As far back as the relevant statistics go, Tasmanians have typically had lower incomes than other Australians, on average. And they still do. Average weekly earnings for full-time adult Tasmanian workers were $220 a week (or 12.75 per cent) less than the national average in the first half of 2021, while according to the most recent ABS State Accounts, annual household disposable income (that is, after interest and income tax payments) per capita was about $2,500 (or 5 per cent) below the national average in the 2019-20 financial year.
One of the offsets to that – apart from all the immeasurable pleasures of living in Tasmania – used to be that housing was a lot cheaper than on the mainland. In June 1983, for example, according to CoreLogic, the median house price in Tasmania was just $27,500, a little over half the national average of $47,000. As recently as June 2001, the median-priced Tasmanian property cost $87,000, just under half the national average of $177,500 (and barely more than one-quarter of the price of a typical property in Sydney).
Not any more. In September 2021, the median price of a Tasmanian house or unit was $515,000, more than 80% of the national average. The median price of a house in Hobart was $700,000, $50,000 more than in Brisbane, $125,000 more than in Adelaide, and $200,000 more than in Perth – and only $180,000 less than in Melbourne.
Of course, if you’d bought a property somewhere in Tasmania when they were half the price of something similar on the mainland, you’d be very pleased about this. And that’s a lot of people, because Tasmania has for a long time had the highest home ownership rate of any state or territory (partly because of our older-than-average population, but also because of our historically cheaper-than-average housing).
But if you are one of the growing number of Tasmanians who have found themselves unable to buy into the local property market as readily as previous generations were able to do, you will almost certainly have a different perspective.
Not only will you have missed out on what has been, for those who already owned at least one property, a fairly easy route to increased wealth (at least on paper). You will also have been paying a lot more in rent.
As recently as 20 years ago, Tasmanian rents were typically 25-30 per cent below the national average. But over the past decade, rents in Hobart have risen by more than 50 per cent, and in the rest of Tasmania by more than 40 per cent, compared with the national average of 23 per cent. By contrast, Tasmanian wages have risen by 27.5 per cent over the same period.
Again according to CoreLogic, renting a house in Hobart will today cost you $500 a week, on average – more than in Perth ($410 a week), Adelaide ($420), Brisbane ($490) and even Melbourne ($430 a week), cities with between six and 23 times the population of Hobart. The Rental Affordability Index compiled by SGS Economics and Planning suggests that, relative to incomes, Hobart is the “least affordable metropolitan area in Australia” for renters – worse even than Sydney.
A good deal of the impetus for the dramatic increase in residential property prices in Tasmania comes from the same source as it does in other parts of Australia – and indeed in much of the rest of the “developed” world – namely, readily-available credit at record-low interest rates.
It also owes something to the increasingly generous cash grants which the Tasmanian Government, like the governments of other states and the Federal Government, have made to first home buyers – cash which, history has repeatedly shown, ends up in the pockets of the vendors of existing homes or the builders of new ones, and does absolutely nothing to stem, let alone reverse, the declining trend in home ownership rates.
In Tasmania’s case, it also owes something to the improvement in the state’s economic performance (as documented in the first article in this series), which has meant that fewer Tasmanians have perceived a need to leave this island, and more mainlanders and foreigners have wanted to move here (or, even if they don’t want to move here, to acquire a “stake” in our improved economic fortunes by buying Tasmanian property as an investment).
There are no hard-and-fast figures on the proportion of Tasmanian property sales which have been to mainlanders, but there’s plenty of anecdotal evidence to support the idea that they’ve been a significant factor.
Of course in any market, what happens to prices depends on supply as well as on demand.
The supply side of housing markets is notoriously inelastic, as economists say – that is, it is inherently slow to respond to changes in demand. Over the five years to 2019-20, fewer than five new dwellings were completed in Tasmania per thousand of population – less than in any part of Australia except the Northern Territory, and more than 40 per cent below the national average of 8.4 new dwellings per thousand people.
More encouragingly, the number of new dwellings approved for construction by local councils has started to pick up – to 7.9 per thousand people in 2020-21, well above the average of 5.1 per thousand people over the preceding decade, and only marginally below the national average of 8.6.
If that pace can be sustained, or even increased further, and translated into a commensurate increase in the number of new homes actually delivered, over a period of years – which would probably require some effort to increase the supply of appropriately skilled labour – that would likely do something to dampen the rate of house price inflation.
Researchers at the University of Tasmania’s Housing and Community Research Unit (HACRU) have shown that the supply of rental accommodation, particularly in Hobart, has been adversely affected by the conversion of rental properties into short-stay accommodation for tourists.
And although the state government has recently tightened the regulation of this market – and it has also been affected by restrictions on interstate and overseas travel during Covid – HACRU’s most recent Housing Update suggests that there’s little sign that these have had “any meaningful impact”.
The stock of social housing (that is, housing owned and managed by Housing Tasmania, the state government’s public housing agency, or by community housing organisations and other not-for-profits for rental to people on low incomes or with special needs), hasn’t kept up with increases in the demand for this kind of accommodation.
According to data compiled by the Productivity Commission, the number of social housing units in Tasmania declined by almost 700, or 5 per cent, between June 2013 and June 2018. Over the following two years (that is, up to June 2020), 986 new dwellings were added to the stock of social housing, and the state government committed during the recent election to provide an additional 2,000 social housing dwellings over the next four years – which, if met, should make some inroads into the waiting list for housing assistance, which has blown out from 2,100 in June 2013 to more than 4,350 as of August 2021, and to the average waiting time for “priority applicants” to be housed, which is now almost five years.
Some of the factors which have contributed to the deterioration in housing affordability for both would-be owners and renters are beyond the control of the Tasmanian government. It doesn’t set interest rates, it doesn’t supervise the lending practices of mortgage providers, and it can’t change the way Australia’s tax system (to a much greater extent than the tax systems of other comparable countries) encourages high-income earners, in particular, to invest in property. They are all the prerogative of the national government, and its agencies.
But that doesn’t mean that the state government can’t do anything. It is, to its credit, committed to supplying more social housing dwellings – although it could probably, and usefully, do even more in that area. It could follow the lead set by its New South Wales Liberal counterpart (and the recommendations of almost every public enquiry there has been in the past 30 years into taxation reform) in replacing stamp duties on property transfers with a more broadly based land tax (that would include owner-occupied homes) – a reform which would reduce the up-front costs of acquiring a home, and ensure that those who benefited from rising land prices made some contribution out of the resulting increase in their wealth to the community (something which the vast majority of Tasmanian land-owners don’t do).
If it’s not prepared to go that far – and the Premier certainly evinces no interest in pursuing any kind of meaningful state tax reform – then it could at least consider imposing higher rates of stamp duty and/or land tax on non-resident property investors (as it has already done with regard to foreign investors in Tasmanian properties).
It certainly shouldn’t give in to pressure from existing property investors to reduce the land tax which they pay – which is a deduction against the income tax they pay to the federal government. And if that means that fewer people purchase properties as investments than otherwise, it should remember that that means that more people will be able to buy them as homes in which they can live – so that the demand for rental accommodation falls by exactly the same amount as the supply of it, and hence that there will be no impact on rents, contrary to what advocates for property investors typically assert.
It should consider what additional steps can be made to speed up the process of approving applications to build new housing by councils, and to accelerate the provision of the infrastructure essential to make new housing estates “liveable”. It could provide financial incentives to local governments which achieve significant increases in new building approvals, or which process them more quickly.
Ordinarily, I wouldn’t be quoting China’s President, Xi Jinping, in an article like this. But I think he’s right when he says “houses should be for living in, not for speculation”. On the other hand, I don’t have to. Sir Robert Menzies was also right when, 79 years ago, he said, “One of the best instincts in us is that which induces us to have one little piece of earth with a house and a garden which is ours, to which we can withdraw, in which we can be among our friends, into which no stranger may come against our will.”
That’s an instinct which Tasmanians were able to fulfil more readily, whether they owned or rented their homes, than other Australians – until recently. It would be a pity if that instinct were to become little more than a memory.<
Saul Eslake came to Tasmania with his parents as an eight-year old. He went to primary school in Smithton, and high school and university in Hobart (graduating with a First Class Honours degree in Economics from UTas). Like so many in that era, he went to the mainland for work, initially at the Treasury in Canberra, before spending almost 32 years in Melbourne, working as (among other things) chief economist of the ANZ Bank for 14 years and chief economist (Australia & New Zealand) for Bank of America Merrill Lynch for 3½ years. In 2015 he came home to establish his own business, Corinna Economic Advisory. Saul Eslake is a Vice-Chancellor’s Fellow at UTas, and a non-executive director of the Macquarie Point Development Corporation.
