The Tasmanian property market isn’t normally one that is troubled by peaks and troughs. Like the South Australian market, it tends to be one where the highs and lows are relatively smooth.
Nevertheless, even Tasmania has been hit by the recent market slide, and Residex figures suggest that Hobart suffered most out of all Australian city markets in April, with a reduction in market value of 2.0%. Residex CEO John Edwards cautions that this may just be due to the small size of the market, and is more susceptible to adjustment than others. RP Data also reports that, in the first quarter of 2011, property values fell by 1.4% in Hobart; houses were down 1.7%, and units fell by a worrying 4.3%.
Cameron Kusher, senior research analyst at RP Data, puts the larger variation in the admittedly small unit market down to affordability.
“The unit market is fairly limited to the central areas of Hobart,” says Kusher. “Meanwhile, we’ve recorded the median house price in Hobart at $325,000 and the median unit price at $280,000. Most people probably feel that they may as well spend the extra $45,000 and get a house.”
Overall, Kusher believes the Tasmanian market will continue to track the national market slowdown. He also highlights population growth as a specific concern.
“[Tasmania] never has particularly strong population growth, and that’s come back a bit more over the last 12 months,” he comments.
Indeed, ABS figures show that Tasmania had the slowest population growth in Australia at just 0.81% for the year ending September 2010. This represents an increase of only 4,094 new residents – and that sluggish influx doesn’t bode well for housing demand both in the short and medium term.
Economically, the state’s fortunes are mixed, too. ABS employment figures for April place the unemployment rate at 5.7% – the highest in Australia. There are, however, a couple of bright spots on the horizon in terms of the economy, the biggest of which is the much-trumpeted Gunns pulp mill project at Bell Bay in the north, which the company reckons will bring $10m of economic benefits to the state.
“In terms of major industrial projects in Tasmania you can hardly ignore the Gunns pulp mill,” comments valuer Herron Todd White in its Month in Review report for May.
“When the mill was announced, our offices received a lot of calls fielding questions from speculative investors seeking our opinion on development and its likely effect on the residential market,” it continues. “With the prospect of a significant increase in employment for the area, the nearby population centres of George Town and Low Head experienced a peak of interest and positive market response as investors entered the market.”
However, the report adds that the ensuing delays for the approval and construction of the mill have tested this response, which eventually declined. Caution seems to be the watchword after the initial market enthusiasm.
“Whether renewed interest will occur following the mill’s gaining of federal approval remains to be seen. However, we have not as yet received a single call from any speculative investors with the market perhaps being ‘once bitten twice shy’, and awaiting the turning of soil and pouring of concrete before investing once again.”
That caution may be wise. Concerns over funding and the environmental impact of the mill has dogged the planning process, with the Greens mounting a last-ditch attempt to repeal the laws permitting the mill’s development in May. While the attempt was unsuccessful, Gunns’ managing director admitted that the company has “more work to do to convince Tasmanians that the mill is safe” after a survey commissioned by the company showed that only 37% of respondents were supportive of the mill.
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