Is the Townsville Real Estate market due for a “Boom”?

It was no surprise yesterday to see the RBA hold fire on a further interest rate cut, particularly in light of the strong Australian dollar.

Despite efforts to pull the dollar down against the greenback, it’s clear that ongoing stimulus by the US Federal reserve continues to thwart the RBA efforts to dampen the Australian dollar.

Not so good news for home buyers but given interest rates are at an all time low it’s likely from what we are seeing buyers are becoming more comfortable committing to purchases given  the low rate environment and the fact house prices are down some 20% on the 2007 Townsville Real Estate peak.

So with all the talk of a boom in Sydney prices and the flow through to Queensland and Townsville markets in general, why have prices showed no signs of improving?

The facts are the Sydney market has gathered some  steam – but putting in perspective the prices have now  increased to a level not seen since 3 years ago – that’s right – all the talk of boom – but no hope of a bubble because the prices are still well off their market highs in the last “boom”.

Secondly Queensland’s mining boom has fizzled, however  there are signs that the next 2 years will see mining investment increase again as the miners re engineer contracts for there staff to stabilize wages and allow some certainty on projects from the planning stage so that can cost these large projects accurately.

BHP are still willing to mothball a mine if it’s not profitable – and my tip is that it will take 2 years for the confidence to flow through to jobs on  the  ground and mines  spending and in turn hiring. Keep in mind the Townsville feeder for the mining boom comes from the Bowen basin primarily, and whilst I often come across fly in fly out miners from Western Australia the toll on workers and families on 26 day on 9 day off shifts (and the travel to get to the sites) means our main focus of a mining recovery and the impact on Townsville property prices are the Queensland mines within commute of Townsville.

And thirdly the major factor in the last boom – $7,000 first home owners grant and zero  deposit finance – put the application into a software scoring system with the countries biggest lender – the CBA and the borrowers where scored eligible – all over the country.  Lending practices are still tight and no FHOGS (first home owner’s grants for established housing) means that we will not see anything like the price boom seen in 2002 – 2007, particularly in the Townsville Real Estate market.

Will we see a boom again? Yes, I believe so.   To what extent?  Well certainly not equal to the boom we experienced in 2007 where home s in Vincent that sold for $70,000 in 2001 were selling for $310,000 (or 400% more) just 6 years later.  I don’t believe we will see all the micro economic factors align again to the extent they did in 2007  in the near future, if ever.

I liken the predictions of growth by all the so called experts (who usually have a vested interest to want to sell a book) to that of a diet. The fact is property investment is a long term project – you set rules when you buy and remind yourself of them every year and stay the course. Short term diets don’t work – lifestyle changes do. It’s the same with property investment – an investment property forms part of well structured and diversified investment portfolio.  Research what you buy, understand the upside and downside, and stay the course – that’s the advice I give my son.