Newsletter Century 21

Unless you are in need of selling, our recommendation would be to “hold”.  

 This is not something you will hear from too many other Real Estate offices, but we like to give it to the punters straight.

Some people have financial pressures and have no choice but to relinquish some of their holdings, some can see opportunities to purchase in another locality or closer to home.

There is no problem in selling in a depressed market if you are purchasing in that same market, the transactions will cancel each other out.

Investors need to look at their real estate purchases for a minimum of at least 5 -7 years, but keep a close eye on conditions so that if the opportunity arises to make some good capital growth, then take the opportunity to sell.

Most investors in the current Port Douglas market experience reasonable rent returns, take advantage of tax deductions and if working on 5+ year plans, usually good capital growth is achieved.

Although we often live in our own little “Bubble” here in Port Douglas we are not immune from the repercussions of the big picture.

That is nationally and internationally with world stock market volatility, a 70% chance of another interest rates rise in March, inflation, affordability, the big R (recession rumours), and the fallout/sell-out from the MFS group who own 40% of all holiday beds in Port it is not surprising that many Port Douglas investors are concerned or at the very least confused.

As always home owners and property investors should be in the market for the long term - property is a long term play and Australia's economic and property market fundamentals are still sound.

However, leading financial experts are warning “A correction in price is coming”  they feel that property has been overvalued for some time.

We can confirm from our ground roots level this is already the case, especially with vendors who are in a MUST SELL situation.

What this means to home owners and investors is be financially prepared and put yourself in a position to take advantage of any slow downs in the property market, which will offer great opportunities for those with a long term view to buy their new home or investment property.

Despite all of the above, the fundamentals that will advance the Port Douglas property market forward have not changed and even when we incur the full effect of the “adjustment in prices” the following major factors will remain:

Supply and Demand –
There is still strong demand for residential properties from city slickers who are seeking a sea change or are just bush bound. Our country has a healthy growing population, we are in the midst of a minor baby boom, our immigration is on the increase, and our demographic changes show that regional Australia is continuing to experience a renaissance even with young professionals flocking to a better lifestyle and improved career prospects. Yet there is a severe undersupply of dwellings around Australia.

In fact the ANZ Bank predicts that by 2010 Australia will have an undersupply of 200,000 dwellings mainly due to the high cost of construction. This  impedes new development and has created a marked undersupply of dwellings.

To bring a new medium density development out of the ground today can cost 25% to 30% more than the market will pay. New development will not take place until the market values increase closer to this level. Of course, the fact that new apartments will cost more in the future means that the prices of existing houses and apartments will also increase.

Rental Returns –
Across the country rents are rising because of the very low vacancy rates. The end result is increasing returns for investors. This will bring about new investors and (those too cautious to play on the stock market) back to property and will strengthen our property markets. Even with interest rate rises, landlords will be inclined to pass on at least some of the increase in costs on to tenants.

The Australian Economy-
In comparison to the USA and Europe the Australian economy is basically sound, with all signs indicating it will continue to remain so, this in turn will support our property markets.

We believe we have not seen the end of the effects of the sub prime mortgage crises in the US and the stock market downturn – there are always aftershocks as more information surfaces. However, once the fall out is over,  investors will put their money back into the property market as they will see it as safer and less volatile than the share market. Ultimately this gives us the confidence that our property markets will continue to perform well in the long term.

Still Got The X Factor-

In 2007 some capital cities including Adelaide, Melbourne and Brisbane benefited from unsustainable mini boom conditions with growth rates of over 20%.

In Cairns even though there was an acceleration of prices during 2007, most of the unsustainable high growth was in the first six months of the year. House prices in Cairns increased at 15% to 20% for the first half of 2007, however by year’s end growth was a more sustainable 10% to 15%. The major contributing factor being that Cairns was still coming off a very low base in early 2007.

In contrast the residential market in Port Douglas remained steady on its high base with its limited land supply and sales volumes stable. Where as surrounding “more affordable” areas including Mossman, Cooya Beach and Wonga Beach all enjoyed higher growth rates than Port Douglas in 2007.  In part the chopping up of cane farms into new subdivisions has delivered land from as low as $107,000 for 800sqm.

The obvious natural drawcards and product diversity of the Douglas Shire accounts for the higher proportion of sales in both the lowest and highest price brackets. The Far North being a tourist destination and property being a global asset - to foreign investors, Port Douglas is great value.

For the remaining average home owners and the mum and dad investors, remember to take a long term view.

Queensland and particularly the Far North is very much a demand-led market, it’s not about speculation – people are still moving here in droves.