Cairns Property Market Update May 2020

Queensland Government reporting as at 23 April 2020 for the Cairns region notes six active COVID-19 cases, 28 recovered cases and no deaths. Of these, 14 cases were acquired overseas. Three cases have been acquired with no known contact.

Almost all of our staff are working from home. We are adapting to contactless inspections for properties where we can’t get internal access or access at all with the use of new technologies and working with owners and tenants to accommodate their specific requirements which range from no contact at all to a care factor of zero.

Market evidence is mainly anecdotal at this stage, however in summary: Many sale contracts which were conditional during March fell over as purchasers pulled out due to overwhelming uncertainty;

  •  Most sale contracts which were unconditional proceeded to settlement;
  •  Demand has fallen significantly since mid-March;
  •  There has been an increase in properties for rent, mainly due to properties being brought back into the permanent market from the short-term and holiday market.

Cairns is a tourist city and has been heavily impacted due to the shutdown. The Easter long weekend is normally a busy period followed by a shoulder period and then high season from late autumn. The city is empty, restaurants and bars are closed, some hotels are closed, tour companies are closed and the marina is full as the reef boats can’t go anywhere. The Cairns economy is more diverse than it used to be, however tourism is one of the foundation stones that has a large bearing on the success or failure of many other industries in the city.

The JobKeeper payment will benefit many businesses for the next six months although the exclusion of casuals will mean many local tourism and hospitality businesses cannot fully access the scheme for their employees. We consider the exclusion of casual employees to be a major oversight by the federal government and fails to assist seasonal economies like Cairns.

Prior to COVID-19, the residential property market in Cairns was relatively healthy with very low vacancy rates and no significant oversupplies. The market was relatively predictable and fairly solid. Once the dust settles from COVID-19, we are likely to see an increase in supply due to people who are in financial difficulty needing or being forced to sell. We are also likely to see a reduction in demand due to fewer buyers. Rental vacancy rates are also likely to rise due to an increase in supply and rents may soften although the rental market was very tight prior to the crisis.

We were hopeful that the crisis may be over prior to the start of the peak tourist season. It is now obvious that international tourism will be a long way off and the best time to come to Cairns may be over by the time domestic tourists are allowed to travel. This may result in an entirely lost season. Many local tourism businesses need a solid peak season to get them through the quiet times of the year and they will end up heading into summer with cash reserves at low levels.

There is likely to be pent up demand from domestic tourists and we may see some additional numbers due to cruising and overseas holidays being unappealing to Australians for some time.

Crunch time will be in late 2020 when the JobKeeper payment comes to an end, the boost to the JobSeeker payment is wound back and far north Queensland businesses are left to fend for themselves. The likely result is a very tough 2021. We believe there will be significant need for additional intervention from all levels of government and banks to get the tourist industry through until Easter 2021 including:

  • Extension of JobKeeper and JobSeeker boost payments for an additional six months;
  • Extension of mortgage deferrals for an additional six months;
  • Restrictions on financiers being able to sell properties under mortgagee-in-possession scenarios for a period of time;
  • Rapid decentralisation of government departments to boost regional economies;
  • Rapid commencement of shovel-ready projects in the regions;
  •  Subsidies to airlines to offer affordable air travel for domestic tourists;
  •  Discounting or deferral of council rates, land tax and other building outgoings for tourist accommodation properties;
  •  An extension of the Queensland government’s Queensland COVID-19 Jobs Support Loan which is already oversubscribed and closed.

Speak with a Cairns Mortgage Broker today.