In today’s show there is good news for the Tasmanian market and Hobart in particular, from Louis Christopher but he balances that with some sobering figures from the west.
Read the transcript here:
Kevin: Interesting that figures released by SQM Research recently have revealed that the number of residential vacancies fell nationally in January 2015. Louis Christopher from SQM Research joins us.
Louis, what does this mean?
Louis: Kevin, during the month, basically, we saw renters return to the market. Seasonally, we always see that. During December or in the lead up to Christmas, you tend to see new tenants stay away – for example, students going back to their homes and things like that.
So there’s a lot of seasonality in these results. Overall though, vacancies did fall, although it’s a bit of a mixed bag. For example, we’re seeing a very tight vacancy rate in Hobart, while in Perth and Darwin – which, of course, are most exposed to the mining downturn – we’re seeing a blowout in vacancies there.
Kevin: We’ll talk about Hobart in just a moment. If you don’t mind, I want to go a little bit more in depth on that one. But just those other two markets – Perth and Darwin?
Louis: Yes. Perth, which we have a vacancy rate on our numbers of 2.6%, and that’s up from 1.9% recorded this time last year. In Darwin, we have a vacancy rate of 3.3%, which is up from 1.5% recorded this time last year.
Now, those numbers themselves – 3.3% and 2.6% – don’t sound too bad, but it’s the relative movement, the increase in vacancies, which is putting downward pressure on rents, Kevin. To give you an idea of what Perth rents have done, on our numbers, rents for houses have fallen 7% in the last 12 months, and units are down 4.7%. Rents in Darwin have fallen 11% just in the last 12 months, and units are down 3.4%.
Kevin: Can you put all this down to the mining?
Louis: Yes, I think it mostly has to do with mining. So all those fly-in, fly-outs we heard about back in 2010 and 2011 boosting up prices, a lot of those jobs are now gone, and that’s been affecting the Perth market in particular. It’s also been affecting some regional mining towns –Karratha and Port Hedland, for example. Those markets are getting smashed right now because of this mining downturn.
Kevin: I guess that’s even more alarming given that it’s over the last 12 months. I suppose you wouldn’t be so worried if this was just month-on-month, because that would be fairly seasonal?
Louis: Yes, that would be seasonal, but we’re definitely seeing a year-on-year deterioration in the rental market, particularly for those two cities and definitely any regional town that’s been exposed to mining.
Kevin: The Hobart story is interesting. Tell me a little bit more about that, Louis. What are you seeing there?
Louis: For any avid property investor or follower of the property market, most would be aware that the Hobart market had a pretty significant downturn between 2010 through to about 2012, where house prices corrected by about 8% to 9%, and the rental market also corrected.
In the last 12 months, we’re seeing a pickup in the rental market. We’ve seen a big fall in vacancy rates and a rise in rent, so rents in Hobart for units are now up to $280 a week. That’s a rise of 8.6% compared to this time last year.
We put down the recovery to the Hobart market to two factors. Firstly, the fall in interest rates has definitely helped that market. Secondly, we’ve seen a pickup in that local economy predominantly because of the fall in the Australian dollar. That’s helped the local tourism market in Tasmania, and it’s also helped a little bit with their agricultural-based market as well.
Kevin: Would you say there’s still a lot more upside in that Hobart market?
Louis: Absolutely. As mentioned, the rents for units are running at $280 to $320 a week for a standard house in Hobart. That’s basically one-third of the amount that you see in Sydney, not that we’ll ever see Sydney prices in Hobart. I don’t think we will. But I think we’re going to see an ongoing recovery in the Hobart markets so long as the Australian dollar stays low.
Kevin: That’s good news there about the Hobart market. Joining us once again is Louis Christopher from SQM research.
Louis, thanks for your time.
Louis: Thank you, Kevin.