TAS Excerpt from the 2014 August Market report

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Changing times 

Will the economic promises of Tasmania’s new Liberal government help along the fledgling recovery of the state’s property market – or will other factors prove more important?

Traditionally, a change of government heralds the start of a new era. And, as with any new beginning, this means high hopes for the future abound. Such is the situation in Tasmania at the moment. 

Since the Liberal Party grabbed victory in the March election, the Apple Isle has been focused on a fresh start. After 16 years with one party in power, any change was going to be appealing, especially if improvements to the struggling economy seemed to be on the cards.

Commentators agree that rebuilding of the economy and the creation of more jobs, as promised by the new government, are essential to the future of the state – and to the continued recovery of its property market.

Recent increases in building approvals and new jobs are being trumpeted by the government as a sign of renewed confidence in Tasmania. But some question whether this will impact on the still-struggling property market in the near future.

Airport extension to benefit market

Rock Property managing director Kent Medwin says the change in local government has brought investors the promise of greater stability. This has helped boost market confidence, which will aid the long-term recovery of the market. 

“Conservative governments usually bring about a desirable investment landscape. But in terms of the type of specific initiatives that might benefit the market … how significant they might be and the timeframe they might take place in is anyone’s guess.” 

In his view, the Federal Government’s plan to extend the runway facilities at Hobart’s airport will prove more immediately important. “It means that, starting early next year, there will be direct flights from mainland China. This will have a tangible economic benefit which, in turn, will have a noticeable impact on property values.” 

Medwin feels the greater access provided by the airport will lead Chinese residential investment to increase. “The level of genuine interest from Chinese buyers is currently about the highest it has ever been. This is likely to have a positive impact on market growth.” 

Further, the preference of Chinese buyers for buying new stock off the plan – which is not common in Tasmania – might impact on how stock is provided to the market in future, he says. 
Any such change should be of interest to investors as it would provide them with an improved range of investment options, and opportunities, in the future.

Cause for optimism

In the latest RP Data-Rismark Home Value Index results, Hobart’s market actually recorded a slight drop (of 0.6%) in values over May.

However, Medwin believes there is still cause for optimism about the future of the Hobart market. It has had several consecutive periods of growth and there is also increasing interest from mainland investors wanting to invest in Tasmania. 

Cash flow is in the sights of mainland investors, he says. “In Tasmania you can get yields in the 4% to 11% range. That is attractive to many people. The top end of that range is an opportunity that investors won’t find in most capital cities.” 

As mainland investors are driven out of more competitive and expensive markets, like Sydney and Melbourne, they will increasingly look to the affordability of Tasmania, Medwin adds. “And it is those investors who will drive prices and values in the market up.” 

According to the latest Herron Todd White report, overall annual sales volumes in Tasmania have increased by almost 15% off historical lows – but the market is still differentiated by region. While Hobart’s market is the most buoyant (with a 12% increase in median price) and Launceston’s has stabilised, regional markets remain oversupplied.

Impact of FHBB 

Meanwhile, the HTW report also notes that government changes might lead to a greater level of economic confidence for the future. But it adds that the market sectors to watch are vacant land and newly constructed housing, which are currently underpinned by the state’s First Home Builders Boost (FHBB). 

The FHBB appears to be creating a market bubble as first home owners fast-track their entry to the market, the report states. Should the grant cease at the end of the year, as it is scheduled to do, there could well be corresponding fallout in those markets.

For investors, the existence of the FHBB means there is currently diminished competition for established housing stock moving into the future. Should the FHBB cease, this situation might change a little.

Suburb to watch: Lindisfarne

Well known as the home base for the water activities that dominate life in the area, Lindisfarne sits along the shores of one of the Derwent River’s sheltered bays. The Motor Yacht Club of Tasmania, the Lindisfarne Sailing Club and the Lindisfarne Rowing Club are all situated on its foreshore.

Just 6km from the Hobart CBD, the quiet, leafy suburb provides views of the city, the river and Mount Wellington, Jo Brownless, from Fall Real Estate, says.

“Lindisfarne also has great local services and amenities, including a range of schools and shopping options, while retaining a real village feel. This helps to make it an extremely appealing suburb.”
All of these features mean the suburb also has strong appeal for renters. For this reason, it has a healthy rental market with a reliable tenant pool.

Lindisfarne has a particularly good mix of old and new housing stock, including some Federation-style properties and waterfront properties. There is also a lot of renovation work currently being done, Brownless notes.

“Buying a property in this suburb will net you good returns as an investor, either in terms of rental yields or renovating for growth or resale. And the prices are getting better and better. I don’t believe they have reached their peak yet by any means.”

As further evidence of Lindisfarne’s appeal, the latest Herron Todd White report includes it in its list of the Tasmanian suburbs experiencing higher residential house sale volumes.

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