Back to school for Airport

Cairns Airport posted negative domestic monthly growth (-0.4%) in June. Continuing international growth (10.4%) dragged the total back into positive territory with 0.9% growth over June 2016. This has been attributed to school holidays:

June passenger numbers were slightly lower due to the 2017 school holidays starting one week later than 2016 in Queensland and New South Wales.

Problem is that isn’t correct. NSW and Qld both started in the equivalent week which means they were actually a day earlier in the month than last year. Victoria started a week later than last year to align the term with NSW ending 30 June. Qld term ended 23 June. Anyways:

AirportJune1AirportJune2

Update: Sydney Airport has now posted June results with a strong growth driven by international:

“International traffic growth of 9.7% versus the prior corresponding period (pcp) is a fantastic result, and represents our strongest monthly result this year. Domestic traffic also grew strongly at 3.6% above the pcp, contributing to overall traffic growth of 5.8% for the month. International and domestic traffic continues to be driven by higher load factors and larger aircraft.”

June Rental Trends

RTA data for the June quarter continues recent trends with the rental gap between Cairns and Townsville increasing to $90/week for 3 bedroom houses based on new bonds lodged during the quarter.

Rental1

3 bedroom houses are the largest overlapping category. 4 bedroom houses are not far behind any longer but the trend there is the same with the gap now at $95/week.

Rental2Rental3

 

Nova City valuations

It is now more than two years since local media speculation that Aspial would start construction of the Nova City project on Spence St before July 1 2015 to qualify for development incentives. The marketing building was constructed in 2015. Two years hence while there have been operational works on the site and reports of pre-sales there has been no final building approval.

Aspial have finally got around to spinning off their non- Singaporean property developments on the higher risk Singapore Exchange second board. The prospectus contains valuation details for Australian properties. The only building in the body of the document related to valuations (p 94) for Australian projects which does not provide a capital value is Cairns. Note 4 provides further details:

There is no Capital Value attributed to the property. The proposed development plans for Nova City were in the midst of being finalised and the sales launch of the residential units in Tower 1 of Nova City (including residential units located in the podium connecting Tower 1 and Tower 2) had not commenced when the independent valuer, Jones Lang LaSalle Advisory Services Pty Limited, commenced its valuation of the aforementioned property. Accordingly, the valuation for Nova City / 81-83 Spence Street and 112-114 Bunda Street, Cairns, Queensland, Australia is based on the market value of the land on an “As Is” basis, and not based on the proposed development plans of Nova City. The market value of the land as appraised by Jones Lang LaSalle Advisory Services Pty Limited, is A$15.0 million, which was lower than the acquisition price of A$18.9 million paid by
our Company.

The explanation doesn’t appear to be consistent with the independent valuation report from Jones Lang Lasalle in Appendix B dated April 2017 which does refer to the relevant pre-sales and marketing which had commenced five months before the valuation.

As at date of inspection preliminary site works were in progress, these are associated with the stormwater drainage easement along the southern boundary. We understand marketing of the apartments for Stage 1 officially commenced in November 2016 and we have been advised by the Developer that 28 contracts of sale (or circa 14% of the total number of apartments) had been issued.

However the only valuation provided in Appendix B is the land value which has been reduced from acquisition value as stated. Capital valuations have been provided for development properties in Brisbane where marketing has not yet commenced.

There are some comments in the Appendix B Jones Lang LaSalle valuation report worth noting:

Based on our analysis we do not consider the proposed development is representative of the highest and best use of the site in the current market. The site it-self (sic) in our opinion is not considered an ‘A-Grade’ location in terms of the Cairns CBD with the prime locations especially from a residential amenity point of view being those situated along the Esplanade or Water (sic) front areas.

There is also this suggestion in the independent valuation:

Strengths: A large development site on the southern fringe of the Cairns CBD which has the potential to be subdivided into smaller parcels, for which we consider there would be a wider market appeal.

Source:  World Class Global

 

Oh deary me!

Smithfield business owner welcomes bypass. Albeit somewhat conditional apparently:

“Anything that takes traffic away from driving past the shopping centre is not good for the shopping centre, as far as I’m concerned,” he said.

Interesting the way this yarn is framed differently by the Compost in different spaces such as social media but perhaps Bastiat summarised this best with his negative railroad a couple of centuries ago.

I have said that as long as one has regard, as unfortunately happens, only to the interest of the producer, it is impossible to avoid running counter to the general interest, since the producer, as such, demands nothing but the multiplication of obstacles, wants, and efforts.
I find a remarkable illustration of this in a Bordeaux newspaper.
M. Simiot raises the following question:
Should there be a break in the tracks at Bordeaux on the railroad from Paris to Spain?
He answers the question in the affirmative and offers a number of reasons, of which I propose to examine only this:
There should be a break in the railroad from Paris to Bayonne at Bordeaux; for, if goods and passengers are forced to stop at that city, this will be profitable for boatmen, porters, owners of hotels, etc.
Here again we see clearly how the interests of those who perform services are given priority over the interests of the consumers.
But if Bordeaux has a right to profit from a break in the tracks, and if this profit is consistent with the public interest, then Angoulême, Poitiers, Tours, Orléans, and, in fact, all the intermediate points, including Ruffec, Châtellerault, etc., etc., ought also to demand breaks in the tracks, on the ground of the general interest—in the interest, that is, of domestic industry—for the more there are of these breaks in the line, the greater will be the amount paid for storage, porters, and cartage at every point along the way. By this means, we shall end by having a railroad composed of a whole series of breaks in the tracks, i.e., a negative railroad.

*bangs head on desk*

Cairns swings against a trend

With the relationship between housing affordability and avocado toast a topic du jour an increased trend to renting was noted in the census data. Cairns appears to have gone the other way albeit remains relatively high based on the proportion of renters.

Renters1Renters2

This is broader SA4 regional data and while Townsville has moved ahead of Cairns on this measure the Cairns urban area would still remain ahead on proportion of renters after our larger regional population is removed.

This is consistent with RTA bond data where Townsville Council LGA has moved from a few thousand less total rental bonds lodged than Cairns Council LGA to about equal over the period. However I’m too lazy to do this comparison for the available census data as it involves adjustment for the Douglas de-amalgamation. Also not sure what impact defence housing in Townsville has on their rental numbers?

Cairns appears to have moved against a trend though on this. Even the more central high renting 4870 postcode nudged down by 0.4 percentage points of renters over the period.

Knock Knock Census Calling

Following the previous post unoccupied properties for Cairns by suburb (SSC) with Port Douglas (SSC) thrown in.

Cairns unoccupied

Port Douglas SSC comes in higher than the broader PD SA2 previously posted at 25%. Below Palm Cove at 30%. There doesn’t appear to be any significant change pattern from 2011 in these areas.

However I suspect this could be an issue for the data. Particularly strata units within accommodation module buildings in the regulations. Census is conducted in August during peak tourism season in FNQ.

Also noted there is a difference between total dwellings and the sum of occupied and unoccupied dwellings.  Must go back and check on that.

P.S. Obviously the residents of Kanimbla deserve an award of some kind but not sure what?

First look at the Census

The first batch of data has been released from the (controversial) 2016 Census.

An aspect of interest in the dwellings data is unoccupied private dwellings. Around 10% of dwellings unoccupied is typical given a proportion will be absent on any given night for a variety of reasons as well as vacant dwellings.

Places like Cairns City SA2 come in well above this at 17.1%. This compares with 10.4% for Cairns LGA which is actually below Queensland (10.6%) and Australia (11.2%).

Port Douglas SA2 is a standout though with 20.8% of private dwellings deemed unoccupied. In 2011 it was 19.9%.

20% of dwellings in Port Douglas unoccupied during peak season?

 

Commentary:

The Census and Cairns…less religious than your average Aussie

Population growing faster than expected

Council Budget

It’s Cairns Regional Council budget day for 2017/2018 with all the boring details at Special (budget) Meeting. I will just focus on this statement apparently drawn from the Mayor’s speech.

council budget

Cairns missed out on a revaluation this year so we will have to wait until next year for that fun. Although I’m curious as to the composition of that 0.4% presumably above the general rate increase?

Increases below CPI funding an equivalent level of council works and services over ten years could be something of a conflict. LGAQ have previously compiled a council cost index based on the relevant components of council costs but not sure if this is still available or behind a member login. The CPI is not really a relevant benchmark for council costs as we have found out at times in the past.

I think I would be prepared to take a bet against this but ten years is a long time to wait to collect and perhaps a closer look at the assumptions is warranted.

May Airport

Airport numbers appear to have recovered from the new year dip with steady growth in May. Domestic was up 2.8%, international 9.5%, total ex transits 3.7%.

AirportMay1AirportMay2Source: Cairns Airport

Sydney this week posted continuing strong international numbers for May up 8.1%, the largest increase for the month in 9 years. YTD international growth is now 7.4%. Given the scale of Sydney as the largest gateway the numbers are quite impressive.

“In 2017, I am delighted that airlines have already announced almost one million additional seats into Asia on an annualised basis, reflecting the confidence that our airline partners see in the Sydney and NSW markets. The additional capacity spans right across the Asian continent, including Indonesia, Vietnam, Hong Kong, China, Taiwan and South Korea.”

There will be a lag before we can catch up with some more recent comparative data from BITRE.