Impetus from China is helping Cairns to reinvent itself: Terry Ryder

Hong Kong businessman Tony Fung is in Cairns this week to discuss with local officials and state leaders his plans for a casino-hotel complex, reportedly a $3 billion project.  

Projects of that scale do not happen overnight and this one may not happen at all. But it says something about the re-emergence of Cairns that such ventures are being discussed.  

There’s no doubt Cairns is fighting back after a long period as the almost-forgotten city of North Queensland. Local leaders are working hard to encourage development and diversify the city’s economy, for too long too dependent on tourism.  

Just how tough the past five years have been in Cairns real estate is illustrated by figures in the March quarter report from the Real Estate Institute of Queensland. The median house price for Cairns today is 6% lower than it was five years ago. The median price for apartments is 23% lower than in 2008. Ouch.  

I know people who own investment property in Cairns and “ouch” doesn’t really do justice to their feelings about the place.  

The city’s recent performance is a million light years from the glory days of the 1980s, when Cairns and the tropical north was the trendiest place in Australia to build tourism-related property developments. Tourists and investors from Japan fuelled the boom.  

But building an economy based on tourism is like building an edifice on sand dunes. Tourism is very cyclical and highly vulnerable to economic downturns, at home and abroad.  

In the past 20 years, Cairns has been overtaken and left behind by Townsville, which has a highly-diversified regional economy in which tourism is just one element.  

Now Cairns is reinventing itself. Tourism is still big and it’s coming strong again, with major investment not far behind. This time the impetus is coming from China. Two of the biggest Chinese airlines have recently begun direct flights into Cairns, complementing the ones coming regularly from Hong Kong, Singapore, Osaka and Tokyo.  

But civic leaders are working to broaden the base. The local council is seeking to inspire construction by waiving some of the big fees that deter developers. The council says 24 projects worth $400 million are happening as a result.  

In terms of infrastructure, always a big generator of real estate growth, $450 million is being spent on upgrading the hospital, $110 million on expanding the port and potentially $1 billion on redeveloping the airport (in a 20-year plan approved by the state government in March).  

There is also a growing resources sector within commuting distance of Cairns. An April report said the Far North’s mining industry had surpassed $1 billion a year in earnings for the first time and now ranked behind tourism and primary industries as the region’s third biggest generator of wealth.  

Against this background we are seeing the first signs of real estate revival. The number of sales, for both houses and units, in the March quarter was a big increase on the levels of a year earlier and some suburbs now have median prices higher than a year ago.  

Valuation firm Herron Todd White says in the June edition of The Month in Review: “Some lead sections of the market, such as the more popular inner suburbs, are already in recovery. The more widespread recovery appears to be imminent … and there are good prospects and opportunities for buyers with a 4-6-year time frame in mind.”  

Terry Ryder is the founder of hotspotting.com.au