The month in review: Tasmania
By Herron Todd White
October, 2009
HOBART
The residential market over the past twelve months has
remained relatively buoyant in the sub $250,000 price
category. This has been predominantly due to the First
Home Buyers Grant. The remainder of the market has
been flat with some price decreases in the top end of the
market.
A concern that exists is this entry level market. We have
long believed that a bubble may exist in this market due
to uninformed first home buyers purchasing property at
slightly above market parameters due to competition
and agents overinflating prices to ‘buy’ listings. Once
the First Home Buyers Grant is reduced, then so too will
demand. With the inevitable likelihood of interest rate
increases, first home buyers and indeed investors may
end up struggling to make payments on the mortgage
and hence be forced to sell. This will create an oversupply
and combined with weakened demand, see values fall.
I would be very cautious as a first home buyer or as an
investor looking to get into the bottom end of the market
at present. Opportunities do exist, but proceed with
caution.
The top end of the market has also seen some price
decreases over the past year. Prestige suburbs such as
Sandy Bay and Battery Point have had a slight market
correction. However, long term, these are the suburbs to
invest in.
Which brings us to the middle market; the traditional
mortgage belt. Many new homes within the suburbs of
Tranmere and Kingston have seen prices fall as well. It
appears as if land values have also weakened. This may be
due to an oversupply of new and as new product. Many
of these houses were constructed during boom times
whereby builders charged a small fortune to construct.
These premiums that were paid for these properties may
now not be recoverable in today’s climate.
The outer lying regional townships, for example of
Primrose Sands, are struggling for sales. There is little
demand in these areas unless the perceived value for
money ethos is met. Values have fallen slightly in these
regional areas, that are approximately 30 to 45 minutes
drive from the CBD.
The regional areas of far south Huon Valley and the
peninsular as well as the east coast towns for example
Orford, are struggling as well. Many of the economies of
the regional areas and townships are tourism and fishing
based. As the general world and domestic economy
softens, property prices have started to slump due to
losses in employment and general lack of demand. Selling
periods may increase dramatically. Many of the proposed
developments, such as the golf course in Orford have
been placed on hold (and indeed may not happen at all)
and thus prices in these areas have softened in the past
twelve months and may soften further in the next year.
These regional areas are possibly one market to be very
cautious with at present.
LAUNCESTON
Rocherlea is a lower socio economic suburb to the north
of Launecston’s CBD being at the fringe of the city. It
was largely established/developed by the Housing
Commission during the 1980’s. Much of the suburb is a“no through” residential area and to some extent is its
own enclave.
While the homes are generally of a similar low maintenance
brick construction and maintain approximate gross yields
at around 6%, local demand is limited and a higher than
average percentage (sales volume) are to mainland
buyers (investors). Much of the local market does not
participate in this area.
During the calender year of 2008 there were only 13
settled residential sales. To the end of July 2009, only 5
have been recorded. The latter sales volume recorded in
a period of very active first home buyer partcipation of
around one third the market fuelled by the first home
buyers compensation grant.
This lack of demand has resulted in limited capital growth.
There would appear to be limited factors that would
encourage growth within the short to medium term. |
