The Tasmanian property market has been doing it tough for several months now.
The market itself – typically regarded as a steady, even sleepy market due to the state’s low population growth and middling economic growth – has been struggling in the wake of interest rate rises, slow tourism and ructions in the state’s key forestry industry.
Well, the situation may be starting to look up where timber is concerned. The sealing of the $276m Tasmanian Forest Statement of Principles opened the door to the Tasmanian government reaching a $23m settlement agreement with timber firm Gunns. This influx of capital is likely to set the company’s troubled finances on firmer footing and boosts the likelihood that Gunns’ plan to build a massive pulp mill project in Bells Bay will go ahead. The firm now needs to find a joint venture partner for the mill – but this is a much more likely proposition now.
Andrew Wilson, senior economist at Australian Property Monitors, thinks the breaking of the impasse over the project is good news.
“Because of its low sales base, the Tasmanian market tends to be very reactive to local issues,” says Wilson. “We’ve seen that in the last year, with the underperforming economy and change in political leadership – that uncertainty has fed through into the housing market perhaps more so than in other centres.”
Wilson adds that the movement could be the catalyst that leads to a shift in the market. “Any news is good news,” he adds. “Buyers can become activated quickly in terms of lift in confidence levels, and that can have a noticeable impact. I’d say it’s good news: it’s precursor for increased confidence and activity in housing market.”
Real Estate Institute of Tasmania president Adrian Kelly also suggests that there’s light on the horizon for the Tasmanian market.
“The March and June quarters were tough in terms of trading – we saw a drop of around 20–25% in volume,” says Kelly. “However, in the last four to six weeks our agents have seen a marked increase in enquiries from buyers and quality property starting to come onto the market.”
Kelly even goes as far as saying that the market has bottomed out.
“It looks as though we’ve reached the bottom of the cycle, and unless something dramatic happens it looks like we’re starting to climb back up. Everyone’s very upbeat about the spring.”
That’s not to say that the Tasmanian market has been completely dead, however. Median prices in certain areas have moved, with the REIT’s latest report highlighting that premium south Hobart suburb Mount Nelson saw the biggest increase in median price – a sizeable 35.2% over the year. Most of the rest of the REIT’s top performers came in at under the $300,000 mark, though.
Kelly comments that Tasmania’s relative affordability is a strength of the market.
“Rental yields are great too: generally speaking, it’s still possible to pick up returns of 6–7% - that’s largely driven by a housing shortage and a lack of good quality rentals. The trick is buying in an area which has historically shown good growth: for that, you really need to stick near to the established centres like Hobart or Launceston, and even Devonport and Burnie.”
The shortage of quality rental accommodation also means there are opportunities for investors who like to get hands-on – although Kelly warns that fixer-uppers are few and far between.
“Most sellers are pretty switched on when it comes to renovating before sale now,” he says. “There are still opportunities there, but you need to be in touch with a good real estate agent so you can find out about them as soon as they come on the market.”
