Island state is showing signs of life
Many signs are indicating that Tasmania is on the rebound, but experts agree that it may not be all smooth sailing
Years of economic struggles in Tasmania clearly had a detrimental effect on the property market and the local psyche. A lack of economic growth has forced locals to look for employment on the mainland resulting in population losses and corresponding stagnation in market activity. However, more and more signs are painting a mending picture of Tasmania’s financial woes.
Recent economic data is relatively positive with unemployment at 6.8%, its lowest rate since February 2013. A number of large-scale projects are in the pipeline, including $42.5 million in repairs to north-east freight roads, the $12 million Burnie Port project and five new irrigation schemes likely to get funding within 12 months.
Propell economist Linda Phillips says economic boost is crucial for long-term growth in Tasmania’s property market.
“Unemployment is the main factor here,” she says.
“Improved retail spending and a lowering of the unemployment rate will need to become evident for this to be of any real benefit to the local market.”
The past 12 months have shown some positive indicators that the local market is improving.
Positive Real Estate property coach Carolyn Weston
can see an encouraging shift in momentum for Tasmania’s reviving market. “Just recently, particularly in the Hobart area, there’s better market sentiment,” she says.
“The houses are selling a little bit more quickly and the rental yields have increased massively.”
Weston says the Tasmanian Government’s First Home Builders Boost has been very influential in aiding growth in the area.
“There are lots and lots of houses being built when you drive through. There’s growth happening there.”
This may prove beneficial in the short term, however, unless population rates increase, the ensuing loss of activity in the rental market could only exacerbate an oversupply.
Tasmania currently has a population growth rate of 0.34% per annum, the lowest of any state. However, progress is looking on the up with the latest CommSec State of States Report indicating the strongest annual growth in 2.5 years.
Hobart looks to be on the rise, with CoreLogic RP Data showing a 1.6% improvement during January.
Weston says Hobart is providing investment opportunities that other capital cities cannot offer. “You can get a positive cash flow property in a capital city, which is unusual,” she says.
“Yields are fantastic. You can still get 6 or 7% rental yield within 15 minutes of the CBD. You can get houses for $250,000–$350,000 with high rental yields, while it costs a lot more in other states to get that.”
Weston says all the indicators are there for growth in the next 12–18 months.
In addition, Phillips says rural Tasmania is also showing significant development. “The rural location at Bagdad is experiencing renewed interest, with sale periods shortening and a slight strengthening in values.”
Affordability seems to be the motivation for buyers looking to capitalise in Southern Channel areas like Snug and Margate.
Houses vs units
Improving sentiment is clearly helping to stabilise the market, but Phillips advises certain areas will still require a cautious approach.
Units were up by just 1.6% in the past year and Propell forecasts a modest 2% growth in 2015. “Unit prices have been highly volatile in the past three years, at times being the best in the nation, but now are the worst,” she says.
Weston says the Tasmanian market generally indicates a stronger demand for houses.
The First Home Builders Boost may have impacted on vacancy rates in urban centres, but recent developments are indicating improvement. “I was getting vacancy rates of 5 or 6% just 12 months ago, now they’ve come down to about 2.5%,” Weston says.
The general market still requires caution, but for well-chosen properties, it may be time to enter the market.
SUBURB TO WATCH
South Hobart: A slice of nature within a city
South Hobart is home to some of the most beautiful properties in Hobart. This, coupled with a ‘’green tinge’’ to the area, is making the suburb attractive to a wide range of people.
Hank Petrusma, of Petrusma Property, says South Hobart provides a unique environment that is hard to find. “South Hobart is relatively close to the Hobart CBD, but yet retains a lot of the green components between the city and the mountains. It’s got a great sense of community and you’ve got all your local cafés, chemists and a great primary school.’’
Located on the gentle valley slopes of Mount Wellington
, South Hobart provides an area with fantastic views. With a vacancy rate of just 1.33%, properties are getting snapped up at an alarming pace.
Petrusma says the area appeals to a wide range of people.
‘’It’s a combination of families who enjoy the outdoor lifestyle and young couples, but I think it goes right across the board, providing a mixture of the old and the new.
“The most important thing about South Hobart is it’s got a very strong community spirit and a village atmosphere, and yet it’s so close to the CBD.’’
A perfect mix of old and new, there is no real pattern to which streets are more popular. However, areas near Marlyn Road and Strickland Avenue have great views.
Petrusma says property investors should be looking to take advantage of what South Hobart has to offer. “Number one, it’s location, location, location. All services are close by; everything you could possibly want to have in an enjoyable lifestyle is handy.’’