Tasmanian property recap
Over the past five years, the median price of houses in regional Tasmania has more than doubled, experiencing the strongest increase in Australia.
The increase has been primarily driven by a seismic economic shift in the Tasmanian economy – moving it from being driven by government and agricultural employment to also including a quick growing tourism and education sector.
While Tasmania’s borders were shut for most of the past two years, it didn’t do much to slow down price growth. While wealth impacts and low interest rates were part of the increase, investor activity also played a critical role. Over the past 12 months, regional Tasmania has seen the biggest jump in investor activity of all regional areas. Very high prices in Hobart were likely part of this, however growth in tourism would also have been drivers.
Launceston and the north-east saw the biggest jump with prices increasing by 65 per cent through the pandemic. The south-east wasn’t too far off with prices rising just under 65 per cent. Popular tourist destination, Adventure Bay, saw the biggest increase in this part of the region.
With interest rates on the move, it’s likely that prices will start to moderate in 2022. In addition, high levels of construction proposed for Tasmania is likely to lead to an increase in housing supply which is great news for affordability.
First home buyers
First home buyers were very active in 2020, despite the pandemic, a recession and a sharp rise in unemployment. The end of sharp price rises will be a welcome relief for most first home buyers who tend to not transact as much in fast moving markets. In addition to a slower market, many first home buyers will also benefit from the extended loan guarantee scheme announced in the recent Federal Budget. The third driver of more interest from first home buyers is rising rental levels which could make buying a home a better option.
As a result, the steady fall we’ve seen in first home buyers since the start of last year is likely to start to stabilise this year.
Investors
Unlike first home buyers, investors transact readily in a fast moving market. As a result, as first home buyers started to drop off as the market got too hot, more investors piled in. Generally as prices cool, we expect that investors will also pull back. This, however, may not occur as much as in previous cycles.
The first reason that investors are likely to continue to transact is that finance restrictions are still light. Even though interest rates may rise earlier than hoped, access to finance through other restrictions aren’t looking likely to change. The second is that rents are rising rapidly. Even with price growth slowing, tenancy conditions are solid which means finding a tenant at a decent rental level is likely to be easier.
Sellers
Most sellers are subsequent buyers. As such, while in a strong growth market sellers are usually buoyed by prices moving quickly, many find it stressful to buy back in once they’ve sold.
In 2021, we saw many suburbs jump by well over 15 per cent within a three month period. Worst case, some recent sellers may have been in a situation where they could not afford to buy back their recently sold home by the time they settle. For a seller that’s a subsequent buyer, a slower moving market makes it easier to transact.
Long-term holders
The last two years have been a great time for house flippers. Buying and selling while taking advantage of leverage has resulted in some investors doing very well over a short time period, even without making any improvements to a property. The investors that do well long-term are those that don’t house flip. House flipping, while lucrative in a rising market, is problematic in a slow market and many get caught out when market conditions change. For long-term holders of property, even buying at the peak of the market rarely creates problems as it’s then possible to ride different cycles over a prolonged time period.
Get in touch to find out how you can make the most of the Tasmanian property boom.