Slow and steady growth continued in the August quarter, with experts predicting much of the same for the rest of the year.
The Tasmanian property market has continued into the August quarter in the same vein as the past five or six years – with slow, measured growth. Investors in the southern state are typically in for the long haul, making gains through a ‘buy and hold’ strategy.
Kent Medwin, managing director of Rock Property, says that although the market began strongly in the quarter, conditions have certainly slowed. “You could attribute the slowdown to interest rates, the GFC recovery process or even the recent federal election, but the fact remains the same: property values are stable but the number of individual sales has reduced,” he says.
Mary Massina, executive director of the Property Council of Australia’s Tasmanian division, agrees that house sales across the state were down in July, compared to both June 2010 and July 2009 figures. However, there were disparities between the various regions: while sales were down in the south, they increased by 15.6% in the north and 22.2% in the northwest.
House growth topped units in the August quarter, taking out second place on the capital city leader-board. Gaining a 2.47% increase in value over the three months, the median house price for Hobart now sits at $382,500. Units increased in value by 0.69% over the three months to $284,000, according to Residex. Year-on-year growth was 8.21% for houses and 7.41% for units.
A number of factors have affected the Tasmanian property market in recent months, including the political uncertainty surrounding both state and federal elections. “In the last six months, Tasmania has been hit with both state and federal hung parliaments that have stalled business confidence and brought about instability,” explains Medwin.
“This instability is remarkable given that there is no logical reason for it. The relatively similar economic policies of both sides of parliament will bring about similar trading environments for investors, regardless of the final election result.
I look forward to normal supply and demand forces restoring order to the property market in the next quarter.”
Experts have identified a national housing shortage of stock on both the sale and rental markets, which should offer good opportunities for vendors. According to SQM Research, the lows of April recovered slightly to around 2,700 properties in August – but still sat well below the highs of November 2008. ABS recorded a 4.4% rise in dwelling approvals in July, which shows optimism for more supply coming onto the market later in the year.
Massina adds that demand has softened for properties in the outerlying commuter suburbs, while it remains strong in the inner suburban areas. “Demand in the upper price bracket in quality inner suburbs remains stable, with good sales occurring in the $1m–$2m bracket,” she adds. “Likewise, the inner market from $400,000 to $700,000 is strong.” However, she adds that demand in the first homeowner market for properties priced between $150,000 and $300,000 has weakened.
Rental opportunities for investors
Houses in Hobart achieved 4.64% rental rates, at $340 a week, while those in the country fared slightly better at 4.75%. Units, on the other hand, are higher in the capital with 4.78% yields, compared to country Tasmania at 4.64%.
Rock Property’s Medwin expects yields to rise further as rental demand outstrips supply across the state. “Our vacancy rate is currently at record lows for the winter period and we’re expecting virtually no vacancies in the upcoming busy summer months. This situation is inevitably driving up rental yields across all suburbs state-wide.”
Medwin adds that the level of active investors has dropped off in recent months, which he says is creating further opportunities for proactive buyers.
“The last quarter has definitely seen a reduction in the number of active investors,” he says. “I think that many investors have been watching interest rates closely in order to build a confidence in the market. For those investors like ourselves who continue to have confidence, buoyed by the national housing shortage, the current market has presented great opportunities for acquiring a number of undervalued sites.”
The months ahead
The economic outlook for the state is slow and steady in the year ahead, according to a Propell National Valuers report. It says the state grew just above the national average in August, with 0.9% population growth – the lowest in the country, but normal for the state. “The prospects for Tasmania in 2011 are for continuing slow but steady growth at a pace typical of the state.”
A number of infrastructure plans are expected to bring further growth to particular regions of Tasmania over the next few years, including the Kingston Bypass with completion due in June 2012, and the Dilston Bypass to be finished in August next year. Hobart’s northern suburbs are also expected to benefit from the $164m Brighton Bypass and Brighton Transport Hub. The dual-carriage highway will link the East Derwent Highway at Bridgewater to the Midland Highway north of Pontville, with work due for completion by June 2012.
Medwin says that assuming interest rates remain at current levels or lower, moderate growth should continue in Tasmania for the remainder of the year. “In spite of the current cost of money, political transition and GFC recovery, the primary drivers of residential housing values continue to be supply and demand.
“Until federal, state and local governments can derive an appropriate mix of incentives for property developers – large and small – to increase housing supply, the mounting demand for residential property across our ever-growing population will continue to drive prices upwards.”