Executive director of the Property Council of Australia (Tasmania division) Mary Massina says Hobart’s rental vacancy rate is sitting at an all-time historical low of 2%, with Launceston measuring a tiny 1.5%.
“As a consequence of supply shortage, rental values remain strong with short leasing periods and a firm tenant demand at present.
“These rates are dramatically underlining the issue of supply and demand and demonstrating that the residential market needs to provide a dramatic increase in houses over the next five years,” adds Massina.
Herron Todd White’s The month in review report for February 2010 also highlights the shortage of available rental property relative to demand in the Hobart market. The report outlines a significant lack of both houses and units for rent in the cities of Hobart and Launceston, which is creating a very tight rental market.
With such a positive outlook for investors, it’s no wonder that interest has been strong. “Investor sentiment has returned to highly positive levels in the ‘mid market’,” notes Massina. “In addition, there’s anecdotal evidence to suggest that at the start of 2010 there’s been an influx of mainland investors buying properties, which would indicate that the residential investor is coming back into the marketplace.”
Stability in the southern state
Median house and unit prices have fluctuated minimally in the month of February, achieving medians of $362,500 and $277,000, respectively.
Director of Halliwell Property Agents Alan Halliwell explains that Tasmania is a relatively resilient market. “Tasmania tends to remain stable during fluctuating markets, which means fewer increases in price during good times, but it also means less damage during tough times.”
WBP Property Group’s state manager for Tasmania Daryll Timms agrees, explaining that the state hasn’t experienced the same population growth as felt in other places around the country.
“Some evidence has suggested an increase in the median house price during the recent quarter; however, this change is a likely result of resumed trading at the top-end of the local market, resulting in a lift to the median price.
“At the commencement of 2010, there’s been no perceivable increase in sales volumes – the current low levels resulting in many real estate agents quietly exiting the business,” Timms says.
Massina notes that the volume of sales has eased slightly across the state since its peak in March last year, but that the inner-western shore of Hobart is seeing multiple bids and short selling periods at present.
“The prediction is that there will be strong buying demand at the ‘mid levels’, especially in the inner-western suburbs where demand is particularly strong at present, which kick-started in late February after a slow start in January,” Massina adds.
Supply lagging behind
Massina states that there are only small property developments in the pipeline for Tasmania – including 400 units at Brighton, 300 at Cambridge and a 430-lot approved at Rokeby – but more are urgently required.
“According to the National Housing Advisory Council, Tasmania needs about 6,000 additional houses over the next five years. This is being driven by Tasmania’s demographic change – an increasing ageing population, an increase in one-person households, demolition of older stock, and an increase in investment homes through an increase in self-managed super funds,” Massina explains.
“There are a number of key reforms that need to occur in order to facilitate an increase in supply: an increase in land supply; greater urban density; metropolitan planning for greater Hobart and Launceston, thereby increasing certainty and consistency about further residential growth; and ensuring greater linkage with infrastructure provision and land use planning,” Massina continues. “Understanding the consequences of the supply-demand equation is a major challenge for Tasmania and one that’s acting as a handbrake to future economic growth for the state.”
Tasmania scored a disappointing 5.2 out of 10 – the lowest in the country – on the recent RDC/PCA’s Development Assessment Forum Reform Implementation Report Cards. The cards identified progress on development assessment reform across the country, suggesting that the island state still has work to do.
“Clarity about where further residential and commercial development is possible through a metropolitan plan would add certainty and clarity to spur further investment,” advises Massina. “In addition, with the Tasmanian 10-year Infrastructure Plan only in its infancy, there’s still a lack of clarity about where infrastructure is proposed and how that will link with land use planning.”
Tasmanian premier David Bartlett recently announced a $16m, four-year state government investment in public transport which could potentially boost demand in property markets across regional Tasmania. The funding forms part of the state government’s long-term plan to improve public transport in Tasmania, with program initiatives aimed at increasing passenger numbers.
“This [investment] could have a positive effect on regional areas by improving services and reducing commuter times,” Bartlett says.