Slow recovery weighs on confidence
Property industry data continues to show improved results, and business confidence appears to be building, but the Apple Isle still faces some economic struggles ahead
Even the most passionate of Tasmanians must feel frustrated by the ‘one step forward, two steps back’ progress of the state’s fragile recovery. Of late, media reports of improved job growth and development projects have been mixed with the grimmer news of mine closures and public sector cuts.
In these up-and-down times, it has been the property industry that has provided some consistent flickers of hope. The most recent Real Estate Institute of Tasmania (REIT) quarterly report shows that house sales are at their highest level for three years and the median price has increased by 2%.
However, the latest RP Data CoreLogic Home Value Index
results show that Hobart’s dwelling values fell by -0.8% over the three months ending August 2014. This could be due to a seasonal slowdown. More positively, the city recorded a year-on-year increase of 2.8%.
PRDnationwide Hobart proprietor Tony Collidge believes there has never been a better time to buy real estate in Tasmania. Due to several years of dormant prices, Tasmania now has the most affordable houses of anywhere in Australia.
In particular, Hobart’s marketplace has some of the best opportunities for capital gains in Australia, he says. “On the clock, Hobart is sitting between 6 and 7, so there is still a way to go and it is a good time for investors to look. Although some may have been smart enough to buy already, REIT data indicates that 15–20% of recent sales have been to mainland investors.”
Further, he adds that rents and yields are better in Hobart than in most of the other major cities. The vacancy rate is lower than 2%, so there is strong demand for rental properties and the rental market is healthy.
The most recent Herron Todd White report backs this up, noting that Tasmania has some appealing investment opportunities. This is because the market is coming off historic lows, has a good variety of stock and a relatively strong rental market, and historically low interest rates.
It states that, for investors, these elements are the ingredients for a recipe yielding good gross returns, with the added potential for capital growth.
Sounding a more cautionary note, Collidge, who is also vice president of REIT, says the future of the market will be dictated by the economy, which remains the lowest-performing economy in the country.
The new Liberal Government is a majority government, which is generating greater economic confidence, he continues.
“People are feeling more positive. And we are starting to see the results of that in the real estate market. For example, sales transactions over the last three months have been considerably higher than in the last three years.”
While the state still needs more economic drivers and more job opportunities, with increased economic confidence comes investment in projects and employment opportunities, Collidge says.
Fortunately, according to the most recent National Australia Bank Monthly Business Survey
, business conditions in Tasmania have improved. The NAB survey also indicates that business confidence has grown at the second-fastest rate in the country.
On top of this, there are a number of major projects underway in Hobart (the $100m Parliament Square redevelopment, the $100m Myer redevelopment, and the $456m Royal Hobart Hospital redevelopment) which should create significant employment opportunities.
In Collidge’s view, these economic improvements should increase the demand for property and, as there is no oversupply, this will push prices up. “Besides, interest rates couldn’t get much lower and the lending environment is good. So it is the right environment for growth in the property market.”
Be wary in the northwest
However, while this state of affairs spells brighter times for the Hobart market, other markets in the Apple Isle are not so lucky.
The northwest of the state continues to be hard hit by economic issues and decreasing employment opportunities. Hard on the heels of the recent closure of the Mount Lyell copper mine comes news that financial results are making closure of the Henty gold mine ever more likely.
Shrinking employment opportunities are helping to cause a decline in capital growth, according to the Herron Todd White report. It suggests approaching the area with caution.
Collidge says that, while the situation in the northwest is hard, things are starting to pick up slightly.
“Because prices are depressed, there might be some good opportunities. For investors, it might be good to get in now and buy at the bottom of that market.”
SUBURB TO WATCH
Risdon Vale: High-growth, high-yield prospect
Surrounded by bush and characterised by its tight-knit community, the ex-housing department suburb of Risdon Vale has started to attract attention due to its affordability.
Rychelle Kay, from PMM Real Estate, says the suburb’s reasonable property prices provide a higher than average rental return for astute investors, while also making it a great entry point for first home buyers.
Located 8km from the Hobart CBD, it is bordered by the East Derwent Highway and has a reliable bus service. This means it has easy access to the CBD, as well as the Glenorchy
and Eastlands shopping centres and Lindisfarne Village.
Further, the family-friendly suburb’s own amenities, which include shops, food outlets and an active community centre, are good, Kay says. “They all provide great service with everything you could need.”
Currently, a typical Risdon Vale property is a three-bedroom, one-bathroom house. Kay says that, as it is an ex-housing department area, the houses are all fairly similar in design, except where they have been renovated or extended.
“However, two subdivisions planned for the area are bound to improve and change the demographic of the area. Prices in the area can be expected to pick up with the recovering market, and the new subdivisions should contribute to an increase in prices too.”
Risdon Vale has no standout streets as most properties are of a similar standard, Kay adds. But the most sought after properties are those falling within the area’s median price range for houses, because they are popular with investors and first home buyers.