The property market is on fire, and is being fuelled by high levels of demand. In recent times, residential housing has shown unprecedented percentage increases, with annual increases of over 25% not uncommon. These are extraordinary times indeed.
We at Devine Real Estate are at the coal face of this phenomenon, and we see these market pressures playing out on a daily basis. The increases are the result of the traditional market forces of supply and demand, with demand far out-stripping supply.
The demand side is a culmination of many factors, not the least being access to cheap money. Finance is available at very low interest rates, so many folk are seeking access to those funds for home purchases. First home buyers can access government support as well. For those already in home ownership, there is the added inducement to purchase further property due to the increased equity in their present property portfolio simply due to the rise in the market.
Additionally, demand is being fuelled by interstate buyers, who are seeking to join the booming market, and who for those suffering COVID weariness, are looking for a safer haven for themselves and their investment.
The supply side is simply not keeping up with demand.
Existing homeowners who otherwise might be interested to upsize or downsize are now reticent to put their property on the market for fear of not finding a suitable alternative.
Construction, after suffering a severe lag at the start of this boom, is now ramping up, but is now being held back by a shortage of materials and a shortage of skilled labour.
The added complication to this is the availability, or rather the lack of availability of land. Which under our complex planning rules have held back gaining access to land for building new homes, residences and suburbs. In this regard the outer suburbs are leading the way, with Kingborough, Sorell and New Norfolk seeing levels of activity not witnessed before.
The new precincts being built will require an adequate level of services and we can only hope that they will also be provided amongst this rapid expansion. It will require new schools, new health services, new roads and transport corridors, new shopping precincts. In all the flurry, we hear little in ensuring the supply of such services.
The increasing demand for housing which has led to a rapid rise in house values, has had a flow-on to increasing rentals for tenants, as there are less properties available for rent. Tenants are increasingly under the pump.
The pressures on people due to COVID restrictions can be telling. A range of lockdowns and movement restrictions elsewhere in Australia have made it difficult for some businesses in Tasmania to maintain viability, and the consequences can be devasting for business owners and their employees. Without employment, people are vulnerable, and meeting rentals is an additional challenge to keeping families together and food on the table.
Tasmania has been lucky – some would say blessed – with COVID being kept at bay. However, the continuing spread of the virus elsewhere has made people nervous, and when people are nervous they become more circumspect in their spending. As such, COVID is having an effect in Tasmania even though it is not widespread within the community.
Commercial properties are also undergoing an increase in demand, although it is impacting various sectors differently.
Industrial property is the stand-out performer and demand is high. Office workers have returned to their buildings and we are experiencing high rates of occupancy once again.
Retail and hospitality remain areas of concern, being impacted by the COVID lockdowns on the mainland and changing shopper habits, particularly with online sales.
Investors generally migrate to property during times of uncertainty, and this has been encouraged by the low cost of finance. Tasmania is on a growth treadmill. Confidence in the Tasmanian economy and improving economic indicators have stimulated interest in Hobart as a destination to invest and develop.
Tasmania is going through a sweet spot on the employment front, with certain sectors such as health leading the way. We are attracting more people and we expect this to continue, but they need homes and we are struggling to keep up with this demand.
It is the ultimate paradox. As much as we need to attract interstate talent and skills to meet this demand, we have no houses for them to live in when they come here.
What does all this mean? We are concerned that the pressures being placed on the market are out of whack, and while property prices are increasing, which is good for property owners, it is happening at the expense of social “wellness”, and that can have longer term consequences.