TAS Excerpt from the 2014 September Market report

Why Hobart trumps Launceston

Investors looking to buy in Tasmania must be diligent with their research, particularly if they are looking to buy outside of Hobart. There are a few reasons why

With cheap dwelling prices and reasonably high yields, Launceston might look like an appealing option for investors not looking to spend a great deal. But for those hoping to add a Tasmanian property or two to their portfolio there may be better options available, says Rob Zubin, the principal of My Property Hunter.

“The economic drivers are not as evident when you get away from Hobart,” he adds.

Just recently, car parts maker ACL Bearing shut down its Launceston factory, resulting in the loss of 136 jobs.

“Another flow-on effect from the diminishing car industry in Australia,” says Zubin. 

Even though Hobart has its own challenges, there seems to be more bright spots there than anywhere else in the state.

“Over the next year or so I think property prices will stabilise in Hobart and in some selected areas you would expect to see some growth,” he says.

“Elsewhere I would be a little bit concerned at this stage for the next year or so. I would be careful about the process of assessing property – just make sure you do your due diligence in areas outside Hobart.”

Nevertheless, Zubin argues that Tasmania is a good option for any investor looking for a balanced portfolio. 

“A good time to buy is when prices are depressed, and property prices at the moment are depressed.

“With the economic activity happening and projected to happen in Hobart, it will definitely have a flow-on to more confidence and more property activity.”

Zubin cites two major redevelopments as evidence of this:
  • The $100m Myer redevelopment which is expected to employ 500 people during the three years of construction.
  • The $465m redevelopment of the Royal Hobart Hospital. This has been under construction since late 2010 and is expected to be completed in 2016.

Zubin says that if you’re not looking to spend more than $250,000 and understand that investing is about holding for the medium-long term, then perhaps Launceston could be somewhere to consider. However, it is important that the specific suburb that you’re looking at has several promising factors, such as low vacancy rates, high rental yields (preferably 6% or more) and a high demand for rental properties.

But at the end of the day, Zubin says it’s Hobart that has the stability and diversity in its economy, plus a larger population size (220,000) than Launceston (106,000).

“As you get further away from Hobart you have too much dependence on one or two industries,” he adds.

And no matter where you choose to buy in Tasmania, it helps if there is a bus stop within walking distance. 

“That’s a key requirement for many people living in Tasmania; because we don’t have trains it would be best to be close to bus lines,” says Zubin. 

What Hobart can offer which Sydney cannot
Despite all the well-known positives of investing in places like Sydney and Melbourne, Hobart offers investors benefits which other capital cities can’t. 

“When you compare it to other capital cities, it is exceptionally cheap and there are also generally healthier returns than you would expect from the other capital cities.”

Indeed, according to the latest RP Data-Rismark Home Value Index Results, Hobart has a median dwelling price of $328,250. The next highest is Adelaide at $400,000 and Brisbane at $455,000. It’s a far-cry from Melbourne ($560,000) and Sydney ($690,000). 

Additionally, the latest Deloitte Access Economics Investment Monitor Report claims there has been rising agricultural demand and tourism flows from Asia, which could be a further boost to the Tasmanian economy. 

However, according to the latest State of the Regions report, Tasmania had two regions in the top 10 for highest unemployment; the north-west is fourth in the country on 14.5%, while Southern Tasmania is eighth on 12.2%.

It also found that Tasmania was spending less on infrastructure than any other state. It spends just 
$700m, compared to the Northern Territory ($1.8bn).

Suburb to watch

The extraordinarily beautiful mountain and valley views alone are almost the only reason you need to buy a house in Howrah. This suburb is just 6km from the Hobart CBD, but it’s also far enough away to be considered quiet and peaceful (particular with its bushland and wide open spaces). Oh, and then there’s the beautiful beach, which is another magnet for tenants and investors alike. The Shoreline Shopping Centre provides all basic shopping needs, but it’s the clean, safe and friendly environment, plus the proximity to the CBD which is the real drawcard for the families, young couples and retirees who live here. And for sporting enthusiasts, Wentworth Park is a picturesque venue with stunning beach views, that’s used for a wide range of activities over summer and winter. 

This suburb offers plenty of opportunity for growth in the medium-long term and also appeals to investors because of the healthy rental return of 5%. Moreover, the vacancy rate is just 1.49% and there is only 1.2% of stock on the market, indicating there’s already solid demand for this area. The fact that prices have only grown 3% in the last 12 months and 7% in the last five years suggests there’s much room for prices to move upwards here. Houses on Hymettus St are perfect for families, as they are within walking distance of the beach, shops and a school.

Do you have more than $120k in your super fund? You could use your super to buy property - Find out how

Top Suburbs : cardiff south , toowong , flemington , reservoir , marrickville

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