Market Update: The Link Between Seasons and Growth

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Market Update

The latest property data and analysis reveals a relatively positive result for Australia’s housing market.

property market update

The standout performer this quarter was Hobart, which topped the chart for capital growth gains in both its house and its unit markets. While Hobart’s house market posted a strong 2.59% growth in the May quarter, it was growth in the unit market that has caused jaws to drop. Over the May quarter, Hobart units increased in value by a shocking 6.66% – which amounts to a value increase of almost $18,000.

Other strong growth performers for the quarter include Country NSW houses (2.39%) and Regional Queensland units (2.44%).

In other parts of Australia, a slowed decline in the resource markets (Perth and Darwin) suggests prices in are rebounding from a cyclical trough. Growth in Perth house values was 2.08% in the May quarter – its highest rate of growth since March 2014.

Understanding Growth in Hobart

As mentioned above, Hobart units recorded an astonishing 6.66% growth in the May quarter. However, it is important to consider the big picture with Hobart unit values, as growth in this market has been less consistent over the last five years compared to other capital cities.


The strong growth recorded in the May (2016) quarter comes off the back of negative growth in the previous two quarters. It also follows losses between 2011 and 2013. To put this in perspective, if you invested in the median Hobart unit in May 2010 (when the median value was $282,000), you will have made nominal gains of just $5,000 in capital growth since buying the unit.

Much of the stunted growth in Hobart is a result of the end of the mining boom and economic growth constraints such as geographic separation from the rest of Australia. However, as the Australian economy moves away from mining and into tourism, and those close to retirement develop an increased interest for investment properties, Hobart units suddenly present an affordable opportunity with high rental yields – which could account for the rebound of growth in the May quarter.

It is true that tourism has grown in Tasmania. Visitation to Tasmania and visitor expenditure in Tasmania grew approximately 7% in the year to March 2016. During this time, most visitors were people within Australia (85%), particularly Victoria (37%). A persistently low AUD may be encouraging domestic tourism for Australians as opposed to overseas visitors. Simultaneously, the low AUD could encourage further increases in international visitation, but this too is dependent on the stability of the global economy. Confidence in the global economy continues to be threatened by heavy migration flows and the possibility of Britain leaving the European Union in the short term.

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Another important factor to consider is the wider Australian housing market, which is in the downswing phase of its growth cycle. As growth slows, the wealth effect of housing diminishes which may also reduce interstate visitation to Tasmania.

Another important consideration for those looking to Tasmania is rent. The rental yield on the median Hobart unit is currently 5.53%.


Rent has trended upwards and in the year to May 2016, rent increased by $20 per week. However, if wage growth does not grow with rents, rental returns may be held back by affordability problems.

A report by SGS Economics and Planning has found that some households in the greater Hobart region are spending an estimated 50-80% of their disposable income on rent. Anecdotal reports suggest that homelessness is steadily increasing in the region, however the report uses 2011 Census income data and therefore discounts wage growth over the last five years.

As the value of Hobart units increase, rental yields are most likely going to fall. The extent of the fall will depend on the rate of wage growth in the region, and this is an important consideration depending on your investment strategy.

Finally, it is important to consider some of the more endogenous structural growth constraints in Tasmania.

The unemployment rate in Tasmania was 6.5% in May (seasonally adjusted), and the state also has the lowest rate of Year 12 completion for 20-24 year olds (58%) due to irregular school structures.

Should Labour win government in the upcoming July 2 election, the opposition leader has pledged $150 million to the University of Tasmania and small business incentives to encourage a culture of further education, which could create long term job and growth prospects.

Seasonality: Winter is Coming

The steady performance of Australia’s housing markets could be a culmination of the recent cash rate cut in May making credit more easily available, and the general seasonal effect of autumn – which has historically seen higher quarterly growth rates in select Australian housing markets.

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As you can see by the graph, summer and winter have historically provided weaker capital growth outcomes compared to the autumn and spring seasons.

Across the historical growth rates, standard deviations in each season are low and fairly uniform – suggesting seasonal variations are reliable in these markets.

Given we have moved into winter, and based on the historical findings presented in the graph, we could expect to see a slight drop in capital growth rates in Sydney and Melbourne in the August quarter. However, with this in mind, it is important to mention that historical growth rates during this period have still been strong over the past 20 years.

While seasonal expectations can be applied to Sydney and Melbourne, the Brisbane market does not reflect the same historical seasonal growth trends. Further to this, Brisbane units are different again to Brisbane houses.


It could be that idiosyncrasies in the Brisbane house and unit markets make purchases and growth stronger at different times. For example, the purchase or sale of an investment property may be more advantageous before the end of the financial year, making autumn an active time for units over houses.

While more research is required before making seasonal generalisations across all markets, winter does seem to deliver persistently lower rates of growth across Sydney, Melbourne and Brisbane.



Over the next few months, I would expect to see lower rates of growth across Australia. A significant mitigation to this would be continued investment fueled by the current low interest rates, as well as recent reforms to self-managed super funds which enables those approaching retirement to borrow and buy.

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 Eliza Owen onthehouse

Eliza Owen is the Market Analyst for


Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer.

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