News from the REIT this week tells us that Investors are fleeing our softening market.
Real Estate Institute of Tasmanian figures released today for the June Quarter saw the market rebound from pre-election jitters (of the possibility of Labor’s introduction of Negative Gearing and Capital gains tax changes). Whilst the recovery was modest, it did see transactions for this quarter increase 7.7% to 2843 sales, and the gross value of sales reach $1.054 Billion. Both figures were down marginally on the June 2018 Quarterly results.
The first 6 months of 2019 has seen overall transactions for this year down 1.9% on 2018 and down 0.5% in cumulative value. Across the State, house prices have increased 4.2% over the 6 months whilst units were up 6.6% and land rose 7.5%. The markets varied across the 3 major population zones with activity remaining very strong on the North West Coast with house sales up 6.4%; Launceston easing down just 0.6%, and Hobart slowing more rapidly down 3.5%.
The biggest shock has been the continued withdrawal of investors from our market (down 10.9%). In 2018, 2504 investors purchased rental properties across the State. In the first half of 2019 the number was 979. This is very concerning and will only add pressure to an already tense rental market. Mainland purchaser numbers are also down significantly (12.6%) on last year. Traditionally mainland buyers account for between 20-25% of our total sales with foreign buyers less than 1%. More than half of the mainland buyers are buying property to move here to live. In 2019 mainland buyers are down by 12.6%.
Major highlights of the June 2019 Quarter were:
REIT President Tony Collidge said
Whilst there was clearly an improvement in activity within the market place following the Federal election, it is evident that our market is transitioning to a more balanced environment. Whilst a reduction in interest rates improved affordability, it doesn’t appear to have significantly impacted sales numbers. I believe that the strong price and rental growth of yesterday’s market is now behind us and that a much more modest level of momentum in our market will occur.
REIT data captured over the quarter showed a strong improvement in activity in April; a robust May and softening in sales numbers in June. What has become evident from these results is that the unavailability of stock (properties to sell) in Hobart and Launceston in particular has almost brought the market to a standstill. Furthermore the withdrawal of investors from our market is a major concern and will only impact the broader economy as we struggle to cater for the housing needs within our communities.
The inability of Government or Municipal Councils to make proactive decisions on urban development and infrastructure needs will have dire consequences into the future. Unfortunately, the lack of strategic foresight and a common sense to planning could see both investors and developers looking to leave the state in pursuit of opportunities elsewhere. This is something Tasmania can’t afford! We need to develop diverse accommodation not only to meet current needs but those of the future. By increasing housing supply, we can create an environment which is more conducive to affordability and meeting buyer needs.