Townsville Property Market Update
The Townsville property market is showing signs of a recovery on the back of significant infrastructure and construction investment from government and private enterprise.
Dancing from the bottom of the market to its current position that is showing signs of a recovery, which has occurred many times over the past few years, the property market continues to display symptoms of uncertainty that has prevented investors from gaining a clear fix on direction.
Townsville’s recovery has been a story of false starts.
However, the rental vacancy scenario in Townsville has become more balanced as prices for houses show evidence of a recovery after consecutive quarters of price reductions.
The residential vacancies trend across houses and units is that they are tightening, moving from over 5 percent to 4.4 percent in September 2017 based on Herron Todd White’s October 2017 rent roll survey of the Townsville property market.
The demand for new housing is flat as the Labor government’s $20,000 first home owners grant for new homes aims to support its jobs policy in the construction industry. The number of house sales is steady in the market, after a prolonged period of declining volumes.
Nevertheless, Townsville’s economy faces significant headwinds because of the prevailing political uncertainty and opposing forces associated with the pro-resources and mining sectors and the disruptive climate change and renewables sectors.
The speed at which technology-driven changes are occurring to the labour market is likely to impact the sustainability of employment in industries such as mining, manufacturing, agriculture and the repetitive administration services sectors, which have traditionally been the cornerstones of the Townsville economy.
Growth in demand from construction, mining, defence and manufacturing sectors may clash with job losses from automation, artificial intelligence and the renewables sector. In the short term, construction will continue to drive favourable increases in demand for rental accommodation in the City.
But the government’s increasing reliance on institutionally manufactured capital instead of the natural capital of small investors and the resources economy, demonstrates a structural shift in fiscal policy of reducing private debt risk and increasing government revenues from housing supply and even retail real estate leasing commodities, as we have seen with the State government’s acquisition of Domain Central shopping centre in Townsville.
New housing products have poor resale price outcomes in that the value almost never exceeds the price at which the new home was purchased. The demand for new housing in the forward estimates is likely to be less. It is expected that federal government changes to taxation incentives for investors also makes private property investment less favourable.
Both the State and Federal governments have a policy focus on homelessness and social housing in the current budgets. This is likely to be a deterrent for housing investors as the appeal of the government schemes seeks to attract more international capital and fund managers to address housing affordability on a large scale through institutional channels, especially in the Sydney and Melbourne markets.
As the current State government policy is seeking to address housing as a health agenda, and they make no bones about their ambition to have a greater influence on market pricing by owning more housing stock, private investors are becoming more skeptical and nervous about the uncertainty of government’s influence on pricing and supply in the Townsville property market.
Townsville’s economy is likely to become more transient as it transitioned to new age technologies and service-based industries such as tourism, engineering, education and defense as opposed to the traditional mining and manufacturing activities.
Depending on the extent of social housing supply brought on by government’s socially-sensitive policies and the slowdown in demand for new homes by low and middle income households, as well as the transition of the economy to high tech transient industries, the rental price increases are anticipated to continue in the short to medium term from construction simulation but return with a slight rebound and steady trajectory.
Population growth will be critical. But this will be dependant upon the implementation of major projects in the region, one of which being the Adani coal mine and the fly-in fly-out deal struck by the Townsville City Council.
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