What Lies Ahead?

Happy New Year.

The Launceston CBD seemed busy pre-Christmas and hopefully that has reflected in a good results for shoppers and local Launceston retailers alike. We saw an amazing daylight finish to the Sydney to Hobart and very good numbers were reported at the much loved Longford Cup. Australia won the Boxing Day Test and to top it all off the Tasmanian weather in the first week of January has been hot.

The recently released PorpTrack Home Price Index for December 2023 shows annual growth for Hobart of -3.5% and for the rest of Tasmanian annual growth of 1.05%. Moderating factors influencing this are undoubtedly the increase in interest rates, the impact inflation is having on real household and business incomes and more supply in the market (all be it marginal). It is however interesting to note that this is likely a reversion to more usual market conditions given the movement in median prices reported in the same PropTrack data showing an increase of 35.6% since March 2020 in the median home price in Hobart and an increase of 52.6% since March 2020 in the median home price for the rest of Tasmania. Given these large price movements the market is holding up well and this is likely supported by ongoing limited supply (despite this loosening to an extent), limited availability of land for development and difficulties with regard to securing planning approval, infrastructure bottle necks and increased immigration rates adding to demand. All these factors are pushing against the impact of rising interest rates and reduced real incomes.

Where to for 2024, this will be very interesting to see. Likely into the first half of the year there will remain pressure on households and in turn business from the impact of the interest rate rises through 2023, some of this yet to be full felt. Notwithstanding this there are many economic commentators pencilling in rate cuts in the last quarter of this calendar year. Moderating inflation and reduced rates will be good news for property owners looking to sell, both residential and commercial. For those looking to buy, availability of funds and serviceability may improve, the spread between yield and cost of funds could also widen opening opportunity. Regardless assessment on a property by property basis in any market will still present compelling opportunity for the patient with available funds.

A strong economy would be a good thing as well, as would a reduction in the level of geopolitical risk we are seeing throughout the world with various conflicts unfortunately raging, China continuing to assert itself all the while having its own property market worries to contend with and despots such as our old mate in North Korea routinely coming up with something mental to consider – last I read it was about nuclear weapons again. Likewise let’s hope for some constructive debate and a generally positive result from the US November presidential elections, regardless of who is nominated by the parties and who ultimately wins. All up a lot has to go right.

What to expect if you are trying to secure a rental property to live in or purchase to enter the property market – limited relief I expect. Competing to get a foothold in market where it is stacked against you as a result of unnecessary intervention. A seemingly endless series of grants under one name or another that only cause surges to property prices rather that providing the assistance they are supposed to, unnecessary tax incentives that push up property prices, a market supported as an investment asset class by government after government rather than one that meets a basic need. Let the market rest on market forces and not interventionist policy. This will allow those smart enough to profit but also those looking to enter the market to take advantage of price falls, and those looking to rent to hopefully benefit from higher levels of housing supply. To achieve this government will need to alter its course (unlikely) and support will be required for a more streamlined approvals process throughout Australia to assist with timely development and release of new property for sale along with better infrastructure planning to service areas so they can be developed in a timely manner. Some strategic consideration of matters such as improved skills training for trades to lift workforce number, immigration levels and how infrastructure such as housing and health services will cope with rapid increases to population in areas wouldn’t hurt as well, but that’s just a pipedream.

If you would like to discuss the property market further or your needs, I would be happy to do so and can be reached on 0408 569 366.

Please note this is not financial advice and should not be construed or relied upon as financial advice. The comment provided above is general in nature and reflects personal opinion only.

Humphreys Real Estate

30 Brisbane Street

Launceston TAS 7250

0408 569 366

[email protected]