The Apple Isle’s property market has been in the doldrums for years, but could a combination of economic factors, greater investment, and the Sydney/Melbourne boom provide a boost to the state?
Tasmania has often been seen as the poor cousin among Australia’s property markets.
Structurally, its economy has been somewhat sluggish in recent years, with little benefit from the resources boom. Neither has it benefited from a strong finance sector like Sydney and Melbourne.
Instead, Tasmania has suffered from something of a brain drain as young people head to the mainland to seek their fortunes, leaving an older population behind them, and the Apple Isle has instead relied on tourism, agriculture and its declining forestry sector.
Deloitte Access Economics says Tasmania is facing “the ‘same old same old’ when it comes to the basic constraints faced by this state. Its demographics are dire; its overall population growth is anaemic”.
However, the falling dollar and lower interest rates may signal better times ahead for Tassie, helping boost housing construction, manufacturing and retail. State subsidies for agribusiness exporters are also helping the state’s farmers.
The lower dollar also means the state’s tourism industry is receiving a welcome boost – albeit perhaps not to the same extent as that of Queensland’s leisure sector – and a bump in infrastructure spending isn’t harming prospects either, including the Royal Hobart Hospital upgrade.
Investors eyeing Tasmania should tread with caution, however: Deloitte is careful to note that any good news is “more of the ‘dodging a bullet’ variety than it is ‘homegrown boom’.”
Thanks to Tasmania’s lethargic economy, Hobart has the distinction of being Australia’s most affordable capital. Indeed, values have dropped marginally in the 12 months leading up to September 2015, according to CoreLogic RP Data. CoreLogic RP Data’s research director, Tim Lawless, highlights that Hobart has been the weakest capital city market in the post-GFC period.
“It hasn’t seen growth,” says Lawless. “In fact, values are down 2% since 2009. It’s really coasting along – even languishing.”
That’s down to the aforementioned economic malaise and barely perceptible population growth. BIS Shrapnel’s Angie Zigomanis also highlights that the state government’s choice to provide the most generous first home buyer incentives in Australia, coupled with a relatively robust construction rate, has kept a lid on prices.
The combination of these factors also means Hobart’s property market is dominated by owner-occupiers, and that opens up opportunities for investors seeking yields.
“There’s a major shortage of rental stock, especially in Hobart,” says Domain’s Andrew Wilson. “The vacancy rate is around 1% and yields are quite high – Hobart’s house rents are on track to match Adelaide
With average house prices more than $115,000 lower than the SA capitals, that means cash flow. In an environment in which investment lending is likely to be harder to procure, the ability to better service loans could make the difference when it comes to expanding a portfolio.
Time for a change
History may also provide an insight as to where else capital growth may come from for Tasmania.
“The last time there was an interstate population inflow was when the Sydney market boomed back in 2002 and 2003,” says Zigomanis.
Given that we’ve just seen a significant boom in the Sydney market, both Zigomanis and Lawless suggest we could see an influx of Sydney and Melbourne buyers into coastal areas of Tasmania, seeking either a sea/tree change or a holiday home.
This could inject some much-needed life into towns on the north coast.
In addition, Zigomanis flags the installation of the National Broadband Network as a bonus for mobile or remote workers seeking lifestyle or lower living costs – and Tasmania’s ‘clean, green and pristine’ reputation won’t hurt either.
“There’s also still the possibility of a ‘MONA effect’,” says Zigomanis, referring to the Museum of Old and New Art in Hobart. “Hobart is building a bit of a reputation as a cool, bohemian place to be. There are isolated pockets of potential, but you need to pick the right neighbourhood.”
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