In catch-up mode but racing ahead
Often ignored and underrated, Hobart is fast becoming Australia’s most lucrative property market
It’s easy to dismiss the Hobart market as a potential investment destination. After all, it’s a very small market and the economy has been anything but underwhelming.
Yet, the slew of data coming out from the Apple Isle has been consistently positive. Case in point, CoreLogic RP Data’s January stats show that on a monthly basis, Hobart was the best performer in January, with home values rising by 4.7% over the month.
Over the three-month period ending January 2016, dwelling values rose by 3%. While the annual growth is moderate compared to Sydney and Melbourne at just 2.3%, growth is starting to gather momentum.
“For investors, Hobart is one of the most lucrative rental markets,” says Tim Lawless, head of research at CoreLogic RP Data.
Gross rental yields are now sitting at 5.1% for houses and 5.3% for units. CoreLogic RP Data puts Hobart units as having the highest yields of any other capital city unit market.
Domain also recorded a healthy showing for the Hobart market during the December quarter.
“The Hobart housing market delivered a strong result in the December quarter, especially given Hobart house prices have increased by just 5.8% over the past five years. This indicates further potential for growth as the local economy improves and positive consumer sentiment builds,” says Andrew Wilson, senior economist, Domain.
The future looks brighter
While Tasmania’s robust performance may come as a surprise for many investors, economic forecasters, such as Deloitte Access Economics, have long been positive about the state’s prospects.
“Tasmania is doing better for many of the same reasons that NSW and Victoria are too. On the one hand there are some bullets that it doesn’t have to dodge. For example, if you didn’t have a boom in mining construction projects in the first place, then you can’t lose that prop to current economic activity,” it says.
The strength in interest rates and exchange rates that used to hold back Tasmania’s economy has now turned green.
“Low interest rates are helping housing construction and, more importantly, they’ve lent a degree
of momentum to the commercial construction pipeline in Tasmania. More importantly still, a fall in the $A has unleashed a torrent of tourists to Tasmania – both those arriving from overseas, and Australians who find that foreign travel is now rather more expensive than it used to be, and opt for the delights of the Apple Isle. Similarly, student numbers from the rest of the world studying in Tasmania are also on the rise,” says Deloitte Access Economics in its report.
It cites these recent positive developments as triggers in Tasmania’s turnaround:
- Vacancy rates dropped by half since second half of 2012. This has the potential to keep the home fires burning around housing construction activity
- Retail spending has recently reenergised to reclaim a faster-than- Australia title on the turnover front
- Car sales have rebounded to match their all-time highs
- Population growth has held up (albeit at really low rates) across a time when Australia’s has continued to fall away
- Unemployment rate fell from more than 8% in the middle of 2013 to now just over 6%, in line with the national unemployment rate.
While the economic forecaster warns that this combination of factors is not enough to turn around the long-term trends for Tasmania, “it is enough to give this State some solid short-term momentum.”
SUBURB TO WATCH
Risdon Vale: High yield reward for investors
Surrounded by bush and characterised by its tight-knit community, the ex-housing department suburb of Risdon Vale has started to attract attention due to its affordability.
The suburb is close to the shopping centres of Eastland and Glenorchy
, although the local shops are also good. Risdon Vale enjoys superb public transport to all major shopping centres, such as the CBD and the above areas.
There’s a healthy proportion of renters in the suburb at 30%, but it’s still predominantly owner-occupied area.
During the past 12 months, the median house price rose by 2.5%, according to Onthehouse.com.au. At this level, houses are achieving a gross rental yield of 7.2%, which means there’s huge potential to find cash flow positive properties.