Sunday, October 11, 2015

The effiency of real estate markets?

Both diverted and disinterested recently but a post at Conus managed to draw some attention and commentary: Cassowary Coast stars in the regional building approvals race

Interest here was the continuing gap in building approvals between Cairns and Townsville with dwelling approvals in Cairns running around half approvals in Townsville. There is a good comment there on the nature of differences between the two cities regards supply and demand which doesn't have me entirely convinced.

However last week the RTA also updated rental bonds data. Median rent trends remain soft in Townsville particularly noted in 3br houses:


Median rent in the September quarter for a 3br house in Townsville was $55 below Cairns. That is quite a turnaround over four years from the September quarter 2011 when the median Townsville rent was $40 above Cairns. New bonds lodged for the quarter were quite high for this category however the gap trend in 4br houses is similar and now $60 higher in Cairns. Units perhaps not quite so pronounced:

RTA also post total rental bonds lodged at the end of the quarter with data back to 2012. There are some striking differences here also between Cairns and Townsville over that period. Douglas has been amalgamated with Cairns for consistency over the period:


Cairns has had a significantly higher proportion of renters although Townsville appears to have been catching up. Growth in rental bond numbers seem pretty consistent in Townsville while Cairns has stagnated over recent years. We may have to wait until the 2016 census results for a better fix on that.

Rentals in Cairns are also significantly more weighted to units relative to houses compared to Townsville:

An additional complication in any Cairns analysis may be the amount of stock that can move between the permanent rental and tourism accommodation sectors at the margin.