Townsville housing market's downturn stabilises: BIS Oxford Economics

The Townsville market hasn’t recovered since peaking in 2008, with the median house price falling by 13 per cent to June 2017.

Vacancy rates in Townsville remain relatively high, at 3.8 per cent in March quarter 2018, although are well down from a peak of 7.1 per cent eighteen months earlier, according to a report released this week by BIS Oxford Economics.

Reflecting this improvement, it appears that the downturn has stabilised, with the median house price on track to rise by two per cent in 2017/18.

The Cairns market has shown more upside, having not experienced the mining boom/bust of Townsville.

Vacancy rates have remained in the 2–3 per cent range since 2012, with a total 21 per cent growth in the median house price coming through over 2012 to 2017 the report stated.

The economists temper this by noting that, "price growth has slowed in 2017/18 and is on track to be flat according."

"In real terms, Townsville’s estimated median house price at June 2018 is 30 per cent below its December 2017 peak in real terms, suggesting there would be little more downside."

The local unemployment rate has improved, although this appears to be on the back of lower participation rates, rather than higher, meaning that "hidden unemployment" could become problematic.

Population growth is weak and as such, minimal price growth is expected over 2018/19 and 2019/20, before some signs of an upturn emerge by 2020/21 with vacancy rates tightening, and some economic recovery coming through as rising tourist arrivals underpin the upgrade of existing tourism infrastructure the economists suggested.

Cumulative growth of nine per cent is forecast in the three years to June 2021 for Townsville.

Whereas the BIS Oxford economists forecast that the Cairns market will begin running out of steam after steady, albeit moderate, price growth to 2017.

Population growth remains slow and, apart from growth in tourism, there remain few other drivers in the local economy that can help employment growth and push through price rises.

As a result, only modest growth is forecast for Cairns, totaling four per cent over the three years to June 2021.

For a look at our take on the BIS Oxford Economics report for the national market check out, "Melbourne house prices forecast to tread water through to 2020/21".