Confidence increasing, activity decreasing
With investors bowing out of the market and first home buyer activity set to be contained by state funding changes, the prognosis for Tasmania’s property market into 2014 is not looking positive
With mortgage interest rates at historically low levels, Real Estate Institute of Tasmania president Adrian Kelly believes there is more confidence in Tassie’s property market now than there was 12 months ago.
But Kelly admits that the local real estate market hardly represents an appealing destination at present for would-be property investors.
“I don’t think prices will rise at all,” he says frankly of Tassie’s short-term property forecast. “But it is interesting to watch the larger cities where their auction clearance rates are high, and their markets are clearly improving.
“I think that will flow through to Tasmania, but it won’t happen for a while yet. We need to sort out issues around employment and job security first, because once those things are better then we’ll start to see an improvement in the property market.”
When Kelly talks about “issues around employment”, he’s referring to the state’s unemployment rate: at 7%, it’s the highest in the country and well above the national unemployment rate, which hovers around 5.5%.
But it is the state government’s decision to can the First Home Owner Grant (FHOG) in 2014, in favour of shifting funding towards first home builders, that has Kelly most concerned.
“The First Home Builder Boost is a positive step but will only help 5% of first home buyers, as the remaining 95% prefer to buy an existing property,” he says, adding that only 40 people have chosen to take up the building grant between January and May 2013.
First home buyer activity to rise?
The abolition of the FHOG was announced in late May, when premier Lara Giddings handed down the state budget.
The move will save the government $11m per year, while the First Home Builder Boost is expected to cost around $4–5m per year for three years, an overall saving of at least $6m annually.
Premier Giddings hopes the home builder’s scheme will help stimulate jobs in the construction industry, thereby bolstering the overall economy.
“If there are more jobs, people will spend more and will look at upgrading their homes or car, and you can stimulate the overall economy, which benefi ts the real estate industry,” she says.
Kelly is not as convinced, describing Tassie’s property market as “on its knees” and in desperate need of more funding and economic stimulus, not less.
But there is one potential silver lining for the state’s ailing property industry.
The FHOG will cease from 1 July 2014, giving buyers time to save deposits and shop the market.
As a result, a fl urry of buying activity in the lower end of the market may come about as fi rst home buyers hurry to take advantage of the grant before it’s too late.
Suburb To Watch
Located south of Hobart’s CBD, Battery Point is one of Tasmania’s most prestigious suburbs and is known for its larger residences and premium apartment blocks.
The suburb is unlike many other neighbourhoods in the Greater Hobart area, says Freddie Forstner of Battery Point and Heritage Real Estate, and for that unique factor you’ll pay a pretty penny.
“The convenience factor is important, but Battery Point is aesthetically quite irreplaceable; there’s a spiritual beauty that can’t be replicated anywhere in Tasmania,” he explains.
“You’ve got restaurants, cafes, a very well-known bakery and patisserie, and the post offi ce is right in the middle of the village. I don’t know of a property that wouldn’t have potential (for growth) if you were to buy in this area.”
Indeed, Battery Point has historically been a star performer: homes in the luxury suburb have surged in value from a median of around $350,000 in 2002 to $925,000 in 2012, almost a three-fold increase. Still, you don’t need to be made of money to invest in the suburb.
“There are cottages in the mid-$500,000 range, which is quite reasonable, while the exquisite waterfront places on Clark Avenue, Tasmania’s most expensive street, sell for over $3m,” Forstner says.
“There are several apartment and villa complexes, such as Stowell Gardens, and the villas there sell at anything from $600,000 upwards.”
Can you afford to buy in this suburb? Find out how much you can borrow
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