The Tasmanian economy is showing its greatest strength for many years, and nowhere is this more pronounced than in the property market.
At a time when the property market is falling in mainland markets, Tasmanian property continues to strengthen. The recent CommSec report showed dwelling commencements were up 12.2 per cent on the decade average and construction work 15.9 per cent on the decade average at the September quarter last year.
While welcoming the news, the various peak property bodies in Tasmania have expressed concern that the lack of action in the past has led to a shortage in supply. The HIA and the REIT were united in calling for more housing starts. In fact the REIT estimates an extra 3,000 properties are needed in Hobart alone to meet current rental and buyer demand. And looking ahead, the REIT sees no quick fix, predicting the supply in the property market is not likely to catch up with demand for at least another six years. That bodes well for existing stock.
Meanwhile the Property Council has called for more certainty in the application of planning laws to enable a quicker process for approvals and thus provide greater assurance to investors.
In its outlook report, property analyst CoreLogic has forecast Tasmania’s strong performance would continue in 2019, again making it Australia’s best performing market. “Hobart is standing out from all other capital cities, in that this is the one market where values are rising.”
Commercial property is also enjoying a strong market, with news that commercial vacancy rates have fallen. The Property Council has welcomed the increase in supply of office space, and this has been endorsed by the TCCI.
So, for both the residential and the commercial sector, the news looks good. Demand is exceeding supply, and that is encouraging a continuing increase in property values.
So, is there more of a story behind these headlines?
Residential demand is obviously being driven by a positive influx of people into the state to live and work or retire, as well as strong interest from interstate investors. At the same time, some property has been taken off the long-term market as landlords have seen opportunity in the short stay market, and this has led to an increasing pressure in the rental market.
IN the commercial sector, Increasing demand is not the only factor. The lower vacancy rate has been caused not only by increasing demand for office space, but also by the withdrawal of some older office accommodation from the market.
There are some headwinds. Four, in particular, stand out to us.
The interest by interstate investors has been spurred at least in part by the rapid increase in the price of property in Melbourne and Sydney. These markets have now fallen around 10% from their high point and are predicted to fall further, which could make those markets once again attractive to investors, or more nervous about investing
The outfall from the Royal Commission into the banking sector has already seen a tightening in lending policy, and this could affect access to mortgage finance.
There is some concern that political factors may affect the market. The possible advent of a Labor government in Canberra, what with its attitude to negative gearing and franking credits, may deter investment in the sector, or at least quieten the market while people adjust.
The main user of commercial office space is the government, and it is showing a trend to reduce its requirement for space, what with new ways of managing office work.
So, in summary, things are good, but the path forward is a little cloudy.
Looking forward, we note the reflection of CoreLogic that the property market in Hobart will remain strong. We endorse that view.
Our prediction: a slowdown in Tasmania’s property growth rates, but growth nonetheless.