Question: What springs to mind when reflecting on the Hobart and Tasmanian markets through 2018?
Answer: It has been a hectic year. We saw the best of the market in the first half of the year, followed by a tempering in some parts over the next six months. It will be interesting to see where the market is sitting in February and March next year, as this will give us a good indication of what is in store for 2019. We saw incredible growth in a number of suburbs, including regional areas, which has been great to see. It can feel like there is no roof on the Hobart market. Expectations are high, it’s positive, jovial and busy. We are on track to reach the $4 billion mark for the total value of sales this year, which [Treasurer] Peter Gutwein should be very happy about given the exceptional amount of stamp duty the Government will receive. Perhaps some of that money could be put towards improved traffic management, or getting a planning scheme in place that will enable us to build in-fill housing in the city … 2019 could be a really exciting year.
House sales at the $1 million-plus level used to be a magical mark. How many sales at that level has Tasmania recorded this year?
Up until October we have had over 140 sales in that range, which puts us on track to do similar figures to the record that was set last year. The difference this year is perhaps fewer were sold to interstate buyers. It is another part of the market driven primarily by locals. How the banks’ finance regulations affect lending going forward will be something to watch carefully.
Where does the line sit between local buyers and interstate/overseas buyers, still in the 75/25 range?
That’s right, and interestingly of those 25 per cent of mainland buyers, two-thirds are buying homes to come and live here. We have seen the number of investors drop off a little this year. However, that has been well and truly compensated for by first-home buyers, which have been increasing. Land sales, in particular, are up significantly this year. In 2017, 1808 blocks of land were sold by agents. This year to the end of October we are only 50 blocks short of that mark. Projecting forward we could hit 2100 blocks by December 31.
Where do you think our market is heading in 2019?
QBE forecasts have, for a couple of years, been pretty spot-on with forecasts for our market, and it’s talking 8 per cent over the next three years, so 4 per cent growth next year, then 2 per cent each of the following years. I suspect that will be about right. As far as transactions, I think we could see a drop in numbers next year.
Is it fair to say conditions are still very good for Tasmanian sellers?
It’s still strong here compared to interstate. If Sydney has lost 10 per cent over the past year but then we grow by 4 per cent, that would be a good result. For us, the shortage of supply of homes for the level of demand continues to have an impact. We have seen our “days on market” lengthen compared to where it was, and the level of inquiry for each listing has softened a little, but exactly what is ahead for next year remains to be seen.
What about rental vacancies and affordability?
Vacancy rates are at about 1 per cent. I would hope that by the end of next year they will be out to about 2 per cent as the market starts to free up a little.Somewhere between a 2 and 3 per cent vacancy rate would give us a comfortable number of properties. Below 2 per cent and it starts to get critical. We have seen rental prices increase over the past two years, significantly so. As house prices have taken off, investors have had to borrow more money, their outgoings are higher, and that is reflected in higher rents. Another example is rates are higher when homes are valued higher. But a landlord can only put rents up once per year, and I expect the last cycle of rises should have almost washed through by mid next year. After that point rents should plateau.