Coming off a very low base, Tasmania’s two largest cities are growing, slowly but surely, into real investment hot spots.
Tasmania’s capital city property market is gradually building up momentum. Residex’s June quarter figures show a 1.35% increase in the median house price and in July, the median house price grew by 2.3%.
And on the other end of the island, Launceston boasts eight of the 10 best-performing suburbs in Tasmania in terms of three-monthly house price growth.
Rob Zubin, managing director of buyers agency My Property Hunter, says the key to Tasmania’s cities is measured, long-term growth. “This has happened for the last five or six years – slow and steady,” he says. “No sharp falls, no sharp rises, just a steady rise.”
In recent months, Zubin says there has been a reduction of product available on the market with no corresponding slowdown in demand. “That has helped property to achieve growth,” he adds.The good news for investors, it seems, is that demand from renters is just as strong.
“There is an undersupply,” Zubin says. “The government, in its endeavour to supply public housing, is now hundreds of houses behind. That’s forcing rents to go up. Vacancy is still around 2% in both cities.”
Inner-city units in Hobart are in particularly short supply. A good three-bedroom apartment in the city with two bathrooms and a lock-up garage can fetch over $500,000.
“That’s what those types of properties are commanding,” says Zubin. “You’re virtually two minutes’ walk to the Hobart GPO – close to the hospital, close to services. Professionals are paying that for inner-city quality apartments.”
Property yields increase dramatically the further you move out of the CBD. “Hobart is not too dissimilar to the major [mainland] cities in its ability to achieve rent,” notes Zubin. “In the city, you might get 3.5%-4% return. Ten minutes out from the CBD, you’re closer to 5.5% return. Fifteen minutes out you could be pushing 6%.”
Analysts are less enthused about country Tasmania where, according to Residex, house prices are continuing to fall. “Regional areas are often stimulated by one or two industries, so if one of those industries closes, it has a significant effect,” says Zubin. The flow-on factor can be significant: when there is an impact on western mining towns like Rosebery and Queenstown, north-western ports like Burnie and Devonport, through which the minerals are exported, are hit hard as well.
Picturesque coastal towns up and down both coasts are being kept afloat by a steady influx of mainland retirees. “People buy there not because of growth, but because of lifestyle and the opportunity to be close to the water, as well as the openness and the freedom that comes with having a well-priced property they couldn’t afford if they were on the mainland,” Zubin says.
Pick of the suburbs
Back in the cities, there is a hum of positivity as major infrastructure projects get off the ground and affluent singles, couples and families scramble to get a toehold in major new developments.
Zubin predicts an average growth of 8-9% pa over the next five years for a number of suburbs, including North Hobart, Primrose Sands and Rokeby near the capital, and Invermay, East Launceston, South Launceston and Newstead in the north.
On Hobart’s Eastern Shore, Rokeby is undergoing a steady process of gentrification as government housing is sold off and families move in. “Properties that were being sold in Rokeby three years ago for $130,000 can’t be bought for $230,000 now.” They’re still a bargain – and that’s with water views. Just over five minutes away, in prestigious Bellerive, water views will cost you upwards of $1m.
Brighton and Kingston, commuter hubs to the north and south of Hobart respectively, are being transformed into little cities. In Brighton, the old army barracks is being developed into one of Tasmania’s largest home estates. There is a major upgrade of the Brighton transport hub underway as well as a facelift for the civic centre.
In Kingston, schools, medical centres and aged care facilities have been redeveloped, and cycling and walking infrastructure put in place and a multimillion-dollar sporting complex just completed. “For investors, there are opportunities here that they just cannot afford on the mainland,” says Zubin. “That has helped the Tasmanian market remain quite buoyant.”