2017 Townsville Property Report - …

1 A Property Investor s Guide | 20172017 Townsville Property ReportTownsville s diverse economy combined with the potential of recent project announcements and consequential job creation provides emerging confidence that North Australia s largest city is in the early stages of recovery. The Townsville Property market can be assessed using population, production, potential growth and comparative price out moreA special Report TownsvilleBy Colin DwyerTownsvilleCairnsThe WhitsundaysBrisbaneQueenslandIntroductio n by Stephen McCarthyCEO McCarthy GroupWelcome to our investor update on Townsville , the first in our 2017 series of research reports specially commissioned for our investor clients.

2 By way of introduction, here s a true story about the famous American financier and businessman, he was asked What is the market going to do? , Morgan allegedly replied, I ve been studying this market very carefully and for a long time, and I ve reached a conclusion; the market is going to fluctuate. This is probably the only sure thing we can say in the short term as to what our Australian Property markets are going to do. History has shown that markets will fluctuate, and consequently they reward the patient investor. This Report is authored by respected economist Colin Dwyer, to give you, our investors, an independent assessment on the short-to-medium term outlook of key regional markets.

3 Colin is widely regarded as a leading economist and social commentator by business, the media and the broader community. We hope it will give you a good understanding of the factors currently in play and give you confidence in your investment decisions. Townsville is a long term quality regional Property market. It is the 13th largest city in Australia and has a diversified economic profile. It has various quality industries of national significance including the largest regional hospital in Queensland, largest Army barracks in Australia, a nationally significant port facility and an internationally recognised tertiary sector. These facilities have quality surrounding suburbs with lower vacancy rates, lower unemployment and easily accessible lifestyle facilities for workers.

4 If we look at the recent past, Townsville economy produced $ but with spare capacity. Townsville has employment specialisations in a variety of industries, including Health, Higher education, Transport, Scientific research and Defence. Lavarack Barracks has a strong positive influence on Townsville s economy with over 5,000 personnel earning above average ,0004,0006,0008,00010,00012,000 Health Care & Social AssistancePublic Administration & SafetyRetail TradeEducation & TrainingManufacturingConstructionAccommo dation & Food Services Professional, Scientific & Technical Services Transport, Postal & Warehousing Other Services Agriculture, Forestry & Fishing Wholesale Trade Administrative & Support Services Financial & Insurance Services Electricity, Gas, Water & Waste Services Rental.

5 Hiring & Real Estate Services Information Media & Telecommunications Mining Arts & Recreation ServicesTOWNSVILLE EMPLOYMENT BY INDUSTRY 201511,8196,611 Source TELC hart 1: Townsville Employment by IndustryThere s another World Heritage listed site - not the reefVisitors to Townsville can take a day trip to smash another World Heritage listed site (that s not the Great Barrier Reef) off the bucket list. Located in the southernmost point of the World Heritage listed Wet Tropics is the Paluma National Park, home to Paluma Village, a small settlement set in the heart of a tropical you $mWorkforceThalangaCharters TowersZinc201717 Olive DownsBowen BasinCoal20201,250 Ravenswood GoldSW TownsvilleGold2017258 380 Lorena GoldCloncurryGold2017 New StadiumCBDL ifestyle2017250750 Adani HQCBDA dministration201730*500 Adani FIFO workforceTownsvilleMining2019200*1,500 Better CitiesCBD/North WardWalkway2017150*200 Sun MetalsStuartSolar Power Energy201750*200 EducationDouglasEducation20175*20960*4.

6 800 Source QLD Government *estimated by DS EconomicsPotential in Townsville assets, at current prices, is solid. Indeed, if all the projects realise their full potential they are likely to boost economic activity, boost confidence, create jobs, improve household incomes, and improve the ability to afford Property . The projects range from multiple mining developments (Adani HQ, Thalanga Zinc Mine, Raveswood Gold and Lorena Gold) to a variety of lifestyle enhancing facilities such as a new stadium and waterfront broadwalk. Potential in ProjectsPopulationEstimated PopulationChart 1 Townsville populationSource DS EconomicsTOWNSVILLE POPULATION FORECAST2015-203620152016201720182019202 0202120222023202420252026202720282029203 0203120322033203420352036295,000275,0002 55,000235,000215,000195,000175,000288,73 5 Source DS EconomicsChart 2: Townsville PopulationTable 1.

7 Townsville Regional Projects, Value and Job Creation Potential 2017-202002,0004,0006,0008,00010,00012,0 00 Health Care & Social AssistancePublic Administration & SafetyRetail TradeEducation & TrainingManufacturingConstructionAccommo dation & Food Services Professional, Scientific & Technical Services Transport, Postal & Warehousing Other Services Agriculture, Forestry & Fishing Wholesale Trade Administrative & Support Services Financial & Insurance Services Electricity, Gas, Water & Waste Services Rental, Hiring & Real Estate Services Information Media & Telecommunications Mining Arts & Recreation ServicesTOWNSVILLE EMPLOYMENT BY INDUSTRY 201511,8196,611 Townsville is the largest city in North Australia and its potential as a diversified regional economic powerhouse is strengthened with the recent announcement of several key projects.

8 While current data suggest a subdued market, the potential in Townsville Property market is emerging. Population projections over the next 20 years suggest that Townsville will achieve average growth of 2% per annum leading to an expected population of 288,725. This is an increase of over 90,000 new residents. With an average of around people per house and given other factors such as rental vacancy rates and steady supply, Townsville could require around 36,000 new dwellings over the next 20 REGIONAL PROJECTS 2017-20203 Townsville s emerging potential comes from a solid foundation and a combination of diversified projects (see table 1) and comparative price differentials (see chart ).

9 In the past 30 years Townsville s median priced houses have grown six fold (see chart 3). Along the journey there have been booms and downturns. Booms occurred in the early 1990 s and the mid 2000 s, each with different intensity. These booms have been influenced by job creation projects and comparative capital city price differences. There have been two downturns; one in the late 1990 s the other more recently. These downturns have been characterised by high vacancy rates, job losses, negative net migration but importantly recoveries. The Sydney to Townsville and Brisbane to Townsville price ratios are well below long run the past two to three years Townsville s capital appreciations have been comparatively smaller than Sydney and Brisbane.

10 This comparative price difference observation has proven to be an eventual positive for Townsville in the past, as investors recognise the potential for capital appreciation. Indeed, two boom periods in the past 30 years have a foundation in significant comparative price differences combined with several other key variables. This observation suggests that when the comparative Property price difference between Sydney and Townsville reaches a multiple greater than then, with other key drivers, Townsville house prices have a platform to appreciate. In 1990 the price differential was and in 2003 the price differential was The current median house price differential ratio is TrendsChart Townsville versus Sydney price difference 1980 to 2016 Source DS EconomicsSYDNEY PRICE DS Economics, ABSC hart Sydney Price Difference 1980 to 2016 House PriceChart 3.