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The Tasmanian market contracts as rates rise

Rising interest rates have started to bite in Tasmania with sales activity contracting.

According to the June Quarterly Report from the Real Estate Institute of Tasmania (REIT), there were fewer sales in the past three months but also fewer buyers competing in the marketplace. 

REIT President Michael Walsh said multiple interest rate increases had started to slow activity in all markets across the state. 

“Over the past three month there has been a notable decline in buyer confidence, and this is having an impact on the market,” Mr Walsh said.

“Agents are seeing bullish buyer activity levels subside with inquiry levels and open home attendance numbers falling. 

“Properties are taking longer to sell, and multiple offers and off market sales are occurring less frequently.”

The Federal Election, interest rate increases and the sharp jump in the cost of living have had an impact on the market.

The report shows sales numbers for the first six months of this year are down 10.5 per cent compared to the same period last year, and 6.3 per cent on the previous quarter. 

Even with 10.5 per cent fewer sales, Tasmania is on target to exceed last year’s record cumulative value of sales of $6.2 billion. 

The number of house sales across Greater Hobart increased 11.8 per cent over the quarter while the median price decreased 3.7 per cent to $790,000. 

In Launceston, sale numbers decreased 15.1 per cent while its median price increased 1.3 per cent to $585,000. 

Across the North West Centres sale numbers decreased 3.1 per cent while the median price jumped 3.6 per cent to $470,000.

The June quarter saw median house prices grow 2.6 per cent to $626,000 while unit prices remained stable at $485,000 and land prices increased 10.6 per cent to $267,500. 

Sales at the top end of the market remain buoyant with the number of transactions above $1 million increasing 81.7 per cent year-on-year. 

While first home buyer numbers decreased 12 per cent (to 821) and investors were down 10 per cent (to 1016).

Mr Walsh said interest rate increases had impacted buyer confidence and had changed the dynamic of the market.

“It appears that those seeking to enter the market at the lower end have been adversely impacted by the rate rises opposed to those at the top end,” he said.

“Whilst the market moves through a transition phase, there are no evident signs of prices collapsing (as suggested by some commentators). 

“Properties are continuing to sell and supply of both properties to buy and rent continues to remain our biggest challenge.”

According to Mr Wash, one of the biggest issues is now the drop in investor activity, which he said would have a flow-on effect and reduce available rental properties.

Investor numbers dropped 20.8 per cent last quarter, while rental property vacancy rates remain at critically low levels at 1.1 per cent in Hobart, 0.9 per cent in Launceston and 1.2 per cent in the North West.

Median rents have increased $25 per week in Hobart, remained stable in Launceston and increased $10 per week across the North West.

“Of real concern is a retracting rental market, which is already under extreme pressure,” Mr Walsh said.

“The lack of investment in this sector is of real concern. 

“I cannot see any short-term solutions to resolve this issue. 

“Whilst we have noted that there is a softening across the market, there remains a solid demand from purchasers and renters for stock.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.