Slow and steady wins the race
Poor Tasmania has been down in the dumps in recent years. However, slowly but surely the Apple Isle is on its way back up
It’s no secret that Tasmania has had a weak housing market over recent years. While the financial crisis hit all areas of Australia, it seemed to hit Tasmania disproportionally. Unemployment skyrocketed and a mass exodus began as the search for work took many inlanders to the mainland. Construction began to slow, and retail dropped for several consecutive quarters. To make matters worse, the recession came back to bite a second time in 2012/13.
Fortunately, it is now widely perceived that Tasmania has since hit rock bottom, and the only way to go is up.
“Tasmania’s got its act together,” says Harley Dale, chief economist of the HIA Economics Group. “Over the next three to four years economic growth should be trending higher. That would imply more business investment, more employment and more demand for housing. It looks a lot better than last year did.”
Tasmania’s crippled housing market is on the mend. Hobart house prices have increased by 2.9%, rental rates have risen 6.1%, and sales are up about 30%.
REIT president Tony Collidge says Hobart seems to be driving the market.
“I think price increases are going to happen in time, but the really positive thing is we are having increased activity in numbers,” he says.
“Confidence is starting to grow, and it’s onwards and upwards.”
Like many of Australia’s other states and territories, the low interest rate has had a significant impact on Tasmania.
“This low interest rate environment has turned the situation a little bit,” Dale says. “It’s part of the equation and certainly it is playing quite a considerable part. But there are other factors at play as well.”
A recent change in government is being attributed to improvement in business and consumer confidence.
“There’s been a little bit of investment. There is some focus now on providing a friendly business environment where you’re going to see some investment come through in some key areas of the economy including agriculture.”
A small but steady uptick in population growth is also seen to be having a beneficial effect. Between 2009 and 2012 Tasmania was almost sucked dry, but a recent shift in migration patterns has created a small pick-up in demand for residential properties.
“When you get that kind of situation it tends to help in terms of what people are prepared to invest in. It’s been very modest but there has been a very slight pick-up in population growth.”
Strength in tourism
Tourism is fast becoming a strong contributor to the state’s economy. Collidge says increasing tourist numbers are helping Tas get back up and running.
“Tourism numbers are at an all-time high,” he says. “We’re a tad above a million and by 2020 they’re hoping to increase tourist numbers to 1.5 million.
“Tourism has really taken off. In fact we’ve just won 10 of the 29 Australian awards; that’s punching well above our weight.”
Tasmania appeals to more than just travellers as a tourism hotspot. Large-scale national and international developers are starting to see the benefits of putting time and money into the area.
“The Crown Plaza announced that they are going to build an international hotel in [Hobart] which is currently being constructed. There are three or four other Singaporean based companies that are buying up real estate to put up accommodation in the state,” Collidge says.
“Tourism is the main driver of the resurgence in our economy, together with our agriculture and aquaculture. It’s certainly giving us an advantage.”
What’s holding the market back?
While there are some positive economic signs, Michelle Koper of CoreLogic says Tasmania is not out of the woods yet.
“The factors holding back the market are weak migration and population growth, high unemployment, low employment participation and a weak overall economic position,” she says.
“When the housing market last saw very strong growth in 2004, interstate migration was at its highest level in many years; it appears this is the key driver of housing demand and growth.”
Dale says population is the key to Tasmania’s future. “You need working age population moving into the state to drive demand for housing. That’s where the median long-term returns would emanate from.”
SUBURB TO WATCH
New Town: Old-town charm
New Town may be one of Hobart’s oldest suburbs, but this does not mean it’s full of buildings well past their use-by date. In fact, old-town charm mixed with the new that comes with renovation makes this suburb highly desirable. The colonial, Georgian, Federation and art deco architecture is a major drawcard. With stock falling by -41.7% and listed properties receiving an average of 645 visits, you had better get in quick before they all disappear.
New Town is clearly a popular option for young and established families. There are four schools, two of which are the only single-sex schools in Tas – Ogilvie High School for girls and New Town High School for boys. Even the New Town primary school has something to brag about, being over 100 years old.
Centro New Town Plaza is an accessible commercial hub, with supermarkets, restaurants and boutique shops. Being only 4km from the Hobart CBD is also a significant bonus. A drive to town takes under five minutes, and bus routes criss-cross the suburb. Popular areas include Park Street and New Town Road, as they offer easy access to local amenities.
Can you afford to buy in this suburb? Find out how much you can borrow