Hi
It's interesting to compare Cairns and Townsville. As two large regional centres, they do compete, but are very different. Like anywhere, both have their pros and cons.
Yes, Townsville does have excellent fundamentals for investors. A diverse economy, historically more resilient than Cairns, a pro-active council, and heaps of potential in terms of its strategic location, port expansion etc. Townsville airport is very small. It's technically an international airport, but not really functioning as one. Townsville is recognised as having one of the most diverse economies in Australia, and widely touted as the second capital of Queensland. It is probably best known for its diverse economy, health capital of NQ, over 300 days per year of sunshine, thriving health and education sectors, and its considerable and expanding defence force.
Cairns has a university, recently expanded hospital, a huge international airport, and new flights are increasingly being introduced. As mentioned elsewhere on this thread, the Cairns economy has not done well in the past. Its achilles heel has been it's over-reliance on tourism, and it took a big hit from the GFC. It is coming off a very low base. However, business confidence is high in Cairns. The amount of energy that has been invested into diversifying its economy is considerable, and links with PNG and Asia are strong. It is more of a lifestyle destination, a tourist mecca, retirees haven, and widely seen as the jewel of the north. It is increasingly capitalising on, and being recognised for, its tropical expertise in medicine, science etc, as well as a 'food bowl' for asia investment.
Both cities do have issues to be aware of, which have historically been the thorn in the side of the whole region. Cyclones and insurances are a particular concern to investors in the region, and you do need to know the in's and out's of these, and how to work around them. For example, and as with anywhere else, flood maps need to be checked diligently. By paying careful attention to the geographical features of the regions, as well as the age and construction of buildings, you can reduce your insurance risk considerably. With Abbot's commitment to the Development of the Northern Australia policy, and the formation of the round table committee to tackle the issue, there is an increasing amount of downward pressure on insurances. The latest advance on the issue was the suggestion of increasing market competition through opening the market up to Asian insurance companies. It's definitely a case of watch this space. Personally, I have explored the issue thoroughly and I'll post further information on it in the near future. In my opinion, if/when this issue is addressed, investors would probably have preferred to get in earlier rather than later as I believe that subsequent price rises are likely to outweigh any savings in insurances.
The other thing to be aware of is the supply and demand factors in both. In parts of Cairns, for example, the entire stretch between Trinity Beach, Trinity Park, Smithfield etc has just about been fully developed. What was once a glut of empty buildings has now been pretty much absorbed, although further demand driven development is still underway. Have a look at the supply graphs of the area and you will see what I am referring to. Townsville has also been developing at a rapid rate. It has more supply than demand in growth areas like North Shore and the CBD, however seems to be preparing itself for an influx of defence personnel families expected in 2014, among other things. Both regions experience strong inter-state population movement, and have higher than average projected population growth.
In terms of rental growth, Cairns definitely leads the way. Rents are high, and rentals in strong demand. I would say it has reached it's tipping point, where it is cheaper to buy. Not so in Townsville, which has seen a softening in the rental market in some suburbs, and at particular times of the year.
Herron Todd White indicators put Cairns further into recovery than Townsville. Cairns turned the corner around the middle of 2013, Townsville towards the end of 2013. Both are experiencing a high level of interest and multiple offers on some properties, with some selling at or before first open for inspection.
Like anywhere though, it really does come down to different suburbs, different streets and different houses. Both Townsville and Cairns have their historically strong performers, and their 'poised for growth' suburbs. On the one hand, there are some areas that have been suppressed for years due to socio-economic factors and their stigma. These are often located right next to 'blue chip' areas with highly sought after schools and capped enrolment. In Cairns, for example, the area widely known as the 'mumbles' (Manunda, Manoora and Mooroobool) could be described as the Logan of the region. Head a block or two up the hill though, or towards Edge Hill and Whitfield, and it's a different story. Strategically, though the M's are well located, in terms of proximity to amenities, and I won't be surprised at their growth. If you have watched the change in suburbs like Annerley (QLD), Footscray (VIC), Western Sydney, Logan etc, you might know what I mean. For investors looking for pre-tax cash-flow, they most likely fit the bill, but do check your crime maps etc. On the other hand, investors looking for after-tax cash-flow would be better off looking in the newer areas with restricted land supply, away from flood zones and in good proximity to major shopping or universities. For example in Townsville, Idalia currently fits the bill.
In my opinion, where you choose to invest does come down to what kind of an investor you are, or your investor and risk profile. Some investors do look for a history of strong growth, as an indicator of potential future growth. Some believe that little or no growth is an indicator of potential future growth. Personally, I am a strong advocate of John Lindeman's work on 'Mastering the Australian Housing Market'. That's a whole other discussion though!
Cheers
Jen