Tuned in investors turning towards Townsville

Most people jump into markets when they hear they’re booming. Few will buy in a down market, with an eye to the future.

They’ll wait until a newspaper report tells them prices have jumped in the past year, which means they’re too late to maximise the best opportunities to buy well.

Perth is the most depressed of the capital city markets and buyers are staying away in droves. The real estate industry is working hard to talk up the market, claiming buyers should dive in before prices rise. Such claims are among real estate’s greatest clichés, but they will be right in the not too distant future – at the right time Perth will represent great buying, after 3-4 years of falling prices. But most won’t make a move until they read there’s a new boom on.

Another example of this conundrum is provided by Townsville. The North Queensland city has had a lot of negative publicity recently and you wouldn’t buy there on the current numbers.

But I rate locations on their future prospects, often in defiance of the current situation, to alert investors to areas poised for growth. Townsville is a classic case.

It’s among the sturdiest regional economies in Australia. I rate economic diversity and Townsville has more than most regional centres, with strong elements of government admin, education, defence, resources, health, tourism and manufacturing – plus an export port.

Its property market had a run of strong annual growth up to 2011 – and, after decline in the past few years, is ready to resume its forward progress. Its comeback will be boosted by major events, including retail projects, CBD commercial and infrastructure spending. It is also receiving economic impetus from the expansion of its military economy and will benefit from the $22 billion Adani mining project.

Townsville is forecast to be one of Australia’s fastest-growing cities, reaching a population of 340,000 by 2050, according to demographer Bernard Salt in a 2015 report.

Townsville has over 100 education facilities, including the James Cook University, where around 12,000 students are enrolled.

It’s close to the Barrier Reef and tourism is a big industry. The city received 1.2 million domestic visitors in the year to September 2016, injecting $925 million (up 35 percent on the previous year). Around 12,000 cruise ship passengers visit Townsville each year and, following a Cruise Ship Terminal upgrade, larger numbers are expected in the future.

Trade through the Port of Townsville often tops one million tonnes per month and it is now Queensland’s third largest port. Examples of the port’s growth include an $85 million export facility opened by Glencore in 2015 and Puma Energy’s $150 million fuel import terminal.

The Townsville house market was one of the strongest among the Queensland regional cities over the five years to 2011, with median prices rising 50 percent. In recent years, there have been few signs of growth and many suburbs remain in decline as a result of recent economic reversals.

News of Clive Palmer’s nickel refinery closing in 2016 has not helped the market.

But Hotspotting expects an economic revival in 2017 and better results in the property market, a sentiment shared by Herron Todd White. In the October 2016 edition of its In Focus report, HTW said conditions in the residential market were starting to stabilise.

A core problem for Townsville has been oversupply, bringing an adjustment in rents. Despite that, yields remain attractive and are generally in the 5-6 percent range for houses. Some of the unit markets have median yields close to 7 percent.

So it’s a good time to consider Townsville as it gears for a growth phase. Job-generating projects are set to get under way in 2017, headed by a $1.9 billion CBD makeover. The Townsville City Waterfront Priority Development Area plan is designed to create a modern city space where 30,000 people are expected to be living and working in the CBD by 2030.

New developments will include bars, restaurants and shops. This will also be the site of a sports stadium, convention centre, arts precinct and a redevelopment of the North Yards railway sheds.

Townsville will thrive on the Adani coal project, which will have its HQ in Townsville, if the miner’s undertakings are kept. But nothing is certain in the resources sector and Townsvillemay have to fight to maximise the benefits because other regional cities can sniff the opportunities. Hence this headline in the local paper on 10 February: “Townsville declares war on Rocky.”

In a story on the front page of the Townsville Bulletin, Townsville Mayor Jenny Hill said the gloves were off in beating out other regional cities for Adani's FIFO hub.

Townsville is likely to benefit from other mining activity in Central Queensland, despite being hundreds of kilometres from the mine sites, in many cases. As one example of how major mining companies approach staffing these days, reports suggest BHP Billiton “has turned to Townsville locals to fill 200 fly-in, fly-out jobs in the Bowen Basin”.

There are 270 jobs on offer at the company’s Peak Downs and Saraji mines near Moranbah and a spokesman for BHP Billiton Mitsubishi Alliance (BMA) says they are advertising FIFO roles from Townsville.

Townsville is also likely to benefit from plans for Singaporean Armed Forces to train at Shoalwater Bay Training Area and Townsville Field Training Area. Up to 14,000 Singapore personnel will conduct unilateral army training for up to 18 weeks a year by 2021. Land will be used for tank training and $300 million will be spent on new facilities. This is the plan that became contentious recently when rural landholders claimed their properties would be forcibly resumed to make way for the military manoeuvres.

Then there’s a $225 million solar farm planned in the Upper Ross, with the project attracting federal funding and a solar power purchase agreement reported to be the biggest in the country. Under a 13-year contract, EnergyAustralia will buy 80 per cent of the electricity generated by the 142MW facility, enough power for 52,000 homes.

With so many large-scale projects in its future, Townsville is poised to return to growth and tuned-in investors will be looking around for opportunities.

Terry Ryder is the founder of hotspotting.com.au. You can  email him or follow him on Twitter.