A high unemployment rate, increasing vacancy rates, and an uncertain economic future place Tasmania’s property market at the bottom of the pile
The numbers are in, and they’re not good. In fact, some could argue that they are downright bad. Tasmania’s unemployment rate has reached 7.4%, which is 2% higher than the national average of 5.4% and the highest figure the region has recorded in just under a decade.
The state’s residential vacancy rate has continued to trend upwards, with the latest data released by the Real Estate Institute of Tasmania (REIT) revealing a 4.7% vacancy rate state-wide in December 2012.
Property prices have slumped up to 6.7% across Tasmania in the last 12 months, with both regional and
metropolitan areas recording a drop in housing values.
It’s enough to make you think things cannot possibly get any worse in the beleaguered southern state – but that is precisely the point, reports First National Real Estate.
According to the property group’s Tasmania Property Market Outlook report for 2013, the average number of days a property takes to sell is expected to fall by 25% as conditions and confidence begin to improve.
“Market conditions in Tasmania are expected to stabilise in general, with our members unanimously of the belief that the market has bottomed or will do so over the coming six months, driven by ongoing economic and job uncertainty and oversupply of properties,” the report confirms.
They also suggest that Hobart will be the best-performing area in the state, “attracting the most interest from buyers, especially from interstate”.
Buy while everyone is selling
While there are plenty of other states and territories across Australia where opportunities for instant gain are more pronounced, investors should not write Tasmania off just yet.
As Warren Buffet famously says, you should go against the crowd and buy when everyone else is selling, because with more people selling and less people buying, there are greater opportunities to secure discounts and under-market deals.
Although the property market in Tasmania may not be thriving right now, this might just be a good time to buy. The market is at its floor and price points are substantially lower than in other capital cities, with Tim Lawless, head of research at RP Data, confirming that Tasmania is the most affordable capital city in the country.
When researching the number of national property sales that were priced under $400,000 in 2012, Lawless confirmed that 67.6% of all house sales and 82.5% of all unit sales in Hobart fell into this category.
“Not only is this Australia’s most affordable capital city, but Tasmania is also showing the highest rate of unemployment,” he says.
Lawless also likens Tasmania’s neighbourhoods to the mainland’s regional suburbs and towns, as they share similar economic and employment struggles.
“As far as housing affordability goes, the vast majority of regional cities provide a substantial saving on the cost of housing compared to the capital cities,” he says.
“The drawback to many of these areas, though, is that job opportunities are often scarce. If we saw more government and private sector businesses choosing to locate their headquarters in regional locations, the labour market conditions would improve and it would be easier to attract new residents.”
The central hub of Hobart, together with its neighbours West Hobart and South Hobart, has been a hive of activity in recent months, recording some of the strongest growth rates in the state.
While other parts of Hobart are struggling to register even modest price growth, median house prices have increased 35% in the last 12 months in Hobart city (up to $505,000), and 6% in South Hobart (reaching $442,500).
Meanwhile, the apartment market has performed well in West Hobart, where median prices have leapt 17% to a new median of $385,000.
Real estate agent Mark Patton from Petrusma Property says these inner-city suburbs are always sought
after by both investors and owner-occupiers, particularly West Hobart, which has always held its value even “during difficult times”.
“It’s a walk to the city for work, a walk to restaurants in North Hobart, and there are lots of funky little shops and cafes and delicatessens in the area. Coupled with the views to the city and water, and it’s a great little spot,” he says.
Property owners in the market to sell will always benefit from a steady stream of interested buyers who are keen to access the suburb’s cosmopolitan lifestyle, he adds.
“There are always more buyers than sellers, because everyone wants to take advantage of the inner-city lifestyle and the cafe culture that exists here – and they want the benefit of being able to walk to work,” Patton explains.
“The area is predominantly popular with either younger people entering the market or older couples downsizing.”
The majority of buying activity is taking place in the under-$400,000 price bracket, which is where demand is strongest.
“If you look at a property for between $350,000 and $400,000, it will sell very quickly. This price range is generally the younger professionals and the first home buyers,” Patton says.
“Some of the bigger homes, which are $650,000 and up, are less in demand, but they hold their value well. They’re bigger family homes with big city views. West Hobart completely holds it own and the inner-city suburbs always do well.”