WHERE TO NEXT?
OVER the past three weeks we’ve had real estate market reports from several commentators, which were mainly aimed at the larger mainland markets and people couldn’t be blamed for thinking it was directed at us here in Tasmania.
The COVID-19 pandemic has sucked a lot of confidence out of the community and business, but it’s important for those looking to enter the property market to have an understanding of what is actually happening.
The uncertainty created by COVID-19 has seen many people put their property plans on hold. Reduced hours, stand-downs and industry uncertainty have seen a number of sellers and buyers forced to withdraw from the market.
But even so there is some solid transacting still occurring in our local market.
CoreLogic reported that the number of properties for sale across Australia was down by 35 per cent on the same time last year, while SQM Research showed Hobart was down 16.3 per cent on last year.
With less properties for sale, is it any wonder that transactions were down [comparing April to March] across the state by 27.5 per cent?
It is highly probable that sales numbers will continue to drop over the coming months to levels not seen in the past 20 years, but the news isn’t all bad.
The flip side is that while our market has shrunk there is still strong demand from buyers for property, particularly for properties priced below $500,000.
The top end of the market is showing signs of slowing, particularly with mainland buyer numbers decreasing. Border restrictions and enforced border isolation have seen interstate interest fall away significantly. What used to be
20-25 per cent of our sales will plummet (possibly to levels below 10 per cent) over the next three to six months.
Of more concern is the continued drop in investor activity (44 per cent), which will place pressure on a rental market that is being temporarily buoyed by an influx of Airbnb properties into that market.
An upside to the fall in the number of mainland buyers and investors is that there has never been a better time for first-home buyers to enter the market. REIT statistics show first-home buyer sales were up by 26 per cent in April.
From a rental perspective it is the first time in four years that Greater Hobart has more than 500 properties available for rent. Our vacancy rate (the percentage of vacant rental properties) has moved from 0.5 per cent in 2019 to more than 2.5 per cent.
Rents are decreasing. Unfortunately, only 32 per cent of the 530-plus properties available are below what is considered the affordable rent level of $400 a week.
The building industry has flagged a stalling in the construction of new properties. This means that more pressure will be placed on the established homes market to fill consumer needs.
Tasmania entered the COVID-19 pandemic with a dire shortage of properties for sale, which has meant that a drop-off in buyers hasn’t created an oversupply situation needed to cause prices to fall.
The Sydney and Melbourne markets rely on demand from hundreds of thousands of immigrants to fuel their property prices. Tasmania does not.
With immigration temporarily ceasing, it is these markets that will be affected most, not Tasmania.
We still have a vibrant real estate market and there are no signs at this stage that prices are dropping. Our median price may move down, but I believe that this is a reflection of increased activity in the more affordable sectors of the market.
Over the coming months, Tasmania’s real estate market will be controlled and driven almost solely by Tasmanians.
I am convinced that there won’t be a significant drop in property prices because of our shortage of supply, and that there is every reason that buyers and sellers can transact with the confidence that this market can’t be undermined.
Tony Collidge is a director of PRD Hobart, a board member of the Real Estate Institute of Tasmania and the REIT’s past president.