Supply and demand are two key factors fuelling the region's property boom

The Cairns property market has gained extra vigour during the course of 2007 due to the pressures of strong housing demand stemming from high levels of job creation and population growth.

Property price increases have come up a notch, accelerating from the 10 per cent or so per annum price growth experienced last year to about 15 per cent per annum growth at present.

Even though new housing construction is adding to the rental supply, rental vacancy rates also remain low as a result of the demand for rental accommodation outstripping supply.

The market is maintaining intensity across virtually all sectors and suburbs and sectors appear to be experiencing growth.

Investors are still a strong force in the market, but the market is increasingly catering to local owner-occupiers as a result of strong population growth and strong confidence in the local economy.

Neither past interest rate increases nor the spectre of further rises has dampened enthusiasm in the market.

However, with the Cairns median house price hitting $361,000 in August affordability is becoming an issue, especially to local buyers who judge prices against their historical perceptions of the market.

But it's a matter of perspective. Investors, particularly those from the southern capitals, regard housing in Cairns as very affordable by their home market standards as well as being an attractive market due to its high population growth, strong economy and low rental vacancy factors.

Houses at the $361,000 median price level typically rent for $360 per week, showing gross rental yields on houses in the low 5 per cent range. Similarly, the median unit price (excluding new units) hit $233,000 in August, with units at this level typically renting for $220 per week.

Acreage property is one sector that does not appear to have kept the same pace as the overall market, with rural residential land values, for instance in estates 30km south of Cairns, remaining especially affordable.

Rick Carr is Herron Todd White's research director.