Improvement on the horizon
Could the tide finally be turning for Tasmania? One expert says yes, while another recommends caution
Years of coping with a besieged economy and bleak forecasts have conspired to make Tasmania seem doomed. But increasingly, there are some encouraging indications for the island state and its property market.
While the latest CommSec State of the States report still ranks Tasmania at the bottom of the Australian economic performance table, it indicates that there are brighter signs for the state.
Tasmania held its third-ranked position on unemployment; the jobless rate is now at 28-month lows. Construction work is expanding at the fastest annual rate in eight years. And population growth has lifted. The lower Australian dollar is expected to help the Apple Isle’s ecotourism and agricultural sectors.
These flickers of economic hope could already be making a permanent mark on the state’s property market – particularly in Hobart.
The latest CoreLogic RP Data Home Value Index shows that, while Hobart remains Australia’s most affordable city with a median dwelling price of $341,500, price growth is occurring. In December 2014, Hobart dwelling values increased by 2.7%, and they were up 3.5% year-on-year.
Flickers of light
Domain Group senior economist Andrew Wilson can definitely see light at the end of the tunnel for Tasmania’s market. The overall performance of the Launceston market has been pretty good for a while, he says. But he is now also tracking improvement in the Hobart market after a few years of flat to modest performance.
“It is no coincidence that a better performing economy is lifting the Hobart market, which is starting to record quite reasonable price growth again,” he says.
Several other factors are contributing to the market’s improvement. Wilson says affordability and value perceptions are playing a big part. Alongside that, unemployment is falling, and there is a lot more confidence in the market.
“I would expect those trends, and the related growth, to continue at quite reasonable levels this year. Probably round about 3% to 5% – although 5% might be a little optimistic.”
However, that continued market improvement does depend on how the local economy goes. Wilson says the Tasmanian economy, and that of Hobart particularly, tends to go slightly against the grain when compared to other state economies. “So it has been improving, albeit from a lower base.”
In his view, that economic improvement is working its way into house price growth and improved buyer activity. The changes to the first home buyer incentives also have had a small positive impact.
“Overall, it is more to do with value perceptions and greater confidence in the market. Plus, those low interest rates are finally starting to generate interest from buyers who have been sitting on the sidelines.”
Tread with caution
On the other hand, BIS Shrapnel senior research analyst Angie Zigomanis advises approaching the Apple Isle with caution.
He says that, while the unemployment rate has decreased, employment prospects remain relatively limited – which is a major problem. Further, interstate migration might have started to turn round, but in his view, it is probably moving back to balance.
However, Tasmania does have growing “intangible” attractions. It is clean and green, and Hobart’s MONA has provided a cultural buzz and has boosted tourism.
Zigomanis says such factors could also help the state’s image and, in turn, migration. The affordability of property could be a big attraction and, if it becomes a trend, that could work well for Tasmania, he continues.
“Trying to attract knowledge workers who can work remotely could make a difference there. They may well be the sort of people who would be interested in the affordability and lifestyle combination that Tasmania can offer.”
Meanwhile, he sees the property market as a mixed bag – the first home buyer new build incentives have led to overbuilding, which has impacted on the already high vacancy rates. Such a situation slows the correction process up, Zigomanis says.
“In terms of price growth, the 12 months ahead will still be pretty tough. It depends on interest rates and such things, too. Beyond that, it might get a bit better.”
But he does concede that property affordability means there are opportunities in the market, especially for those prepared to wait.
SUBURB TO WATCH
Warrane: A top pick for families and commuters
Location and convenience are driving the increasing interest in the predominantly working-class neighbourhood of Warrane.
Thanks to the suburb’s position just five kilometres from the Hobart CBD and bissected by the Tasman Highway, commuting couldn’t get much easier for office workers wanting an affordable home.
Warrane is also known as a family-friendly suburb, due to its proximity to Bellerive Beach and its decent range of sporting facilities.
While it is primarily a residential suburb, nearby Rosny Park acts as an economic and employment hub. It is also home to the Clarence Campus of the Tasmanian Polytechnic and the Tasmanian Academy, which is another solid driver for the area.
Growing awareness of these attractions mean that Warrane’s vacancy rate has fallen to 0.21% (from 0.42% last year). Given Hobart’s relatively high vacancy rates, this is a sure sign of rising demand.
In another indicator of demand, properties are spending an average of 64 days on market, which is good for Hobart.
According to RP Data, there is a very limited unit sector in Warrane. Three-bedroom houses, suitable for families, dominate the market.
The best streets to buy in are ones set back from the Tasman Highway. Streets like Flinders
Street and Cambridge Road, which are located close to the Eastlands Shopping Centre, schools and sporting facilities, are popular.