Hot and hotter in Cairns
Thursday, November 22, 2007/
The demand for multi-storey apartment complexes in Cairns is ensuring new projects are being snapped up off the plan, while house prices in the established suburb of Edge Hill have risen by 20% in the first nine months of this year.
After taking a short breather, the Cairns property market is coming back to life – but some areas look better than others. Cairns is an unusual mix of contradictions: a coastal town without a beach, a regional centre with an international airport and a world-class holiday hub that attracts backpackers and the mega rich.
After a couple of decades of slow growth punctuated by booms and busts, the property market here has evolved into one of the most sophisticated in Australia.
The opportunities for investors are varied and include the grand old Queenslanders of Edge Hill to the ultra-modern apartment complexes of the CBD. Then, in the city’s northern beaches, you have the high-end resorts of Palm Cove and newly emerging holiday destination of Trinity Beach co-existing just a few hundred metres from suburban style sub-developments.
The cranes that dot the Cairns skyline provide your first visual clue to that growth. The city population of 130,000 has virtually doubled since the early 1980s but it’s still a small city and there are signs that the strong trend in unit prices – though still growing – is slowing.
Greg Wood, a director of Knight Frank’s Cairns branch and chairman of the Northern Development Industry Association lobby group explains: “It’s not topping out but there are certainly some indications that the unit market is slowing down from an investor point of view.”
Data from real estate group PRD Nationwide shows the price growth in CBD units has not been that impressive, with average growth of 5.6% per annum over five years. Still, some people have made fortunes.
Tom Hedley is the founder of the Hedley Group, one of the most prolific developers in the region who has a personal worth of about $800 million.
This capacity to release new stock on demand has almost certainly reined in price growth. Why buy second-hand what you can pick up brand new? And with another 10 towers slated to begin construction in 2008, it may be some time before this new capacity is completely absorbed. Most of these developments are set a few blocks back from The Esplanade, the revitalised bayside area of the city, which has benefited from civic works such as an 800-metre boardwalk and a manmade lagoon.
But while the hotels and apartment complexes nearest the water are characterised by their boxy and dated appearance, the newer complexes are defined by their modern lines and large liveable balconies.
Darren Reed, a consultant with real estate agency The Professionals, says: “The big balconies are big selling points of these types of properties. They are essentially your dining room in this part of the world.
Old Cairns is holding its own. About five minutes’ drive north of the city centre is the long-established suburb of Edge Hill, where beautiful elevated timber homes known as “Queenslanders” overlook the town, and prices keep rising.
A spokesman for valuer Herron Todd White says prices in the exclusive suburb of Edge Hill had moved 20% in the first three quarters of 2007. When you factor in a price rise of 15% per annum since 2003 you are looking at some very fast-moving property values. Darren Reed says: “Prices in Edge Hill have been pushed from mid-400s about 12 months ago to mid-500s. There has always been a strong market for character homes in established suburbs like Edge Hill. It’s important because it’s elevated; you need to be elevated to catch that afternoon breeze.”
Meanwhile, in the Northern Beaches, development continues as holiday makers and owner-occupiers flock to the resort style villages of Palm Cove and Trinity Beach. Just a few minutes’ drive north of the airport, both locations offer a crucial feature that central Cairns lacks: absolute beachfront.
Palm Cove’s reputation as playground for the rich and famous is well deserved. It is the home of luxurious resorts including Sea Temple and Peppers Beach Club, where guests are feted with private infinity pools and Rolls-Royce airport connections. You can buy into Peppers with a one-bedroom unit for as little as $320,000.
Sea Temple, a joint venture between Juniper and Mirvac, is fast becoming an established brand in the region with another venue in nearby Port Douglas. Sea Temple offers fine dining, spa treatments and direct beach access, and investors can choose from a variety of property configurations, from two-bedroom apartments from about $650,000 to villa-style homes over two levels with an asking price of $2.2 million.
But sources say that the resort has not been as successful as had been hoped. A recent example saw a mortgagee-in-possession sale go for about $175,000 less than its off-the-plan price. In addition, a site in nearby Yorkey’s Knob was onsold to another developer after a planned Sea Temple resort failed to generate enough interest.
But it’s not all spa treatments and private pools in Palm Cove. Apartment complexes weave in between resorts by Rockman and Sebel. You can pick up a nice beachfront three-bedroom, three-bathroom apartment here for about $700,000. Price growth for units in the region has been strong, averaging about 17% over the past five years. But it hasn’t been steady.
Darren Reed says: “In the middle of 2004 there was a real rush on beachfront property. Over a three-month period there was a big spike in prices that saw $400,000 properties sell for $700,000 before settling back down to $500,000. It really lifted expectations for a while”.
A couple of minutes south of Palm Cove, the owner-occupier scene in Trinity Beach is heating up. It is slightly more laid back than its upmarket cousin, and definitely less showy, but that doesn’t make the property any cheaper. The same kind of beachfront apartment that would set you back $700,000 in Palm Cove would be closer to $750,000 in Trinity Beach.
The area features good selection of restaurants and the beach is as good as Palm Cove if not better. Growth in this newly emerging area has been steady at around 12.3% per annum over the past five years. But with further developments under way, including Hedley’s 51-apartment Vue project, prices may be under some pressure in the short term.
Over the medium to long term, Trinity Beach looks like a winner. Despite the ongoing development, there is still a lot less stock here than in Palm Cove. On average, yields in Trinity Beach are about 5.1%, far above those generated elsewhere in the region. Trinity has an infrastructure with schools and community sporting facilities and, unlike Palm Cove, it feels like a place where you could actually live, not just holiday.
Driving between the Northern Beaches and central Cairns you can’t help but notice number of suburban sub-developments springing up. Huge numbers of four-bedroom, two-bathroom homes are going up on small blocks cheek-by-jowl as far as the eye can see. While these suburban developments aren’t expected to affect demand for property elsewhere, it’s a strange feeling to see this little bit of “Kath & Kim” suburban splendour exported to far north Queensland.
Investors looking for capital growth would need compelling reasons to look beyond Edge Hill. Admittedly, some of these homes high on the hill won’t be suitable for children and you will have to trade your dreams of a tennis court for a view. But rest assured there will always be demand for classic timber homes in an established suburb.
Buyers looking for lifestyle have voted with their feet: owner-occupiers have flocked to the CBD and Palm Cove remains number one in the district for holiday letting. CBD buyers will need to temper expectations for growth until the development slows down, and Palm Cove buyers need to know that prices are extremely negotiable and remember to perform due diligence on the body corporate whose fees can vary wildly from building to building.
If you’re looking for the best of both worlds and don’t mind being a trail blazer, then Trinity Beach might be just what you’re looking for. Beachfront property is still relatively affordable and hedges against future development. The area has the best profile for future growth as investors and empty nesters get turned on to the lifestyle. Comparable with the Sunshine Coast’s Sunrise Beach, Trinity is halfway between a town centre and a resort village, which can only be a good thing for property owners.
This story first appeared in the Eureka Report.