The Queensland State Emergency Service said it had received dozens of calls for help, with nine people needing treatment, mostly for cuts and abrasions.
"Early this morning a mini-tornado tore through the suburb of Vincent resulting in approximately 40 houses being damaged with 25 of them losing their roofs," a spokeswoman told AFP.
One resident told Sky News that when the storm hit it sounded like "a jet taking off". Another said it was like "being in a washing machine".
Queensland Premier Anna Bligh, who faces being thrown out of office in state elections this weekend, said it was a frightening experience for the people affected.
"It appears to be something akin to a mini-tornado. It has taken roofs off houses and there's a lot of vegetation down and that's caused enormous damage," she said.
She added the suburbs of Vincent, Pimlico and Gulliver had been affected, with heavy rain continuing to fall into the exposed interiors of roofless homes.
"These are very heavily populated areas of Townsville so there's no doubt that a lot of people have had a very scary experience this morning."
The town was officially declared a disaster area, which allows victims access to cash grants for rebuilding and other support and provides for the defence force to be called in to help if needed.
Photos posted on Twitter and other social media sites showed widespread destruction, with Vincent resident Beth Simmons telling ABC radio the storm lasted about 20 minutes.
"Suddenly one of my windows flung open. When I went to shut it, the other one flung open and broke on my arm," she said, adding that she sheltered in the bathroom as the storm raged.
"I have a roof, which is wonderful, but my neighbours don't," she said.
Another resident Shane Sayers was asleep when the storm hit his house, tearing off the roof.
He said he knew his home was crumbling when he heard an enormous crack.
"That's when I realised the whole house was being torn apart," he said. "We jumped in the bathroom and just prayed."
"Well we went around the neighbourhood and there's houses that haven't got roofs and houses that have lost complete walls and trees down and power lines down, cars flipped over. It's just amazing," he told ABC.
Ergon Energy spokesman John Fowler said about 7,000 homes were blacked out across Townsville, which is adjacent to the Great Barrier Reef with a population of just under 200,000 people.
"It's going to take a while to restore," he said.
Wild weather caused problems elsewhere in Queensland's north and far north, with widespread flooding in places.
Nine people had to be rescued from their cars after becoming trapped between two causeways near Cairns, the Queensland Department of Community Safety said, while a key highway was cut off by a landslide.
- AFP
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