In Tassie low median prices means the federal FHOG, in addition to a $4000 State Government stamp duty concession, goes a long way. 
As a result of the FHOG and low interest rates, sales volumes have jumped over 25% in the last quarter. Close to 1000 homes were sold across the state in April, the highest number since November 2007.
Housing finance approvals fell significantly in April after significantly out-performing the national average six months prior. This is likely reflecting a backlog of new entrants looking for opportunities. Reports now suggest a significant lack of supply, especially at the median level.
Median prices are being supported by these factors, especially given the relatively small size of the market, yet some price softness remains at the top end of the spectrum. However, going forward, challenges to the property market remain, especially as the very large first home buyer impact currently in the market begins to dissipate.
Australian Capital Territory
After significant weakness through the back-half of 2008, the Canberra property market has recently shown signs of improvement. Price data shows that only modest falls in prices took place through much of 2008, with the number of transactions falling 14% in the year. As is the case across the country, price falls were mainly at the top end of the market and the recovery, which is now in train, is centred at the more affordable level of the market.
Residex data suggests prices across the ACT were up 2% in the March quarter and just under another 2% in May alone. Housing finance approvals are up over 30% in the last six to seven months, outperforming the Australian average. The proportion of first home buyers has risen sharply, supporting the market, yet is well short of the national average.
This is likely due to a large proportion of potential first home buyers moving to Canberra for employment that is temporary rather than permanent. Due to demand from this segment the unit rental market remains tight, vacancy rates are still around 1% and there is a shortage of stock, which is supporting prices.
Residex suggests there has been no significant fall in unit prices over the past year, further prices have actually gained strongly this year so far, to be up 4-5%. With rents still relatively high, a rental yield of 5.5% (the second highest in the country) has attracted buyers. Going forwarded, still very low unemployment and relatively high incomes should support this market.
Northern Territory
The Darwin property market has taken all before it, shrugging off the falls in prices that have occurred across the country. Solid territory government finances, ongoing strong population growth, defence force activity and international investment in energy resource projects are all contributing to support the boom in the market. Darwin experienced only one quarter of price falls way back in March 2008, with demand staying strong and the number of sales falling only 2-3%.
Since then, Residex data suggests house prices in the territory have increased well over 10% in the last 12 months, with unit prices outperforming even this, to be up closer to 15% over the same period.
Darwin has a high temporary workforce with migration levels from overseas and interstate remaining solid. This has kept the rental market running red hot with vacancy rates entrenched at very low levels, despite local government efforts to bolster the rental stock. As a result rental growth is the highest in the country at around 15% over the past year. Consequently, unit rents are the second highest in the country and housing rents are the highest in the country and, as such, rental yields are 6% and 5.8%, respectively, which have attracted investors into the market.
However, as the local economy slows in line with other commodity-driven states, the Northern Territory housing market will inevitably cool with it. Further, deteriorating affordability will begin to discourage inward migration and take some heat out of the market and growth should return to more sustainable levels.
Dr Alex Joiner is an economist with ANZ Bank.
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