A host of recent reports indicate that Tasmania’s economy is still foundering in the doldrums. While this does impact on the property market, the situation may not be as dire as it initially seems
In maritime lore, the doldrums are famously renowned for prolonged periods of calm which trapped seafaring adventurers, often reducing them to intense states of anxiety. This state of being is one which aptly describes the Apple Isle’s economy, which continues to stall and flounder.
According to the latest CommSec State of the States report, Tasmania remains locked at the bottom of the Australian economic performance table on most key indicators. It describes the state’s economic outlook as challenging.
Meanwhile, the latest Deloitte Access Economics Investment Monitor states one of the major reasons for the steady decline of Tasmania’s economy is its consistently below-average population growth. Further, the state’s working age population declined by over 1.1% over the two years to the end of 2013.
Perhaps the biggest problem is the ongoing lack of jobs. While there has been a small improvement in the unemployment rate, it is still at 7.4%. And this has a significant impact on the state’s property market as it limits the pool of active buyers.
However, REIT president Adrian Kelly is more optimistic about the state’s property market – if not its economy overall.
He says that while REIT’s latest quarterly property market report shows a 4.6% decrease in house sales over the March quarter, sales were actually up 14.9% for the year. The median house price remained steady on $305,000 over the quarter, which equates to an increase of 4.5% for the year.
“Most positively, Hobart’s median house price increased by 4.1% to $385,000 over the quarter,” Kelly says. “This was its third consecutive quarterly increase in a row and is in conjunction with an increase in sales volumes.”
The latest RP Data-Rismark Hedonic Home Value Index results, which record that Hobart had a 2.8% growth in dwelling values over the quarter, add support to the REIT results.
While Launceston recorded an 18.5% decrease in sales over the quarter, Kelly says this is due to a market correction after an outstanding December quarter. Sales in Launceston were still up 25.1% on March last year.
Where are the FHBs?
It is the lack of first home buyers entering the market which is of most concern, Kelly continues. First home buyers now account for just 17% of house sales across the state.
“This is impacting on sales in the lower end of the market and the planned removal of the $7000 first homeowners’ grant on July 1 will just make the situation worse.”
But, according to the latest Herron Todd White report, first home buyers in Tasmania are responding to the state’s First Home Builders Boost (FHBB), and as this incentive applies to new build homes, it has not had an impact on existing housing markets.
The report states that building approvals and activity have increased by just over 8% since the same time last year. It adds that increasing volumes of building contracts indicate that first home buyers are active within the residential construction market.
This means that, unusually, property investors are not competing against first home buyers in the Tasmania market.
Further, the Herron Todd White report suggests the state offers investors a unique opportunity – due to low interest rates, a firm rental market, government incentives*, and capital values coming off a declining market. All of these factors mean good returns for investors.
The combination of ongoing affordability and a strong rental market should be attractive to investors, agrees Kelly. “Giving what is happening in the Sydney and Melbourne markets, we think some investors will be priced out of the market and start to look to markets like Hobart’s.”
Property industry confident
Despite some of the conflicting information, it seems that confidence is returning to the Tasmanian property industry. The latest Property Council/ANZ Property Industry Confidence Survey shows a seven point jump in confidence.
ANZ’s Paul Braddick said the increased confidence reflects an improving economic outlook following two years of very weak conditions. “Housing market activity is expected to improve - with expectations of further gains in house prices and residential construction activity.”
There is currently a general air of positivity among REIT members, Kelly adds. “Most of our members are reporting improvements in the market. We feel that, overall, the situation has changed for the better.”
Suburb to watch
Waverley
Surrounded by mountains and with its own lake, Waverley is considered to be one of Launceston’s up and coming gems. Once a housing commission suburb, it has gone through significant change in recent years and now has much to offer.
Situated 4km from Launceston’s CBD but with the Tasman Highway running through the middle of the suburb, the suburb offers direct proximity to the attractions of the city. It also sits next to the Newstead shopping and medical precinct.
While it is predominantly a residential area, the suburb is home to Waverley Woolen Mill and some light industrial/commercial businesses, like a vineyard and winery.
The combination of these features mean few other suburbs in Launceston provide the proximity to amenities and the general convenience that Waverley does, James Hoyle, from LJ Hooker Launceston, says.
Typical properties in the suburb are standard brick and tile three bedroom homes with a lock up garage or carport built around the 1970’s – 1980’s and also 2-3 bedroom weatherboard properties built around the same era.
Hoyle says Waverley offers affordability to first time home buyers, especially young families, and, with strong rental returns, it also offers good opportunities for investors.
“As sale prices stabilise and the Launceston property market bounces back and grows, interest in suburbs like Waverley that are situated so close to the CBD will only grow more popular.”
