What is the rental vacancy rate?

SQM Research provide an excellent range of free real estate data which I frequently use and reference. Michael Matusik has had a spray at their rental vacancy rates data. This is how SQM determine what is a vacant rental from online sources:

The Rental Vacancies component is based on all monitored and unique online listings for the period of a calendar month. The series starts off in January 2005. All listings are taken from online monitoring of major listings sites. Only those properties with unique addresses or a unique listing id are used. Those advertisements with no addresses are excluded from the series. Any addresses repeated between sites are de-duped. Only those listings that have been advertised for three weeks or more (and are still currently advertised as at the time of collation) are used.

I don’t have a problem with that which is intended to identify what is genuinely vacant and not just part of the routine churn of tenants. What is more important is that a methodology is consistent over the historical series. Where I tend to agree with Matusik is what the SQM vacancy rates implies for the rental stock because I have previously taken this up with SQM also.

I never did get a satisfactory explanation and it still doesn’t reconcile when updated for 2016 Census data. This is SQM for postcode Cairns 4870:

SQM1Source: SQM Research

The 208 vacant dwellings and 1.4% vacancy rate implies a rental stock of 14,857 dwellings. This compares with 11,156 rentals in 4870 on census night. You would have to throw in all the census responses with no tenure stated as well as every unoccupied dwelling on census night to get to the implied stock. That pattern is replicated across other Cairns postcodes.

If I aggregate the SQM data for Cairns postcodes (4868, 4869, 4870, 4878, 4879) I get a vacancy rate of 1.6% in October. SQM also provide data on a regional basis although this is not labelled for number of vacancies and doesn’t correlate well with the aggregation for Cairns. Perhaps I have misunderstood something?

The SQM vacancy rate for the Cairns region at 1.9% does though correlate with the most recent HTW CairnsWatch which is based on a rent roll survey at 2%.


Source: HTW CairnsWatch

More important than trying to achieve some kind definitional and measurement ideal is a consistent series over time which is understood.  While I have some doubts about this aspect of their data this doesn’t discredit SQM as a useful source. The query I would have on that HTW series is whether the ‘balanced market’ range displayed remains contemporary or requires review. It looks high compared to what now seems to be ‘normal’ in most cities.


SSM: young males lost in the post

Well the same sex marriage results are in with the predicted resounding win for ‘yes’. I’m sure there will be more than enough media commentary for any sane person so will just focus on the response rate where Leichhardt came in last in Queensland.


The bottom four response rates are all the NQ electorates. There was nothing unusual about the result in Leichhardt which was about average at 63.4% yes versus 60.7% for Queensland. Kennedy was one of only a few to vote against with just 46.7% in favour.

The lower response rates came in the younger demographics and particularly males:


All that now needs to be resolved apparently is how to deal with the rights of homophobic bakers and florists *insert irony font here*.

Global Pokie Hub?

Market announcement this morning from Reef Casino:

Dear Sirs,

QLD Government’s announcement regarding “Global Tourism Hubs”
We refer to the Queensland Government’s recent policy announcement regarding possible “global tourism hubs” which “focusses on tourism as a primary driver with gaming as a second” specifically in Cairns and the Gold Coast.
Given the size of Cairns with a population of approximately 150,000 people, it is our view that a second casino in Cairns would not be commercially and economically viable. However, as previously stated, it is the Trust’s intention to continue to invest in its main asset, the Reef Hotel Casino in Cairns. The Trust also continues to consider any further investment opportunity to expand its operations.
Following the Queensland Government’s recent announcement, the Trust will continue to work with the Government to further explore opportunities to expand the Reef Hotel Casino in Cairns on state-owned land in the Cairns City Port precinct identified by the Government which is located across from, and adjacent to, the Reef Hotel Casino so as to create a larger integrated resort encompassing the current Reef Hotel Casino complex and including public amenities.
The Trust has reinvested more than $55 million in the Reef Hotel Casino since its original investment of some $210 million in 1996. The Reef Hotel Casino continues to be the biggest single site employer in Cairns providing stable employment for approximately 500 Cairns residents.

Dear Sirs? Perhaps some in the Market Announcements Office at ASX  to which it is addressed are not Sirs but I digress. They are almost certainly correct that Cairns City would not be able to sustain two casinos. Despite their promotion as tourism assets Australian casinos remain heavily dependant on pokies.

Employment Extravaganza

It was a big week for regional employment data to play with. The regional SA4 stats from ABS were out on Thursday as covered by Conus: Regional jobs data shows regional QLD employment growth at fastest pace in a decade

The same day saw updated quarterly numbers to June for the Queensland state public service. Nick Behrens has noted on Twitter that growth currently appears to be running ahead of population growth which may not be consistent with stated fiscal principles. Nick has previously posted on this and the public sector component of employment: Queensland Public Service Headcount: adhere to the sixth fiscal principle or jettison it; Debunking myths about public sector growth and Queensland’s jobs market.

Public service full time equivalent employment growth at the SA4 regional level looks like this:


Sunshine Coast Hospital opening during the year may be responsible for at least some of the outsized growth there. A direct comparison of Cairns and Townsville is interesting.


Ha! Take that Townsville and we will have a bigger Christmas tree too!

Friday and a belated release by Dept of Employment of Small Area Labour Market data, also quarterly to June: Dept of Employment SALM data confirms the improvement in the North

Insurance Imbroglio Inquiry #XLIV

ACCC: Northern Australia insurance inquiry

On 25 May 2017, the Australian Government directed the ACCC to conduct a wide-ranging inquiry into the supply of residential building (home), contents and strata insurance in Northern Australia.
Scope of inquiry
Matters to be considered by the inquiry shall include, but not be restricted to:
the pricing and availability of insurance to consumers in northern Australia;
the key cost components of insurance pricing in northern Australia and how they have changed over time, particularly catastrophe risk;
the terms and conditions on which insurance is supplied;
the competitiveness of markets for insurance in northern Australia;
the existence and extent of any barriers to entry, expansion and/or exit in the supply of insurance in northern Australia;
any impediments to consumer choice, including transaction costs, a lack of transparent information, or other factors;
identifying any regulatory issues, or market participant behaviour or practices that may not be supporting the development of competitive markets for insurance in northern Australia; and
the profitability of insurers through time and the extent to which profits are, or are expected to be commensurate with risk.
The inquiry commenced on 1 July 2017. The ACCC must submit interim reports to the Treasurer by 30 November 2018 and 30 November 2019. The inquiry is to be completed and a final report submitted to the Treasurer by 30 November 2020.
On 24 October 2017, the ACCC released an issues paper for public comment. Submissions are due by 5pm, 21 December 2017. 
The ACCC will host public forums across northern Australia in late November / early December.

Domestic growth descent at Airport

Cairns Airport numbers for September continue a softer domestic growth trend:


Domestic growth for the month was 0.8% and International growth 1.8%. The airport noted that passenger growth aligned with seats so load factors were similar.


The numbers here are ex transfers and transits where it was also noted by the airport:

The 4% growth of transfer passengers includes strong growth in travel to Weipa related to expansion of Cape York mining activity. When measured by seat capacity, Weipa is Cairns seventh largest route with 16,200 available seats in September.

Source: Cairns Airport

Experience on Watch

The skydiving tragedy last week in Mission Beach placed ASX listed Skydive The Beach (SKB) back on my radar. SKB is the operator of Skydive Australia which conducts the tandem skydives in Mission Beach and Cairns. SKB has built a model aggregating this activity to a dominant position in Australia and NZ.

I did look quickly at SKB some time ago when it diversified with a takeover of local icon Raging Thunder. Then promptly forgot about it. Subsequently it has acquired Reef Magic cruises and is now in the middle of acquiring GBR helicopters which is due to complete November 1st.

Quick back of the drink coaster calculations these three Cairns based non-skydiving businesses look like comprising about a third or more of group revenue based on current corporate configuration and available information. So SKB decided on a name change and this week is now Experience Co (EXP) to reflect a broader adventure tourism strategy.

I always like ASX listed entities for the transparency and regular reporting requirements which can provide useful information where the activities are material for the group. This is why I will miss Mantra Group when it is swallowed by the Accor octopus.

So Experience Co is now on my watchlist and look forward to their future results and commentary.

Note: This is not investment advice but general commentary related to Cairns. I do not have any holding in EXP. Good research or advice is essential.

Seasonal Cyclone Outlook

Australian Tropical Cyclone Outlook for 2017 to 2018

The Northern region outlook suggests an average number of tropical cyclones with a 53% chance of more tropical cyclones than average and a 47% chance of fewer tropical cyclones than average. In a typical year the Northern region experiences around three cyclones, and one or two tropical lows that later become cyclones after moving into the Western or Eastern regions. About three-quarters of the tropical cyclones in the Northern region impact coastal regions. Outlook accuracy for this region is very low.
The Eastern region outlook shows a near average season is most likely, with a 54% chance of more tropical cyclones than average and a 46% chance of fewer. About a quarter of tropical cyclones in the Eastern region make landfall. Outlook accuracy for this region is low.

There have been some reports of a mild La Nina event developing in the Pacific such as this recently at the AFR:  Meet La Niña, the little girl spreading fear in commodity market

The BOM do cover this possibility at the Weekly Tropical Climate Note:

Sea surface temperatures (SSTs) across the equatorial Pacific Ocean have warmed marginally in the last week as a result of weakened trade winds. The SST pattern across the equatorial Pacific Ocean is currently indicative of an ENSO-neutral state. Atmospheric indicators also depict an ENSO-neutral state.
A majority of international climate models surveyed by the Bureau suggest further cooling of the tropical Pacific Ocean is likely. Five of the eight models suggest SSTs will cool to La Niña thresholds by December 2017, but only three maintain these values for long enough to be classified as a La Niña event.
It is not unprecedented for La Niña to develop this late in the year, however it is unusual. Of the four late-developing La Niña events on record, three have coincided with above-average wet-season rainfall across northern Australia.
See the Bureau’s current ENSO Wrap-Up for more information

Tinaroo Falls is currently at 42% capacity so would probably appreciate a somewhat wetter than average season. Rainfall down at Cairns Aero has trended below average for several years now following the severe 2011 La Nina period.

Cairns Rainfall

Don’t start me on the period used by the Commonwealth Actuary for his insurance study. Probably worth keeping a weather eye on global catastrophe reinsurance markets also following the US hurricane season.