Future growth looks good – albeit not spectacular – for the island state
Tasmania is often – and perhaps unfairly – mocked as a quiet backwater, somewhat divorced from the rest of Australia where nothing of note happens.
Admittedly, its property market has never been one for stellar highs – but then, it’s rarely succumbed to deep lows either. And, while it has been going through a rough economic patch in recent months, things are starting to look up for the island state.
One of the most concerning indicators – unemployment – is rapidly coming under control, with ‘significant falls’ in the unemployment rate being recorded since June. Another point in Tasmania’s favour is that its population growth rate – legendary for being the lowest in Australia – has been less affected by the downturn in overseas migration that has impacted the rest of the country.
The nascent recovery is borne out in the figures, too: APM records house price growth in Hobart as 2.6% for the final quarter of 2010 – the most robust in Australia – and suggests that with employment growth and rising incomes, the steady performance of the housing market should be maintained throughout the coming year.
Infrastructure projects such as the $565m redevelopment of the Royal Hobart Hospital, the construction of 30 child and family centres around the state, a new acute medical unit in Launceston General Hospital, the development of a $36m maximum security block at Risdon Prison and a new $30m high school at Kingston should also help to tide over the state’s economy in the short to medium term.
Indeed, the view from the ground is that Tasmania should continue along its steady growth path.
“The situation is fairly steady – as it has been over the last 12 to 18 months,” explains Rob Zubin, director of Hobart-based agency My Property Hunter. “Admittedly, overall sales volumes are lower, but that seems to be the way it’s going to be from now on. Even so, the market has remained relatively steady."
The biggest impact on the market has been the departure of many first homebuyers, says Zubin.
“The number of first homebuyers halved in 2010 – from 30 to 15%,” he says. “That’s put pressure on rental properties, and vacancy rates are consistently 2% or lower with returns continuing to be strong.”
Even so, Zubin warns investors not to expect rental yields to rocket up, as affordability constraints are likely to create a natural ceiling for rents.
However, the real key to the future of Tasmania’s property market could lie with the Baby Boomers, argues Residex CEO John Edwards.
“What we could see is a high level of growth over the next few years, as Melbourne people take advantage of the capital growth they’ve secured over the last couple of years, sell up and retire to Tasmania – especially as the growth in Melbourne now seems to be slowing.”
Edwards suggests that Tasmania could be the locale of choice due to its affordability and closeness to Melbourne.
“What I think will happen is that we’ll see Hobart become the ‘retirement capital of the south’, as Melburnians gravitate there with big bucks in their pockets. Still, there’s a high level of risk in just banking on the retirement crowd right now,” says Edwards
Zubin acknowledges that there’s already been an increase in the retiree and sea changer market. “The retirement market has grown from around 10 to 15% of the overall market,” he says. “Admittedly, Tasmania already has an older population compared with most states, but it’s attractive as a retirement destination from lifestyle and affordability viewpoints.
“Even so, I wouldn’t say that there was compelling evidence of a flood of mainland retirees yet, but it will be interesting to see if that increase in population continues.”
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