Hobart has led a rebound in home price increases across six of Australia’s eight capitals, according to RP Data-Rismark’s June Hedonic Daily Home Value Index. The surprising 2.7% increase in value for Hobart properties topped next best cities Perth and Canberra, which both recorded 2% flat.
Apart from Adelaide and Darwin, each capital recorded an increase of 1% or more, in what is traditionally a weak month for home values.
RP Data research director Tim Lawless attributed the positive result to two factors.
“The catalyst for the improvement in market conditions is likely to have been the 55 basis point reduction in the average discounted home loan rate over May and June, as well as the subtle improvement in consumer sentiment readings that have been reported,” he says.
The index comes in the middle of a period of sustained negativity for Tasmanian property investors, with an unemployment rate of 7.3% adding to poor consumer confidence and putting the state economy in a far more volatile position than its mainland counterparts.
Vacancy rates have remained tight in the state until recent times, when the Real Estate Institute of Tasmania (REIT) confirmed the usual 1–2% rate had doubled in a period of 12 months to now sit at 3–4% and sit as high as 6% in certain areas. This may spell bad news for any recoveries to house values.
REIT president Adrian Kelly says many property owners have had to lower rent or risk extended periods without tenants.
“Many investors are buying and selling residential properties for 5–10% less than the previous market price,” says Kelly, adding that the same investors would also have to accept that unfortunate reality with their rental properties.
With a lack of upwards pressure on prices and a perceived oversupply of stock, due to strong construction in the post-GFC stimulus period, BIS Shrapnel has released a report, predicting only moderate growth between now and 2015, with inflation causing it to dip into the red in real terms.
The report stated that an influx of tree-changers and retiring downsizers to the state had been offset by an even greater exodus of young people to the mainland markets, or overseas.
“Tasmania’s net interstate inflow has now reverted to a net outflow,” says Angie Zigomanis, BIS Shrapnel senior manager and report author. “This will slow population growth, meaning the current excess supply will continue to persist over the next three years.”
Bottom buying opportunities
The upside of the uncertainty surrounding the future of Tasmania’s housing prices is that upgraders, owner-occupiers or investors looking for a good property can now get them at extremely affordable prices.
A snapshot by REIT shows 10 suburbs across the state with median house prices of $210,000 or less, with Queenstown being the most affordable at $90,000. The mining town, on the state’s central west coast, has houses listed for as low as $30,000 according to realestate.com.au, which provides a great opportunity for someone looking to acquire properties for cheap and either add value through renovation, or hold long term.
Even the most expensive suburbs, such as Sandy Bay, in Hobart’s inner south, are representing their best opportunities to get into the market for some time. Sandy Bay’s median of $585,000 will appeal to upgraders who are after an entry point into one of the state’s most sought-after locations.
ANZ head of property research Paul Braddick believes tourism is still one of Tasmania’s great white hopes for improving the economy, with recent fluctuations in the Australian dollar providing flickers of positivity.
“Tourism has been a bit of a nail in the coffin over the past 18 months because with the Australian dollar as strong as it has been, a lot of people have been doing their holidaying offshore, rather than domestically,” Braddick says. “A little while back the dollar went down in value a bit and this led to it being promoted as a bit of a driver for Tasmania, but over the last month or so we’ve seen it push up from 97 cents to 103 cents, which has not been good news for the tourism-related states.”