Rather than being racked by two-speed troubles, Tasmania’s property market is more likely to be in cruise control this year, coasting along the bottom amid dire predictions for its wider economy
These days it’s become a fact of life – economists talk about speed more frequently than 1990s ravers in luminous green clothing.
Almost all of Australia’s financial problems and challenges are thrown under the umbrella term of two-speed or three-speed economics. In fact, the term is being so frequently thrown around that it is arguable that a lot of us ordinary folk have lost sight of what it really means. We’re marvelling at the Emperor’s supposed clothes because we’re too scared to admit that we don’t see them and must, apparently, be stupid.
The reality of a two-speed economy is a frightful one. What we’re really seeing, according to the theory, is two wholly different growth drivers in the economy – one that’s performing well and one that isn’t. It’s much like a Penny- Farthing bicycle. There’s a big wheel that’s powering forwards, while a little wheel labours behind it. The big wheel is what’s guiding the bicycle onwards, while the little wheel is being reluctantly tugged ahead only because the other wheel is moving. It doesn’t make for a very stable ride.
If the bicycle as a whole were Australia, the bigger wheel would currently be the resources industry. Spurred on by Asian demand for raw materials, it is what’s been responsible for keeping the country out of recession at a time when Europe and the US are struggling. The little wheel represents the other parts of the economy: manufacturing, retail and a host of other sectors.
Now let’s look at Tasmania. Not having a prominent resources industry like Queensland, WA, NT or even SA has, and also lacking the manufacturing and commercial bases of NSW and Victoria, the Apple Isle constitutes a big spoke in the part of the economy where the wheel isn’t turning well.
This is where the state’s current troubles start. “This is a state that is still shedding jobs despite what is already worryingly high unemployment… with soggy retail turnover and with a bunch of businesses going bust,” reports Deloitte Access Economics’ latest Business Outlook report.
The report adds that while the value of the Australian dollar remains high, this situation is likely to continue. “If the Australian dollar does come to the party by losing some altitude, that would be very welcome news for Tasmania’s manufacturing and forestry sectors, who have been under the gun,” it says.
Having put economic descriptions about Tasmania through their paces, the reality of Tasmania’s property market, surprisingly, might not be quite as speed obsessed. Despite the poor state of the wider economy, property prices should stay reasonably intact over 2013, according to APM senior economist Andrew Wilson.
“I don’t think there’s a lot of downside to Tasmania. It’s coming from a very low bottom and I would suggest the Hobart housing market will continue to bump along, hoping that 2013 will be a good year for the Australian economy,” he says.
Wilson adds that low population growth, which has frequently been a criticism of the state’s ongoing financial prospects and property market, should be seen in the wider context of Tasmania’s lifestyle appeal. With a pleasant natural environment, lower prices for goods and property, and a seemingly slower pace of life, the island is a popular destination for retirees and tree-changers. This partly explains the state’s successive years of positive net interstate migration, according to a QBE LMI Housing Outlook 2012-2015 report.
“Most interstate migration comprises ‘tree change’ movers from the mainland. They will often have a greater level of assets and, having retired, will have a lower need for employment,” says the report.
Flat or defying gravity?
That Tasmania is a destination for retirees and tree changers leads Wilson to conclude that the state is unlikely to experience the kind of property price falls that were experienced in areas such as Queensland’s Sunshine Coast over 2011 and 2012.
“It’s not the sort of environment where you get fire sales and that’s because of the lower population levels. People usually just stay put. They move there to downsize or retire, so they don’t do anything. It just means there are low volumes being generated.”
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