Launceston’s 2020 property market great for investors, bad for homeless

While all eyes have been on Hobart’s housing crisis in 2019, Launceston’s property market has been quietly growing at comparable speed. Investors may have cause for celebration, but social services are struggling to meet demand as vulnerable and homeless Tasmanians are priced out of rentals.

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How you feel about the housing market in Launceston going into 2020 most likely depends on how much money you have.

For those in a position to buy a house or add to a property portfolio, things are as rosy as they have been for the past three years.

“Wherever you want to purchase real estate in the state at the moment, you really couldn’t go wrong,” Real Estate Institute of Tasmania president Mandy Welling said.

But if you are renting, and especially if you are struggling to make rent, things are unlikely to improve in the new year.

Salvation Army Launceston social operations manager Anita Reeve said the need for the Salvos had become greater over the past two to three years, corresponding with growth in the property market.

“The cost of housing goes up, the cost of rentals goes up, because tourism is high we get properties utilised as Airbnbs instead of long-term rentals, and thus it’s very, very difficult for people on low incomes to find rentals,” she said.

“It’s come on us very suddenly. Even though there were some indications, I don’t think anybody fully understood the implications that [property market growth] would have for people. The reality is we are just not meeting demand at the moment.”

Northern Tasmania grew like gangbusters in 2018, according to property analyst Simon Pressley.

After population decline from 2012 to 2017, Launceston growth suddenly shot up in 2018 – with an increase in house sales reaching growth of 27.8 per cent in the final quarter of that year.

The sugar hit wore off in 2019. But it was still steady, and experts don’t expect that to taper off any time soon.

REIT’s September Quarter Report shows that, in the year to September 2019, house sales in Hobart – where there has been a much-publicised housing crisis – grew one per cent. But in Launceston, house sales grew 8.4 per cent over the same time period.

Launceston house prices grew 13.4 per cent in the year to November to a median value of $396,948. That’s compared to 8.7 per cent to $533,105 in Hobart.

A unit in Launceston now costs the same as one in Hobart, a stark contrast to three years ago.

In September, Launceston’s housing market was being heralded as the “strongest in the country” by Domain, after it discovered property values had grown by 20 per cent over the previous 18 months – outperforming all major capital cities.

It’s a similar story in the rental market. In Launceston, the average rent for a detached house increased 24 per cent over the past three years, to $370 per week. At the same time, Launceston had the fastest statewide growth in Airbnb listings – 328 per cent since July 2016 – many of which would have otherwise been made available as rentals.

REIT president Mandy Welling said property investors were looking outside of Hobart to its Northern neighbour.

“I would say there’s more demand in Launceston than Hobart at the moment,” Ms Welling said.

“I have to say that Launceston is rapidly catching up to Hobart [in terms of house prices]. The level of services there, population growth – people are not seeing the need to just be living in the capital city.

“There are many, many opportunities on offer in the north of the state, and that’s pushing people north.”

UTAS Housing and Community Research Unit director Keith Jacobs said it was difficult to make predictions in the housing market, as there were many unknowns. However, he said it was probable the runaway house price growth in Hobart in 2019 could have flow-on implications for Launceston.

“As house prices become very, very expensive in Hobart, people will start to look at other parts of Tasmania,” he said.

“We know anecdotally a lot of people are moving from interstate, for a whole bunch of reasons. Maybe people that would have chosen to live in Hobart will move to Launceston instead.

“UTAS is expanding to Launceston, which may have an impact. You might get landlord investors looking at Launceston as a place to purchase [in advance of the Inveresk campus construction due for completion in 2024].

“The other thing is interest rates are very, very low at the moment, and that’s likely to see people who couldn’t consider owner-occupation considering owner-occupation.”

He said the solution to the unaffordable housing trend was supply-side interventions: government policy that increases the amount of housing in existence. For example, the government building more social housing and making it available at below market prices for low-income Tasmanians.

The alternative is demand-side interventions, which tries to make it easier for people to afford the housing that is already available without impacting house prices: for example, through the government providing grants and concessions to home-buyers and landlords.

“That’s just going to raise prices,” Mr Jacobs said. “They don’t work, there’s not an academic anywhere that will say they work.”

“The housing crisis is not going to go away, it’s going to get worse, and no intervention is going to be effective if it doesn’t address supply for people on low incomes.”

The state government is undertaking a mix of supply and demand-side interventions, from buying more public housing, to offering grants to landlords.

Housing Minister Roger Jaensch said in December the government had boosted “the availability of affordable residential land in areas of greatest need, including hundreds of lots in Moonah, Rokeby, Devonport, Newnham and Huntingfield”.

“And, from this year, our historic agreement with the Morrison Government to waive Tasmania’s housing debt will free up more than $230 million in loan repayments that can now be invested in further increasing supply and access to affordable housing,” he said.

The federal government’s forgiveness of an $157 million social housing debt this year will result in 400 applicants being off the public housing waiting list, the state government says.

The funding will be spent on grants to social housing providers, like Anglicare which operates in Launceston; money given to landlords in exchange for them renting their properties to low-income tenants; and purchasing properties for use as public housing.

But those 400 households do not come close to meeting need. The public housing waitlist has over 3300 households on it.

The University of Tasmania’s Institute for the Study of Social Change estimates that in Launceston there is a need for 3900 new social housing properties – 3300 right now and a further 600 to meet projected population growth over the next 20 years.

“The private housing market has never and will never meet the needs of all households,” the authors wrote in the institute’s December housing update. “The original vision of the social housing system was that it would offer a permanent solution to the private market’s failure to accommodate lower-income households.”

But for those not in need of public housing – for those looking to buy – Launceston will be an excellent place to do so this year.

“I look at Invermay, and I relate that to our suburb next to Hobart which is New Town, and a very average piece of real estate there – which probably requires $200,000 worth of work – is still selling for nearly three-quarters of a million dollars,” Mandy Welling said.

“Yet I can go up there to the footy [at UTAS Stadium] and park outside a house that looks exactly the same, and I can secure that for under half a million dollars.

“But it won’t stay like that.”

THE EXAMINER’S HOUSING COVERAGE IN 2019:

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