

This has previously been discussed by Walkley Award winning financial journalist Michael West at the SMH whose enquiries failed to elicit any actual real information on Aquis from Crook: Resort dreamers keep casino chips close to the chest

The City Beat column in the Courier-Mail has today reported a split at Crook Group: Crook Group shuts down
ONE of Brisbane’s oldest and best-known public relations firms has ceased trading after the directors split up the business to go their own ways.
Crook Group closed down this week after more than 20 years, with director Andrew Crook now working under the banner of Crook Media.
Two other directors, Ben Ready and Brenton Gibbs, have branched off to launch RG Communications.
Mr Ready said yesterday he could shed no light on the split due to confidentiality agreements all round.
Mr Crook could not be reached as he was travelling overseas with key client Clive Palmer, the alleged billionaire and ever-entertaining MP.
He isn’t the first of the Crook team’s noteworthy clients. The company previously spruiked for two well-known companies which crashed spectacularly during the GFC: tourism and property group Octaviar (previously known as MFS) and one-time child care giant ABC Learning Centres.
Crook Group also hired former journalist Scott Emerson, who later became a partner. He now serves as state Transport Minister.

I wasn't aware that Crook had previously represented Octaviar and ABC and don't recall either among the Crook testimonials? Both failed companies are notable as being connected to boards which comprised directors of prominent political background.

Thursday, May 1, 2014

Visitor expenditure takes gloss off tourism recovery

The International Visitor Survey from Tourism Research Australia was released this week and commentary on that can be found from Pete Faulkner at Conus: Mixed bag from International Visitor Survey
Visitors to TNQ rose by 3% and we saw its share of international visitors fall to 11.6% (from 11.9% a year ago). Worryingly, the average expenditure per visitor for TNQ fell by 7.1%; that equates to a decline of close to 10% in real terms over the year.
Pete also followed up with further analysis and comment on the decline in visitor expenditure in Queensland: IVS and NVS highlight falling visitor expenditure

I haven't read the survey report and not sure what accuracy there may be around the survey methodology on visitor expenditure but these numbers do appear to take some gloss off the reported tourism recovery. Perhaps that shift from Tim Tams to homebrand milk powder is partly to blame *wink*?

Meanwhile I briefly note a tweet today that Tourism Australia has been targeted for substantial funding cuts by the Audit Commission in Carnberra.