Lingering oversupply dents growth prospects
Despite the promising recovery in prices, overbuilding and slow migration continue to weigh on the market
The Hobart market has been fairly stable over the past few years, with prices oscillating but overall remaining steady.
Apart from the more affluent suburbs, which have recorded moderate growth, prices haven’t really moved.
“This in itself is a good achievement for an island state that suffered severe economic difficulties,” says Linda Phillips, senior economist at Propell Ltd.
“For the first time in a while, the economic news is starting to improve, led by a windfall on GST for the state. With median prices that first home buyers can only dream about, the state looks increasingly attractive by comparison to high-priced mainland cities,” she says.
The affordable offering has certainly caught the eyes of a growing number of mainland buyers and investors who are starting to move into the market.
The lower end of the market is also seeing support from first home buyers who still enjoy Tasmania’s first home buyer’s grant.
While the market is yet to reflect these drivers and deliver a significant increase in prices, there is a feeling that it has bottomed out and there is an upside to the market. The improved prospects, along with high gross rental yields, help offset the risk of investing in this state.
“Around Hobart it is the higher-quality and better suburbs that are performing the best, including Sandy Bay
and Battery Point
. North, West and South Hobart are all performing well,” says Allan Romaniuk, residential manager SA/TAS at Propell.
“The best investment opportunities are still found in the more desirable suburbs of Hobart. Other markets such as Launceston are too small and specialised to invest in, unless an investor has fully acquainted himself or herself with the market and has an intimate knowledge of it. Outside of
Hobart, the smaller level of transactions means that even a standard property can take a year to sell, so it is a very different market.”
Outside of Hobart, there are two areas of interest to investors, though these are small pockets that require careful research. Inland from Hobart is Lenah Valley, a transport area close to the city, according to Romaniuk.
“The first is the area to the east of Hobart, across the bay, including Geilston Bay, Bellerive, Howrah
, Lindisfarne and Rose Bay.
“These attractive suburbs are well positioned for capital growth, although their distance from employment nodes makes them slightly more difficult to rent.
“The second is the area surrounding Kingston, well to the south of Hobart, including Huntingfield and Blackmans Bay
. Investors will be more comfortable with these carefully selected modern growth locations than with older areas within the existing city.”
While prices have yet to respond to newfound interest, this is showing up in listing statistics, with the number of total listings in Hobart down 7% compared to last year, a leading indicator of the potential for price growth ahead. This means that, for investors, there is the potential to buy into the market before any significant growth arrives.
According to Angie Zigomanis, senior research analyst at BIS Shrapnel, Tasmania has been overbuilding in response to the increase in the first home buyer grant to $30,000 in 2014. “This boost to building will prolong the state’s oversupply at a time when local economic conditions are challenging,” says Zigomanis.
“The rise in construction and limited population growth mean that the current excess supply is likely to persist over the next three years. However, prices are expected to remain stable due to low interest rates and subsequently as interstate migration improves.
“Over the next three years, Hobart house prices are expected to grow by a total of 4%.”
SUBURB TO WATCH
Trevallyn: Scenic suburb near Launceston
If you want a character home with spectacular mountain views but don’t want to fork out a stack of money, it might be worth pursuing the Tasmanian delight known as Trevallyn. This attractive suburb boasts a wide range of properties, including brick, weatherboard and newly renovated houses.
Trevallyn is just 1km from Launceston, which is a major hub for tourism, agriculture, health (thanks to the Launceston General Hospital) and education (due to its University of Tasmania campus).
But its big advantage is the fact that typical three-bedroom houses can be purchased for less than $250,000. The average rental yield is also a strong 5.1% pa, according to OnTheHouse.com.au.
Two-storey houses with stunning mountain and Tamar River views are available on Newlands Street. There are also attractive character homes on Levella Court which are only several minutes’ walk to the Launceston CBD. And it certainly helps to have a balcony to maximise the views.
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