Not all doom and gloom for Cairns, despite $8 billion resort falling through
The most predictable thing to happen in Australian real estate this year is the decision not to proceed with an $8 billion resort in Cairns.
The alleged Hong Kong billionaire who was allegedly planning to spend billions building an extravaganza in North Queensland has reportedly decided to spit the dummy because he can’t get what he wants.
There was always an unreal quality about this scheme. I can’t imagine anyone spending that amount of money on a resort anywhere in the world, let alone in a small regional city in Australia.
Almost exactly a year ago, I wrote this on Property Observer: “There are many reasons to consider buying in Cairns. But a grandiose plan for a $4.2 billion (as it was then) resort complex should not be one of them.
“Earlier this year, Hong Kong businessman Tony Fung announced his plan for the biggest tourism property development Australia has seen. Aquis will have nine hotels with 3,750 rooms plus 1,200 apartments, a sports stadium, a convention centre, an 18-hole golf course and an aquarium clustered around an aquatic paradise. The artists impression looks like something you might expect to see in Dubai or Macau.
“Queensland Premier Campbell Newman got quite excited about it and promised to wave it through the approval processes as only a conservative Queensland government can.
“And, according to reports, many developers and investors are excited, too. Suddenly Cairns is on the radar screen, in a way that hasn't happened since the frothy days of Japanese mega investment in the 80s. There's been a surge in building applications which the council says is inspired by the Aquis proposal.
“Frankly, it's all rather ridiculous. A $4.2 billion resort development in a regional city of 150,000? I'll believe it when I see it.”
Well, it looks like I’ll never see it. And you’ll notice that, along the way, the $4.2 billion resort proposal has morphed into an $8 billion proposal.
So, here’s the core lesson. A lot of people got excited about this proposal and wanted to invest in Cairns. That was seriously not logical. Sadly, too many people make investment decisions based on the hype surrounding an extraordinary event.
Sadly, too many people make investment decisions based on the hype surrounding an extraordinary event.
Here’s the question every investor must ask when they get excited about a location on the basis of one major proposed event: If this major event does not go ahead, is this still a good place to invest?
If the answer is no, don’t buy there.
Fortunately, the answer in the case of Cairns is yes. For the past two years, I have been recommending Cairns a good place to consider for property investment. The Fung furphy was never part of the equation that led me to that recommendation. When I first put Cairns in my hotspots reports, the grandiose resort had not been announced.
Cairns stacks up for other reasons. It’s an example of a regional centre which has struggled in the past because its economy was fundamentally based on tourism – but which is now moving to a new level because (a) the economy is diversifying; (b) big money is being spent on infrastructure; and (c) as a bonus tourism has come back strongly, led by a big influx from China.
Cairns also has the best rental yields in Australia, including mining towns (most of which are no longer providing high yields, because of high vacancies and sharply falling rentals).
And, in the past 12 months, most of the suburbs of Cairns have delivered double-digit price growth, with some growing above 20%.