A lack of confidence in the local economy has put property on the back burner for investors
Hobart remains a buyer’s market, but the buyers so far don’t seem to want anything to do with it.
Some properties purchased in the last few years at ‘bargain prices’ have since been re-listed for less than they were sold, while sellers who rejected offers last year are now being forced to sell for much less. The upcoming spring selling season is crucial for Hobart and with RP Data reporting nearly 7,000 more homes on the market than six months ago, buyers are likely to be treated with some dream deals. But first, they are going to need to change their own mindsets.
APM senior economist Andrew Wilson says the market is likely to remain subdued while Tasmania continues to endure tough economic conditions.
“We are seeing some fluctuations in terms of prices, but there is not a lot of buyer activity going on down there,” Wilson says. “There’s no real sense of breakout buyer confidence in that market and that reflects higher unemployment and no sense of improvement in local economic conditions.”
Confidence is likely to receive a further kick in the guts after the recent news the long battle to sustain the Gunns timber company has effectively been lost, with the 137-year-old family business going into administration.
While Premier Lara Giddings is holding onto the faint hope that a last-minute investor will purchase the company, more than 600 workers are facing the prospect of losing their jobs. Considering the Tasmanian population is only slightly more than 500,000, the Gunns closure would impact the unemployment figures significantly.
“The unemployment rate in Hobart was at 5.9% in August, which is the highest in the nation,” says Wilson. “And the trend is up. A 5% unemployment rate is reasonably acceptable, but it still reflects an underperforming economy and keeps buyer confidence subdued.”
Few areas able to resist price slide
Few areas of Tasmania have shown any immunity to the spiralling downward trend in medians for 2012. Real Estate Institute of Tasmania figures showed the Tasmanian median decreased by 3.3% overall in the June quarter, to sit at $290,000. This figure represented a 4.9% fall for the calendar year.
Only Hobart stopped the number being significantly worse, with a 4.8% increase for the quarter, putting its median at $370,000. This was propped up in part by three of the five municipalities reporting prices higher than the state median being located around the capital. These were Clarence, Hobart and Kingsborough.
Meanwhile the north-west area of the state was hit hard, recording a slide of 7%. This region also saw a 1.1% rise in vacancy rates, to sit at the diabolical total of 6.2%.
Sales activity was down by 6.5% for the quarter, highlighting one of the main issues that need to be reversed if the Tasmanian market is to rebound.
“Some buyer activity has been happening, but it’s at a low level,” says Wilson. “Generally, there’s no competition amongst properties throughout Tasmania and that means that people are postponing their buying positions. Sellers are also waiting things out for now. The capacity of people to pay, which has been reduced by high unemployment, really does have an impact on housing markets.”
An end to the negativity?
Mainland markets remain integral to Tasmania’s eventual recovery, according to Wilson.
“We need an overall lift, which we’re starting to move towards,” he says. “Generally in the Australian housing market, you do find there is a follow through or ripple effect that impacts on all capital city markets.
“I suggest Hobart will be a laggard in terms of being dragged down by unemployment; however, the middle and upper markets are driven by confidence and we’re at least six months away from seeing any increased optimism in the outlook for Hobart.”
Even those looking for value buys should think very hard before making the purchase.
“Some value could be found in nicer areas, but you’d be looking at a medium term type of outcome in terms of capital growth,” Wilson says.