Recovery hopes build
Significantly improved sales across Tasmania give the property industry hope that the times are a-changing and the future will be brighter than the reality of recent years
Sometimes in the midst of darkness, there is a touch of light. It might be just a flickering single flame, but it can be enough to create warmth and guide the way.
Unrelenting coverage of the woes of Tasmania – a stagnating economy, high unemployment, a struggling minority government – have meant dark times indeed for the property industry. But Real Estate Institute of Tasmania (REIT) president Adrian Kelly has seen the light.
There has been an increasing volume of sales over the last year, he says. “At the end of 2013, we finished up 10-15% in terms of sales – in comparison to last year. This is very positive news: we are seeing a turning point.”
For example, despite Tasmania not being a big auction state, auctions are starting to do OK now, and the industry is seeing multiple offers on properties again.
While he concedes the trend was largely evident in the metropolitan areas, and that the regions are still struggling to show increases, he remains upbeat. “2013 was the best year that we have had for a few years. We feel the improvements that we are starting to see should flow through and continue.”
At this point, prices have not moved much. Nor does Kelly expect them to for a couple more years because the drivers are not there yet. But he believes there will be further increases in the volume of sales in the near future, and that prices will flow then through eventually.
As the prices skyrocket in markets like Sydney and Melbourne, Tasmania is starting to see an increase in mainland investors. This is largely due to Tasmania’s affordability in comparison to those mainland markets. “Mainlanders” are now about one in every seven buyers.
Kelly says this is one way in which what is happening on the mainland is starting to flow through to Tasmania.
However, he also thinks that the record low interest rates are finally starting to impact on the state’s market too. “It took a long time, but I think we are now starting to see increased sales as a result.”
Investors should also note that, due to the affordability of property, the state’s rental market remains particularly strong with attractive yields.
Louis Christopher, from SQM Research, says Hobart is recording a clear trend of declining vacancies with the vacancy rate currently standing at just 1.4%. This means rental properties are increasingly sought-after.
Most property commentators are not as optimistic about the prognosis for Tasmania. For example, Hotspotting’s Terry Ryder and Residex’s John Edwards have both recently noted the Apple Isle’s lack of real growth.
The big problem continues to be unemployment. Ongoing body blows to major employers, particularly in the forestry and manufacturing industries, have led to a significant lack of jobs in certain areas. Over 2013, the unemployment rate increased by about 1%.
In terms of stimulating economic activity, it remains to be seen what impact the enhanced First Home Buyer Boost (FHBB), which was announced late last year, will have. But Kelly says developers and builders are reporting an increased volume of enquiries. It is hoped that will translate to a boost in construction industry activity.
According to the most recent Herron Todd White report, some of the state government’s job creation initiatives are now well underway. More are due to be implemented this year.
Further, the Coalition government has committed to a $100 million plus economic growth plan for the state. This plan includes:
• A major upgrade to the Midland
• The expansion of Hobart airport
• The establishment of a Centre for Antarctic and Southern Ocean research
• Implementation of a jobs program that will provide a payment of $3,250 to Tasmanian businesses hiring long term unemployed job seekers
Mortgage delinquency increases
Meanwhile, the latest Fitch Ratings report shows that Tasmania has replaced Queensland as the worst performing state by mortgage delinquencies.
The proportion 30+ day’s arrears on home loans in Tasmania were recorded at 1.51%, while the 90+ days arrears were at a record high of 0.68%. Stagnation in the local housing market and unemployment are believed to be the key drivers of these results.
Suburb to watch
Long renowned as an idyllic seaside town, Kingston Beach was originally a beachside escape for early 20th century residents of Hobart. It even boosts a literary claim to fame as the childhood holiday location of Australia’s first Nobel Laureate Patrick White.
That beach resort history has been carefully preserved by the area’s heritage plan which ensures buildings adhere to a certain, slightly quirky style and character, Peter Hodgman, from Raine & Horne Kingston, explains.
“This means that houses tend to be weatherboard cottages with high-pitched, galvanized iron roofs and picket fences. Properties tend to be on smaller blocks of land, although this is not always the case.”
Describing the suburb as “the jewel in the crown of the Kingsborough province”, Hodgman says it is the lifestyle on offer, along with the close-knit, caring community atmosphere, which are its selling points.
Situated on the Brown River and featuring mountain views, Kingston Beach is just 11kms from the Hobart CBD. Despite this proximity to the city, the suburb is well-served in amenities with its own shopping centre and a good range of leisure activity clubs, cafes, parks and playgrounds. The beach itself is safe and sheltered.
Whenever the economy picks up, Kingston Beach tends to be the first to see capital growth – and this means property values will increase, Hodgman says.
Prices are set to rise, Wendy Nielsen, from Harcourts Kingsborough, agrees. “The area is very popular. Some residential vacant blocks of land are selling for $450,000 - $500,000.”
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