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Real Estate

24 June, 2021

Right time for first homes buyers and Rentvestors

REAL estate in Cairns is a premium product and could perhaps be described as a ‘blue-chip’ investment.

By Peter McCullagh

Rental vacancies are at historically low levels and building is booming, but facing material supply issues. Land is also in short supply, so the established housing market is strong.

Adding pressure to this situation is high interstate migration with cashed up southerners entering our housing market and snapping up existing properties.

Whilst this sounds like a mess and reasons why locals cannot enter the market, Cairns based mortgage broker, Mark Turnbull from Horizon Home Loans believes the time is right to enter the market and purchase your first property or build an investment portfolio for the future.

“For the first time we have many key indicators aligning creating favourable conditions for those either wanting to enter the market or grow their existing portfolio.”

The Reserve Bank currently has the Australian Cash Rate resting at 0.10%. This historically low rate is allowing our banks and lenders access to cheaper funds, effectively creating low housing interest rates.

These low interest rates are driving demand within the market for existing housing stocks.

“The demand for construction loans has slowed since the First Home Builders Grant finished earlier this year.

“We are seeing the majority of our lending is to existing customers, looking to upgrade and purchase another property, rather than selling. They are looking at keeping their existing property and taking advantage of the excellent rental returns available in the market today,” he said.

Cairns has an extreme rental shortage with less than 1 per cent vacancy rates across the region. Rental returns are strong with short supply and increased demand leading to many properties generating a positive return for investors.

Jade Kilpatrick, Principal with Freemans Residential is seeing a lift in the number of investors in the Cairns market at the moment.

“We are seeing a number of ‘Rentvestors’ currently in the market.

“These are people who due to personal financial circumstances choose to rent a home to live in whilst owning an investment property,” Ms Kilpatrick said.

“Capital growth has steadied in the past few months. We saw up to 8 per cent lift in house prices in Cairns between October last year and March 2021.

“Since then, the prices have steadied, but the buyers are still in the market and looking for the value properties.

“We have had some properties that are returning 10 per cent or more on the rental market. These represent excellent value and for a first home buyer they are saving rent, plus they know their property is priced well and also an attractive proposition as in investment property should their individual circumstances change.”

Mr Turnbull has been in the finance industry for many years, and real estate always moves in cycles. Now the cycle is attractive, and all the key indicators are pointing to strong return along with a buyers’ market, that is more buyers than properties.

“Strong rental return, combined with low interest rates, plus good capital growth has allowed many existing homeowners to unlock the equity in their homes and take advantage of ideal conditions to buy an investment property,” he said.

Real estate is booming according to figures released last month in the Cairns Report. Unit prices are up 5.5 per cent over this time last year along with extremely low vacancy rates. The median price for units in Cairns is $248,000 with an average return of $332 per week.

Rentvestors and first home buyers have never had conditions so favourable.

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