- Investors driven away by low yielding opportunities
- Rental market starting to ease, with vacancy rates rising from 0.4% last year to 1.1%
- Land prices have slumped, with the largest falls some 10% from market peak
The Tasmanian real estate market is doing it tough, it seems, with the latest from Herron Todd White‘s Month in Review, April finding investor activity in the island state scant.
Among the drivers of diminishing returns, HTW Valuer, Mark Davies, noted higher interest rates and cost of living pressures. Davies also recalled speaking with those in the industry:
“A leading Eastern Shore real estate agent told me recently that he hadn’t sold a property to an investor for eight months until mid-March when he sold two.”
Mark Davies, HTW Valuer
Investment activity has also been hampered by unfavourable yields, Davies noted that gross yields are about the same as a fixed-term deposit, making a real estate investment less attractive due to the risk involved, compared to cash in the bank.
According to SQM Research data, the highest-yielding suburb in Tasmania saw a yield of 7.9%, before a sharp decrease to second-placed Queenstown at 5.7%. The top 60 highest-yielding suburbs in Tasmania were floating between 4% and 2%.
Property gross rental yield for Hobart
Rents begin to ease
Vacancy rates for the state remain below one per cent, according to Davies, with data from Domain and SQM, likewise showing low levels of available rentals.
Domain data found that the vacancy rate rose between April last year, and now. April 2022 saw a rate of 0.4%, with April 2023 recorded a rate of 1.1%; March 2023 was lower at 0.8%.
“Rental vacancy rates are still below one per cent, however due to the lack of supply and ever-increasing living costs, it seems weekly rentals are beginning to level out, albeit at historically record high levels,” said Davies.
Something more manageable
Of the other trends Davies observed: downsizers potentially being active. He noted that the downsizing throughout Hobart and surrounding suburbs could reflect a change in lifestyle.
“Downsizers appear to be active throughout Hobart and surrounding suburbs as they cash in their McMansions for something more manageable in their twilight years,” said Davies.
Buying power and price slumps
While not exactly a buyer’s market, the conditions have changed to see a trend that hasn’t been around for about a year. Davies said that a recent spike in listings is “… offering purchasers the time to take a breath and not be pressured into making an offer on the spot.”
“This gives them the time to employ the services of a building inspector and potentially make the offer subject to the sale of another property. Offers like this were not considered 12 months ago.”
Among other observations, Davies said vacant land prices have been slashed, as interest rates rose; other influencing factors included the higher costs of construction, labour, and materials.
The report found that land prices saw as large as 10% reductions from the peak of the market, with Davies noting, “Some agents are saying they can’t give vacant land away at the moment.”
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