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The Global Success Story Down Under

The Global Success Story Down Under
December 15, 2021 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

In addition to becoming a national leader, it’s a truly inspirational success story that has gained international recognition. Once laughed at, this beautiful jewel Down Under is now envied. For a variety of reasons, people just can’t get enough of it.

The large collection of things which makes Tasmania so special have culminated in its real estate also becoming rare and precious.

Reflecting upon Tasmania’s astonishing transition from what it was in 2013 is inspiring.

Back then, people were moving away from the state in droves. The state economy was a basket case. Students were dropping out of school early just to sit on unemployment benefits. Young adults were leaving the state because there was no work.

Real estate in its capital city had seen 15 percent wiped off its median value over the 2-years ending 2012.

Fast forward to now. The state’s three most prominent cities (Hobart, Launceston and Burnie) each have new universities being developed and Tasmania’s economy has led the nation over the last 4-years. Household confidence and wealth is strong, and the migration pattern has reversed.

The volume of dwellings available to rent or buy reached an all-time record low a few years ago and is still reducing.

Tasmanian real estate is treasured, scarce, highly valued and difficult to come by.

 

What Makes Tassie (Oh So) Special

Rewind to 2013. I had never been to Tasmania, and millions of other mainland Australians were the same. A business commitment required me to go there so I extended the trip into a week-long family holiday.

With no expectation, I was immediately impressed by Tasmania’s natural beauty. I loved that it had not buckled to community pressures for large-scale urban development and really enjoyed many outstanding historic experiences.

Beautiful Tasmania

My taste buds have *never* been more stimulated. The purity of the Tasmanian air and water cannot to be duplicated. They provide the foundation for the highest quality food produce on planet Earth (seriously).

You know food is seriously special when you’re enjoying a meal at one of the many great restaurants and your young son, with a smile from ear to ear, says “Dad, these vegetables taste nicer than vegetables.

And there are so many amazing things to do. We went on a tour of the Cadbury chocolate factory, Salamanca markets, strolled through the beautiful suburban streets of Battery Point, visited the historic site of Port Arthur, Australia’s oldest brewery (Cascade), and some of the international award-winning wineries and whisky distilleries.

I’ve never been a guy for galleries, but the day which we spent at the Museum of Old and New Art (MONA) is one of the best experiences I’ve ever had.

Tasmania stole my heart in late 2013.

And as a professional property market analyst, the state had captured my mind.

My innate urge to ‘join big-picture dots’ allowed me to quickly relate to the vision of then State Premier, Will Hodgman. From reading the newly appointed Premier’s Economic Plan, it was clear that this visionary had immense clarity for how to use the uniquely special attributes of his state and take it from being mocked to admired.

It’s one thing to have something that many others want, but one can’t sell a secret. Hodgman’s bold plan included whetting one’s appetite through targeted digital media.

Cataract Gorge, Cradle mountain and umpteen other beautiful natural landscapes is a great backdrop for trekking, mountain biking, cycling, award-winning wineries and scenic trips. Combining these unique tourism experiences with outstanding hotels, Air BNB options, and restaurants and cafes that boast premium produce as good as anything in rural France.

The plan was an overwhelming success. Official data from RTA confirms that Tasmania enjoyed a 93 percent increase in international visitors over the 6-years directly prior to COVID-19. That’s double the national average of 45 percent. And that’s before the international airport status that it has now acquired.

In 2014, Tasmania’s economy was ranked 8th out of 8 Australian states and territories. Implementation of a solid plan produced consistent economic (and real estate) improvement, such that it was ranked 3rd by Q1 2019.

From mediocre to marvellous, Tasmania gained first place on the national economic podium in Q1 2020, has retained it since. It still has all of the pieces to stay there for some time yet.

In food, the arts and science, Tasmania is spoilt with an abundance of creative minds. It has a fast-expanding university sector and is the global headquarters for the Antarctic.

The state is an international leader in the renewable energy space, producing more electricity than it uses each year.

Just for good measure, a small sample of modern-day Tasmanian legends include Olympic swimming golden girl Ariarne Titmus, Princess Mary of Denmark, Simon Baker (actor), Jack Riewold (AFL), Chris Goulding (basketball), Sarah Hawe (rowing), Marcos Ambrose (motor racing), Richard Porte (road cycling) and Eddie Ockenden (hockey).

Ecotourism, outdoor adventures, renewable energy, science, arts and culture, and food and beverage are an impressive list to be globally recognised for exceling in. It is such an incredible collection of qualities parcelled up into one small state that houses only 2 percent of the nation’s population.

 

Real Estate Jewels

Whilst the state had just come out of recession in 2014, it was the clarity and confidence that I had in Tasmania’s future economy behind my decision to ignore the consensus and start investing in the state’s property market in March 2014.

As if it was yesterday, I can still remember the widespread national commentary about property markets. In 2014, my home city of Brisbane was everyone’s pick as Australia’s next ‘hotspot’ while no one had a positive thing to say about Hobart.

At different stages over the last 7+ years, Propertyology has helped circa 200 everyday Aussies to invest in Hobart, Launceston and Burnie.

Practising what we preach, my wife and I have our own parcel of real estate in each of these three cities.

Investing In Tasmania

HOBART TAS

Over the 7-years ending September 2021, the median value of houses in Hobart increased 120 percent (from $330,000 to $740,000). Apartments have been equally impressive.

The result is streets ahead of second placed Sydney (75 percent for houses and 45 percent for apartments), and nearly 3-times higher growth than Brisbane (45 percent for houses, 5 percent for apartments).

The properties which Propertyology purchased in 2014-15 typically cost $300,000 to $400,000. A lot of the investors did so using a 10 percent deposit ($30,000 to $40,000).

Those same properties today are worth between $650,000 and $900,000, meaning that their original deposit has increased from (say) $30,000 to $380,000 over 6-7 years. That’s world-record return on investment stuff.

The annual rental income is today $8,000+ more than when Propertyology’s clients first invested in Hobart.

Such is the scarcity of Hobart real estate that Australia’s 12th largest city (population 247,000) currently only has 97 dwellings advertised for rent and a piddly 1,300 dwellings advertised for sale. In both cases these are all-time record lows.

The current outlook for Hobart’s property market is as strong right now as it has ever been.

 

BURNIE TAS

In 2016, we purchased a good quality house with large living space for only $235,000. I’d happily live in it myself and, whether from the bedroom window or the front deck, enjoy the beautiful view over Bass Strait.

70 percent capital growth along with a 30 percent increase in rental income over the following 5-years is proof that, if one knows where to look, small fish certainly are sweeter.

LAUNCESTON TAS

The epicentre of Tasmania’s premium food and booze, Launceston is such a beautiful city that has striking architecture, the best cafes and restaurants, outstanding infrastructure and a vibrant economy. This city was founded prior to 6 of 8 capital cities and is one of the most underrated property markets in Australia.

Our family has enjoyed a few great holidays in Launceston, including a truly special trip staying in this luxury beach house.

When you book your own trip to Launceston, make sure you go to the Penny Royal adventure park, the monkey enclosure in the immaculate botanic gardens, Josef Chromy and Clover Hill wineries, the automobile museum, Stillwater restaurant and the Inside café.

I remember being the only bidder at the auction when we paid just $375,000 for a large character home. The property market was flat in February 2018. 4-years later, if we sold the property today it would have a ‘6’ in front of the sale price. Enormous growth.

The property has never been vacant. In this current market of very low rental supply in Launceston we could easily get $500 per week rent, but we are happy with the $470 that we receive from the lovely lady that rents it (6.5 percent yield).

Property Market Outlook

In short, Tasmanian property markets have been driven predominantly by local owner-occupier buyers that have confidence in local economic conditions and strong household budgets.

According to REIT, buyers from the mainland only represented 18 percent of sales over the 12-months ending September 2021 and sales to investors was a low 19 percent.

Looking ahead to 2022, ANZ (8 percent), CBA (5 Percent), NAB (4 percent), Westpac (6 percent) and SQM Research (-1 percent) have forecast a softening 2022 for Hobart’s property market and an even more subdued 2023. This cohort’s forecasts for the last 7-years were equally miserable, so make what you will of their latest thoughts.

Based on current fundamentals and policy settings, Propertyology is forecasting an increase in median house prices over the 2-years ending December 2023 in the vicinity of 35 percent for Hobart and 45 percent for Launceston and Burnie.

I shared my thoughts on the outlook of Tasmania’s property market recently in this interview with Property Pod. Apologies for my attire – it is part of a running gag I have with these 3-great guys about the tripartite success of Tasmania’s real estate, the state economy and the euphoric rise of my beloved Brisbane Lions AFL team (coincidentally coached by Tasmanian legend, Chris Fagan).

It is important to note that resale supply of housing is currently more than 70 percent below 5-years ago (and the market was strong then).

Rental supply is also such that there is no longer any such thing as a vacant dwelling. As I said earlier, Tassie real estate is treasured.

On the demand side of housing, the RBA cash rate is likely to remain well below 2 percent for years to come, relaxed border controls will benefit the tourism and student economy, and (both) overseas and internal migration will accelerate in 2022.

Tasmania has $2 billion worth of infrastructure projects currently being constructed and another $6 billion in the infrastructure pipeline.

This truly special place is situated high up the list of Australian locations to benefit from the COVID-19 lifestyle movement.

According to reports from realestate.com.au, search engine activity to buy property in Tasmania was at record high volumes in 2020/21. A whopping 60 percent of enquiries were from mainland buyers (including 40 percent from Victorians contemplating a relocation).

Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

 

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