Slow and steady may be winning the race for the Apple Isle, with tourism boosting the economy as well as the state’s spirits
Until now, it hasn’t been a good run for the Apple Isle. Economic deflation due to the GFC, changes
to its forestry industry, and a lack of population growth have been the catalysts for a disappointing few years in the property market.
That’s why the hike in growth in Tasmania’s final 2015 quarter came as a surprise and further fuelled speculation that the state is finding its feet again.
Regardless of its economic status, the state is strong in its investment property sector. Its median vacancy rate of 0.9% is the lowest in the nation, and half that of runner-ups Sydney and Canberra at 1.8%, according to SQM Research’s February figures.
While Tasmania may never experience a boom as its mainland cousins do, it does continue to perform at a solid and steady rate, and is heavily supported by its key industries: mining, agriculture, forestry and tourism.
“Confidence is definitely on the rise in Tasmania now, and pressure is being applied to housing markets in regional Tasmania as well as the capital city,” says market analyst Simon Pressley, managing director of Propertyology.
“All of Hobart has vacancy rates below 2% at the moment, and there’s no evidence to suggest that this is likely to change any time soon.”
Pressley is optimistic about the market, stating that “Adelaide and Hobart are the two Australian capital cities with the most responsibly controlled rates of new supply, which should see vacancy rates (and rental yields) remain among the best in Australia for a while yet”.
This supply control is part of the reason property prices have managed to hold firm, says Pressley. “The demand side is improving via some healthy jobs growth, wage growth, housing affordability, and confidence.”
Increased tourism is boosting the retail sector and lifting the Tasmanian spirit. “There’s a good energy,” says Pressley. “The economy is vibrant again. There are a number of new projects creating extra jobs such as new hotels and the $680m hospital redevelopment.”
Tourism Tasmania’s latest snapshot report states that visitor numbers in 2015 were up 7% from the previous year. “Visitor expenditure increased 10% to $1.92bn,” says Eliza Owen, market analyst at OnTheHouse.com.au. “Within Australia, visitors from New South Wales saw the largest increase (14%), likely driven by strong wealth effects from a rapidly growing housing market.
“Potentially, New South Wales residents are looking to Tasmania for interstate investment properties.”
While Tasmania’s visitors are increasing, it seems they are happy to leave also, as ABS figures reveal
Tasmania’s population growth is still slow – a major stumbling block for demand in the property market.
To paint the picture, in 2014 Melbourne welcomed 95,700 new residents, according to ABS’s Regional Population Growth report, while Hobart received 1,200 new residents – the lowest in the nation and a population increase of only 0.6%. In fact, even though Darwin’s total population was almost half that of Hobart’s 220,000, Darwin welcomed 3,000 new residents – twice as many as Hobart.
Population growth isn’t in decline, though, so while the going may be comparatively slow, housing values are indeed strengthening.
“Growth in Hobart houses in the year to January 2016 was 4.15%, with stellar quarterly capital growth of 3.69%. Units on the other hand fell in value by -1.45% in the last quarter,” says Owen.
Even with its laudable increase in values, Tasmania still has the lowest median price in the nation. CoreLogic February figures reveal Tasmanian houses average a sale price of $353,000, and units $311,000 – both around $100,000 less than the next lowest median. This makes it a good entry point for investors, who currently hold only a small percentage of the market share.
And even though Tasmania’s major cities may not have the same desirability as mainland capitals, the state does attract lifestyle buyers and has the highest rental yield in the country (5.3%, according to CoreLogic data), which could further revitalise its profile among investors.
While Tasmania has some of the highest-yielding suburbs in Australia, tourism does skew the figures, so investors should tread carefully when investigating high-return investment options. But there are many stable and sought-after areas that are returning yields at the top end of the median.
Real Estate Investar reports that among the highest rental yield suburbs with strong demand are Cambridge in Hobart’s northeast at 6.81%, outer suburb Dromedary at 9.96% (with neighbouring Bridgewater achieving just over 8%), and Rocherlea in Launceston at 7.5%.
SUBURB TO WATCH
Bang for buck in Mornington
Just 7km from Hobart but set in a landscape of mountains and rivers, Mornington is growing in popularity as buyers realise the value they can get for their money.
With a low house median of $283,000, Mornington is an affordable suburb that returns an excellent yield of 5.8% – virtually the same rate of return as neighbouring suburbs Bellerive and Howrah, which have median house values in the mid-$400,000s and $368,000 respectively. This is likely to see house-hunters searching out cheaper dwellings and rents in nearby suburbs, and Mornington fits the bill for both historic capital growth and yield.
A vacancy rate of 1.15% lands Mornington in fifth place in Tasmania for lowest vacancy rates. The suburb appeals to families, and three-bedroom houses are in highest demand.
Newer homes on eastern streets are at the higher end of the median, while high-set houses have mountain views.
