Economic Report. Tasmania December Savills Research. Tasmania - Key Economic Indicators. Highlights

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1 Savills Research Economic Report Tasmania December 2018 Highlights Tasmania s economic growth for the current annual period has been notably above trend, with the strongest growth rate, on GSP numbers, since June Total retail turnover growth in Tasmania was recorded at 5.6% over the year to September 2018, the second highest growth rate nationally, boosted by the state s burgeoning tourism industry. After record rates of employment growth over 2017, there has been a stabilisation period, though total employment growth in the 12 months to August 2018 (0.9%) remained above the 10 year CAGR (0.3%). Residential development approvals continued to grow in the 12 months to October 2018, up 18.8% on the back of significant construction activity in the residential property market, with approvals for houses up 36.2% and approvals for attached dwellings up 40.1% over this period. Tasmania - Key Economic Indicators Date AUS Tas. GDP Growth** Sep (2.6) 4.2 (1.2) Population Growth Mar (1.6) 1.0 (0.6) Inflation Sep (2.0) 2.7 (1.9) Employment Growth Oct (1.6) 0.9 (0.3) Unemployment Rate Oct (5.6) 5.9 (6.3) Retail Trade Sep (3.7) 5.6 (2.8) Job Ad Growth Total Oct (-4.6) 10.6 (-6.2) House Price Growth Jun (4.8) 13.9 (4.0) Attached Price Growth Jun (4.2) 20.0 (3.3) Earnings Growth May (318.6) 3.4 (4.0) **On a rolling annual basis

2 Savills Research Economic Report - Tasmania Report Contents Executive Summary 2 Treasury Growth Forecast Table 3 State Summary Table 3 Gross State Product 4 Population & Retail Trade 5 Employment 6 Residential Property 8 National Key Economic Indicators 10 Shrabastee Mallik smallik@savills.com.au Director Research & Consultancy For our latest national reports, visit savills.com.au/research To join Savills Research mailing list, please research@savills.com.au Key Contacts 12 Executive Summary Australia s second smallest state economy, Tasmania has been the subject of notable economic uplift over the past 3 years. The diversity of the Tasmanian economy comes from healthy activity from the state s resources, tourism, manufacturing and food and agriculture sectors. Export activity is also strong, with demand for food products and agricultural goods from Asian economies growing considerably, in line with a growing Asian middle and upper-middle class. In FY-18, Tasmania s Gross State Product grew by 3.3%, outperforming all long-term averages. Over the past 2 years, we have seen growth in Sydney and Melbourne s residential property markets have a positive spill over effect on demand (particularly investor demand) for residential property in Tasmania, particularly in Hobart, which was the only capital city nationally to record positive growth in residential houses and attached dwellings (on latest available CoreLogic data). We have also seen a growing trend of older Australians choosing to migrate to Tasmania in pursuit of the lifestyle benefits the state has to offer, further compounding demand for residential property in the state. A growing ageing population has also helped to drive growth in the Health Care sector, which exhibited the largest growth rate of any sector in Tasmania in FY-18 (11.8%), with ongoing gains in the sector likely over the short to medium term. Looking forward, we are likely to see continued growth in Tasmania s state economy, on the back of strong household spending, infrastructure spending, private investment activity and a renewal in demand for the state s exports. A lower AUD has already boosted tourism for the state over the past 5 years and with projections of a low AUD over the short term, we are likely to see ongoing gains for the state s tourism and exporting industries. We are already seeing growing private investments across hotel and apartment constructions, with several large projects already underway. With several projects in the pipeline, projections for Tasmania s labour market remain strong into the short to medium term and are likely to boost economic growth past long-term averages. Tasmania Treasury Growth Forecast Table Outcome Forecasts Projections FY-17 FY-18 FY-19 FY-20 FY-21 Real State Final Demand Growth* (%) Real Gross State Product Growth* (%) Employment (%) Unemployment Rate (%) Hobart Consumer Price Index (%) Population Growth (%) Source: ABS, Estimates, Forecasts & Projections - Treasury * SFD = State final demand is the estimate obtained by summing government final consumption expenditure, household final consumption expenditure, private gross fixed capital formation and the gross fixed capital formation of public corporations and general government; GSP = Gross State Product, which is State Final Demand + Net Exports (as defined by the Australian 2

3 December 2018 Ec. Growth (Year to Sep-18) Retail Trade (Year to Sep-18) Population (Year to Mar-18) Inflation (Year to Sep-18) 4.2% 5.6% 1.0% 2.7% State Summary Table Economic Growth Latest 10yr Avg SFD / GDP Growth ($) Sep b (1.6) 30.90b (2.6) 31.26b (1.2) 32.31b (3.4) 33.36b (4.2) Population Population Growth Mar m (0.2) 0.52m (0.3) 0.52m (0.8) 0.52m (1.0) 0.53m (1.0) Employment Employment Growth Oct k (4.2) 1.5k (0.6) -3.2k (-1.3) 9.7k (4.1) 2.3k (0.9) Full Time Emp Growth Oct k (4.0) 2.9k (1.9) -3.6k (-2.3) 1.2k (0.8) 2.9k (1.9) Part Time Emp Growth Oct k (4.6) -1.5k (-1.7) 0.5k (0.6) 8.5k (9.9) -0.6k (-0.7) Unemployment Rate Oct Consumer Price Index Inflation (%) Sep Retail Trade Total Growth (%) Sep Food (%) Sep Department Stores (%) Sep Household Goods (%) Sep Clothing (%) Sep Cafes (%) Sep Job Advertisements Total Growth Oct ,018.8k (6.0) 0,017.9k (-5.1) 0,018.2k (1.7) 0,017.7k (-2.3) 0,019.6k Office Oct k (-1.5) 3.5k (3.2) 4.1k (16.7) 4.3k (5.4) 5.1k (18.5) Industrial Oct k (9.9) 3.7k (-5.2) 3.3k (-10.3) 3.5k (4.9) 4.1k (18.4) Retail Oct k (11.4) 1.5k (-8.1) 1.4k (-4.8) 1.1k (-17.8) 1.1k (-4.4) Residential Property Prices Detached House (%) Jun Attached Dwellings (%) Jun Development Approvals Total Residential ($) Oct k (23.7) 2.82k (19.6) 2.23k (-21.0) 2.52k (12.9) 2.99k (18.8) Residential Houses ($) Oct k (30.2) 2.33k (18.5) 1.89k (-18.8) 1.94k (2.9) 2.65k (36.2) Office ($) Oct b (55.2) 0.11b (168.0) 0.03b (-70.3) 0.06b (94.5) 0.07b (11.8) Industrial ($) Oct b (3.7) 0.09b (23.7) 0.06b (-38.8) 0.06b (2.8) 0.09b (49.7) Retail ($) Oct b (-72.6) 0.07b (30.1) 0.07b (-4.6) 0.03b (-50.2) 0.12b (247.0) Source: ABS/DOE/RBA/Savills Research; 10yr Averages shown in brackets; *Median prices quoted savills.com.au/research 3

4 Savills Research Economic Report - Tasmania GSP Growing business and public sector investments will continue to support economic growth in Tasmania. Gross State Product (Annual Growth to FY-18) Tasmania s Gross State Product grew by 3.3% in FY-18, whilst its State Final Demand (SFD) expanded by 4.2% (on a rolling annual basis) in the 12 months to September Tasmania s economic growth for the current annual period has been notably above trend, with the strongest growth rate, on GSP numbers, since June Whilst the tourism sector has been driving total growth over the past 18 months, a well diversified economy is evident, with strong growth recorded across the Services, Mining and Agriculture sectors. Public and private investments have been on the rise, buoying the construction industry, with considerable funds injected to improve transport and infrastructure in the state. Treasury forecasts for the Tasmanian economy remain above trend over the next 3 years on SFD basis, though GSP growth is likely to be muted for the current financial year, following a reduction in international exports, whereafter notable improvements are likely, on the back of a lower AUD. 9.3% 8.0% 8.0% 7.2% 5.9% 5.4% 5.0% 4.3% 4.2% 3.3% 3.3% 1.5% -0.6% 4 Health / Edu / Rec Finance & Insurance Business Services Dwellings Mining & Utilities Food & Accomm Wholesale & Retail Trade Manuf / Logistics / Cons. Other Agriculture Total Public Admin IT / Comms

5 December 2018 Population & Retail Trade Population Growth Population growth was recorded at 1.0% in the 12 months to March 2018, circa double the 20 year CAGR (0.5%), following notable increases in both overseas and interstate migration. More overseas migrants are being drawn to the Southern most state enticed by promising employment prospects and above trend employment growth. In addition, we are seeing growing tourism into the state (both international and domestic) aiding the second best performing retail sector in the country. Looking forward, strong economic drivers are likely to support ongoing strength in population growth in Tasmania. Considerable public sector investments are now being used to increase the state s liveability status, particularly in its capital. Housing affordability is also proving to be a drawing card, particularly for older residents. 8,000 Natural Increase ('000s) Overseas Migration ('000s) 6,000 4,000 2,000-2,000) 4,000) 6,000) Interstate Migration ('000s) Retail Trade Growth Total retail turnover growth in Tasmania was recorded at 5.6% over the year to September 2018, the second highest growth rate nationally. Tasmania s retail sector has been provided a considerable boost by the state s burgeoning tourism industry. Growth in Supermarket and Food retailing was recorded at 12.1% and 10.2% (respectively) over the 12 months to September An expanding residential property market has helped Household Goods retailing to record a strong growth rate of 6.3% over the same annual period. With projections of an increasing population and continued injections into the tourism sector, Tasmania s retail sector is likely to perform well into the short to medium term. 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% savills.com.au/research 5

6 Savills Research Economic Report - Tasmania With a greater numbers of older residents moving to the state recently, overall employment growth in Tasmania will be likely boosted by requirements in the Health and associated services sectors over the medium term. Employment Full Time & Part Time After record rates of employment growth over 2017, there has been a stabilisation period, though total employment growth in the 12 months to August 2018 (0.9%) remained above the 10 year CAGR (0.3%). Positively, there was an evident skew towards full-time employment growth in 2018, after record rates of part-time employment growth, largely due to a growing tourism and retail sector, which have traditionally been more preferential to part-time and casual workers. However, ongoing public investments into improving the state s transport and infrastructure facilities and a blossoming residential property market means that we are likely to see an increase in full-time job creation over the next months. In addition, with greater numbers of older residents moving to the state recently, overall employment growth will be likely boosted by requirements in the Health Care and associated services sectors. 15,000 F/T Employed P/T Employed 10,000 5,000 - (5,000) (10,000) (15,000) 6

7 December 2018 Job Advertisements by Sector (5yr Indexed) There was notable growth in job advertisements across the office and industrial sectors in Tasmania. Healthy business investments are increasing requirements for office workers, whilst record high public and private investments into infrastructure and construction, have helped to lift requirements in the industrial sector. Professional job advertisements grew 18.5% over the year to September 2018, with job advertisements in the Industrial sector up 18.4% over the same period. Whilst job advertisements in the retail sector was notably down (-4.4%), this was largely because it was coming off a historically high base, following a surge in tourists visiting the state over the 2016/17 period increased requirements for transitional workers in the state. Positive signs are evident for the industrial sector as improvements in mining profitability and strengthening in new hotel buildings increase requirements for workers across the mining and construction sectors, respectively. 160 Job Ads - Total Job Ads - Office Job Ads - Industrial Job Ads - Retail Employment by Industry (May-18) The makeup of Tasmania s labour market is different to that of Australia s, with the Public Sector, Education & Recreation sectors jointly accounting for 32.8% of the total (29.5% nationally). There is also a greater skew towards the construction sector, accounting for 10.5% of Tasmania s labour market, compared to a figure of 9.4% nationally. The Professional & Technical Services sector was notably smaller in Tasmania (5.5% compared to 8.4% nationally), but this is in line with a smaller office market in the state s capital. Requirements in Healthcare and Aged Care are going to increase significantly over the next 10 years, in line with an increasingly ageing population and more older residents migrating to Tasmania. Public, Edu & Rec (32.8%) Construction (10.5%) Retail Trade (10.3%) Hospitality (7.9%) Manufacturing (6.5%) Prof & Tech Services (5.5%) Logistics (5.1%) Agriculture (4.6%) Other Services (4.0%) Admin & Support (2.5%) Fin & Ins Services (2.4%) Wholesale Trade (2.1%) Rental, Hire & R/E (1.8%) Utilities (1.4%) IT & Telco (1.3%) Mining (1.3%) Source: DOE / Savills Research savills.com.au/research 7

8 Savills Research Economic Report - Tasmania Residential Property Residential Property Prices (10yr Indexed) According to the latest available data from the ABS, median house prices in Hobart grew 13.9% in the 12 months to June 2018, with the median house price recorded at $450,000. Median prices for attached dwellings in Hobart similarly grew, by 20.0% over the same period, with the average median price for attached dwellings recorded at $355,000. More recent data from CoreLogic point to ongoing gains, as record high population growth (boosted by both overseas and interstate migration) buoy the residential property market. It is also important to note that the current growth in residential property prices across Tasmania, and particularly Hobart, has been due to a slew of interstate investors in search of higher investment returns and will likely continue to drive growth in residential property prices as they look to capitalise on the state s growing tourism sector. Volume Sales (Annual Growth to Jun-18) There was a slight easing in the total number of houses and attached dwelling transacted in the 12 months to June 2018, after record high transaction volumes in the residential property market during However, given the breadth of transactions remains quite small, such large changes are normal and shouldn t be taken as a sign of a failing residential property market. With residential property prices in Tasmania increasing during 2017 on the back of a spur in activity from interstate investors, credit tightening for investor loans has had a stabilising effect on total sales volumes across the state. However, given significant relative affordability (compared to Australia s other major capitals), sales volumes are likely to pick up over the medium term. $450,000 $400,000 $350,000 House Price (Hobart) Apartment Price (Hobart) House Price (Non-Metro TAS) Apartment Price (Non-Metro TAS) 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 13.9% 20.0% 7.3% 5.1% $300,000 $250, % -10.0% -15.0% -2.0% -11.8% -6.4% -4.8% $200,000 $150,000 Residential Statistics (Houses) by State METROPOLITAN NON-METROPOLITAN STATE Median Price* Sale Volume* Median Price* Sale Volume* DAs* DAs / 100** AUS 693 (-5.7%) 171,871 (-11.7%) 417 (0.2%) 130,780 (-3.4%) 119,473 (2.5%) 0.89 (0.83) NSW 945 (-12.1%) 44,264 (-14.2%) 470 (1.1%) 49,983 (-4.1%) 29,754 (1.7%) 0.84 (0.68) VIC 732 (-1.7%) 54,712 (-16.4%) 353 (4.4%) 27,809 (2.1%) 39,572 (8.1%) 1.16 (1.01) QLD 526 (2.1%) 33,903 (-12.2%) 430 (-3.2%) 34,037 (-8.1%) 25,234 (-0.1%) 0.84 (0.81) WA 500 (-1.0%) 5,860 (-0.8%) 310 (-4.6%) 5,860 (-0.8%) 12,416 (-11.4%) 0.67 (0.98) SA 468 (2.1%) 24,240 (3.4%) 275 (0.7%) 6,385 (4.2%) 8,055 (-0.1%) 0.70 (0.69) ACT 690 (2.6%) 4,362 (-7.8%) n.a n.a 1,315 (36.0%) 1.58 (1.22) ; *12 month growth rates in brackets; **10yr Averages shown in brackets 8

9 December 2018 DAs per 100 vs. DAs (split) Residential development approvals continued to grow in the 12 months to October 2018, up 18.8% on the back of significant construction activity in the residential property market, with approvals for houses up 36.2% and approvals for attached dwellings up 40.1% over this period. Looking forward, this level of construction is likely to continue, with plans underway in several locations across Tasmania to combine convenience based retail with residential and commercial developments. The Tasmanian Planning Commission is in the process of creating plans to create new towns, promoting residential development in the state. 4,000 3,500 Houses Approvals Per 100p Attached Dwellings , ,500 2,000 1,500 1, Residential Statistics (Attached Dwellings) by State METROPOLITAN NON-METROPOLITAN STATE Median Price* Sale Volume* Median Price* Sale Volume* DAs* Total (%) AUS 556 (-3.8%) 102,002 (-16.5%) 384 (0.3%) 36,898 (-10.6%) 103,223 (-1.1%) 46% NSW 710 (-6.6%) 34,878 (-20.3%) 390 (-3.1%) 11,491 (-15.2%) 37,091 (-12.7%) 55% VIC 550 (1.3%) 34,706 (-18.1%) 280 (2.9%) 4,800 (-4.7%) 34,793 (15.5%) 47% QLD 398 (0.0%) 11,224 (-13.3%) 385 (1.3%) 17,621 (-11.5%) 16,533 (0.0%) 40% WA 410 (0.0%) 6,942 (0.4%) 210 (-19.2%) 635 (15.5%) 4,864 (-18.7%) 28% SA 374 (-2.9%) 8,403 (-5.0%) 182 (-11.2%) 1,097 (8.5%) 4,115 (-3.9%) 34% ACT 430 (-3.6%) 3,890 (-21.7%) n.a n.a 5,315 (31.5%) 80% ; *12 month growth rates in brackets savills.com.au/research 9

10 Savills Research Economic Report - Tasmania National Key Economic Indicators NORTHERN TERRITORY WESTERN AUSTRALIA SFD: 0.3% Inflation: 1.2% Retail Trade: -0.8% Pop. Growth: 0.8% SOUTH AUSTRALIA SFD: 3.1% Inflation: 1.8% Retail Trade: 3.7% Pop. Growth: 0.7% SFD: 4.2% Inflation: 2.7% Retail Trade: 5.6% Pop. Growth: 1.0% 10

11 December 2018 SFD: 3.2% Inflation: 1.8% Retail Trade: 2.2% Pop. Growth: 1.7% QUEENSLAND SFD: 3.5% Inflation: 2.0% Retail Trade: 3.5% Pop. Growth: 1.4% NEW SOUTH WALES SFD: 3.7% Inflation: 2.5% Retail Trade: 3.9% Pop. Growth: 2.1% VICTORIA SFD: 4.4% Inflation: 2.2% Retail Trade: 5.9% Pop. Growth: 2.2% TASMANIA savills.com.au/research 11

12 Savills Research Economic Report - Tasmania December 2018 Methodology Figures written in this report may not coincide with numbers published by entities such as the Australian Bureau of Statistics, as a result of differing calculation methods (such as on a rolling year basis, consolidating numbers from a number of entities, etc.). Key Sector Contacts Capital Transactions Ian Hetherington +61 (0) ihetherington@savills.com.au Project Management Gavin Boswarva +61 (0) gboswarva@savills.com.au Valuations Sandra Peachey +61 (0) speachey@savills.com.au Industrial Darren Curry +61 (0) dcurry@savills.com.au Hotels Michael Simpson +61 (0) msimpson@savills.com.au Retail Investments Steven Lerche +61 (0) slerche@savills.com.au Office Leasing Rob Dickins +61 (0) rdickins@savills.com.au The Savills Research & Consultancy team has years of experience, and is supported by our extensive agency, property management and valuation professionals. For national-level consultancy or subscription requirements please contact: Capital Strategy & Research Shrabastee Mallik +61 (0) smallik@savills.com.au Savills is a leading global property service provider listed on the London Stock Exchange. Trusted since 1855, we have extensive experience across the Asia Pacific, with over 50 offices, and in Australia, we have over 800 staff focused on meeting all your property needs. This information is general information only and is subject to change without notice. No representations or warranties of any nature whatsoever are given, intended or implied. Savills will not be liable for any omissions or errors. Savills will not be liable, including for negligence, for any direct, indirect, special, incidental or consequential losses or damages arising out of our in any way connected with use of any of this information. This information does not form part of or constitute an offer or contract. You should rely on your own enquiries about the accuracy of any information or materials. All images are only for illustrative purposes. This information must not be copied, reproduced or distributed without the prior written consent of Savills. savills.com.au/research 12