15th May 2009
A rare combination of cash flow positive and high growth properties are enticing investors in the island state.
Like all other Australian capital cities, Hobart has seen a dramatic increase in first homebuyer activity, with one in three sales now being secured by first timers.
Rob Zubin, principal buyers agent, My Property Hunter says this is a significant increase from levels experience this time last year when just 17-18% of properties in Hobart were being purchased by the first homebuyers.
As a consequence of the rise in first homebuyers, it has been increasingly difficult for investors to compete - another countrywide trend, says Zubin.
"Despite the competition, investors who are well-versed in property and have long term buy and hold philosophies are still managing to buy into good opportunities."
Peter Bushby, president of the Real Estate Institute of Tasmania says the resilient Tasmanian economy has been a crucial factor in providing confidence to active investors at present.
"The main factor driving our economy in Tasmania is our strong tourism sector. We had a very good summer season already because many holidaying Australians are choosing to stay in the country for safety and financial reasons and find Tasmania a great place to visit," he says.
"Investors who know the Hobart market are attracted to the capital city for this reason and for the fact that properties start at a low cost base and attract strong rental demand" he says.
Bushby says the Hobart market is traditionally considered a reliable property market for investors as lower prices provide a lower risk investment environment.
"We haven't got an over supply of housing and that is reflected in the vacancy rates. It is very difficult to get quality rentals at the moment and experienced investors buying into the current market are using this to their advantage."
Cash flow properties abound
The current Hobart property market presents the ideal time for investors to locate cash flow happy properties, say experts.
"Rents have increased 10% across the board in the last six to nine months. A large number of investors are looking for a balance of capital growth prospects and good rental yields. These opportunities are commonly found within a 15kms radius of Hobart and Launceston," says Zubin.
He says buying close to the big city regions will provide the best opportunity to maximise a buy and hold strategy while achieving good yields.
"Investors should adopt a buy and hold strategy because short term gains are not an option in the Hobart market at the moment. They should look at holding their properties for the medium to long term between five and 10 years at least. Those who are holding out for a 20-30% capital growth on their investments in the short term market need to get real with the new market," he says.
Bushby points out that Tasmania is not going to be an easy market in the short term but if buyers go into the market with a five to 10 year strategy and buy well, they should be in a good position for growth down the track.
"Investors just need to remember to do their homework. Stay close to transport, amenities, schools, shopping centres and amenities," he says.
Zubin says one of the benefits of the slow market in Hobart is that investors have the time they need to make educated buying decisions.
"Investors are spending more time assessing properties, which is a good thing for their future position," he says. "Experienced investors know that there is no rush for them to buy and if they're buying they have a wider choice of stock. Investors are not eager to buy first thing comes along, giving them the ability to carry out more investigations to buy the right property at the right time."
Areas to watch
Zubin says buyers should watch for bargains in the Launceston, Invermay and South Launceston areas, where very strong rental appeal makes for a good investment.
"These areas are popular which makes for competitive buying, but the location is a good place for investors to be," he says.
In the Hobart area, Zubin tips all rounder suburbs like Claremont, Glenorchy and Midway Point.
"These areas are located near Hobart airport and are experiencing a lot of development in infrastructure, producing high growth potential," he says.
"In Midway Point investors can pick up a nice house with potential water views for mid to high $200,000's."
He says inner city areas such as North Hobart and Mount Stuart provide good capital growth potential for investors but the higher priced properties mean yields are not as great as other areas.
"Move out to Midway Point or Claremont and there is a balance of good capital growth and rental yield between 6-6.5%. Tenants are drawn to these areas because property is still affordable to rent."
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