Signs of life

There appears to be good level of buyer interest in all ranges of property in Townsville over the last week, including the affordable end of the market, according to many agent’s I have spoken with.

It’s no secret the Townsville property market has been languishing at levels reminiscent of the 1994 – 2001 era, or at what could be described at pre-boom levels.

Prices seem to have stabilised over recent months and the “Vincent’ factor as I would call it – or the price of a high set three bedroom ex – Defence Home in the Vincent Village area seem be showing resistance to price drops.

Having worked in finance through the pre-boom cycle and then hitting the high of May 2007 when I wrote something like $30m in loan funding’s for the month, those heady days are certainly passed. But what has replaced it is a normal and healthy cycle which can only be tempered by rising interest rates.

Whilst many buyers are cautious, and certainly know the market values, what is significant is that quality homes in the affordable bracket (up to $450000) which are priced at fair market value are definitely selling.

Interest from first home buyers is definitely wained, but whilst most put this down to the winding back in the first home owners grant, I would challenge this – first and foremast the reason is the financial institutions tightening lending eligibility criteria. It is no secret amongst the Commonwealth Bank staff and brokers  that I speak with that the bank is “top heavey’ with first home owner exposure on it’s lending book, and I think their is enough evidence to say that most Bank’s have followed with stricter guidelines. there are strict ‘gate openers”, including savings to qualify, although the CBA owned Bank West still apparently have less rigid requirements than it’s parent.

There is also an unexpected but rational approach from the NAB to loan pricing. In similar fashion to Business Loan pricing, a local finance broker mentioned during the week that the if you borrow through the NAB with a loan to valuation ratio of 75%, you will obtain a better rate than loans above 75%. This basically risk weighted pricing and could be a sign of things to come in home lending finance.

The Sydney and Melbourne markets are still booming with RP Data auction clearances still high, but recently lending data released suggests that their is demand from overseas buyers, as well as locals and the increase in demand could be misleading with regard to the trigger’s for the increase.

The RBA keep referring to the resources boom as a reason for prudent interest rate policy, but the property market in places like Townsville in the late 1990’s struggled when at the same time there was rising demand in Sydney and Melbourne property market’s.

I rememebr articles by economic writers suggesting that  if you could move interest rates diferently in each stae you would increase them Victoria and NSW and drop them in Queensland and WA. That was some 10 years ago but their is lot of similar trends showing through that suggest we could be in a repeat cycle, although the resources boom is just gathering momentum and the outcome could yet to be felt.

None the less these cycles will have a silver lining for those with rental properties – rents tended to increase in the last cycle as investor activity in purchasing rental properties slowed with interest rates rising and share markets booming, thus resulting in a shortage of supply.

With that in mind, and given investment property interest is hedged by negative gearing, the property that’s suites investors may well prove to be very sought after, particularly when you can purchase properties in the Kirwan area under replacement value which are less than 5 years old and tick all the boxes as solid long -term assets with good depreciation and capital allowance benefit’s, with long – term being the key phrase.

Townsville’s a great place to live and invest and has a bright future, and it’s now affordable as ever !

As always get quality advice before you dive in, and remember if you are from out of town a valuation costs about $300 and good insurance as part of the contract conditions to ensure you are not paying too much.

Leave a Reply

Your email address will not be published. Required fields are marked *