Hobart no longer one of Australia’s forgotten cities
The Tasmanian capital has made a significant mark on the country’s property market in terms of capital growth
Nerida Conisbee, REA Group’s chief economist, says “Tasmania is surprising in its strength for housing”.
“Unemployment is declining in that state, and housing demand is improving. Tasmanian housing stats are the highest in 21 years,” she says.
In an April market update, Eliza Owen, market analyst at OnTheHouse. com.au, reports that houses in Hobart grew a solid 4.82% in the year to March. She observes that this performance had been anticipated since peaks and troughs in Hobart’s house market generally follow movements in the Sydney market. “Hobart especially had room for capital growth off the back of a cyclical trough, where annual growth was -9.13% in 2012.”
Owen theorises that upswings in the Sydney market may cause investors to consider nearby markets that are cheaper. Moreover, its movements serve as a sign that buying and selling property
even in other markets is a good idea at this time.
“The markets followed Sydney growth at a lag, which would explain why they are coming into peak growth at the moment. They might be expected to ease in growth by the fourth quarter this year,” she states.
Owen also highlights how Hobart’s transition from a mining-focused region to a tourism-centred one has helped heighten confidence in the state’s economy. More income has been generated through visits from both interstate and international visitors, especially those from China, and export subsidies provided by the federal government.
Domain chief economist Andrew Wilson supports this view in the Domain House Price Report
for March quarter 2016. Median house prices rose by 4.3% in this quarter, building on the 3.5% uptick observed last quarter. The report notes that in terms of annual price growth Hobart is the second-best performer out of all Australian capitals, with an increase of 7.6%.
“After a lengthy period of subdued growth, Hobart continues to play catch-up, recording the strongest price increase of all capitals across the March quarter,” says Wilson. “Despite further likely rises, Hobart remains the most affordable Australian capital city.”
This affordability is likely playing a role in the region’s ascent.
“There’s some new development, but it’s a very small market. The outcomes tend to be quite volatile. But Hobart’s certainly the strongest market in terms of growth. There are some good-value opportunities, with properties under $400,000. Investors are getting interested, and rents are growing quite sharply. The affordability perception is driving the market, and Hobart is ticking all of the boxes for investors at the moment, including capital growth.”
The suburb of Clarendon Vale is the top performer in this state’s housing market with respect to growth. It recorded 37% growth over the past 12 months at a low median price of $173,000. This is a considerable jump from its 6% growth five years previously. Rental yields are a high 7% as well, which is beneficial for investors. In fact, Tasmania reported the best yields in Australia’s housing market, Conisbee indicates.
“Even though it is a low-cost market to buy, it does have an active rental market that achieves comparably high rents.”
This observation supports Conisbee’s assertion that the lowest-cost properties generate the highest yields.
Owen believes that some areas of Australia will see units experiencing losses in comparison to houses, and it seems Tasmania is one example. The unit market saw a significant drop of 6.2% in this quarter, and the total decrease over the past 12 months was 3.3%. Nonetheless, the suburb of Somerset in regional Tasmania balked this trend and still reported 37% growth, up from 12% three years ago.
“With the housing market coming into the downswing part of its cycle, the house and unit markets in many parts of the country will start to mirror other signals in the economy, and adjust to a more reasonable price level,” Owen says.
SUBURB TO WATCH
Ulverstone: An affordable waterside suburb with opportunities for high yields
Situated on the coast of Tasmania is the suburb of Ulverstone, which appeals to many retirees and is also known for its farming land. It is one of the lower-priced areas in Tasmania, with a median house price of $232,500.
The housing market declined sharply by 8.3% in the past 12 months, although the unit market still reported slight growth of 0.9%. Nonetheless, investors may find this suburb profitable since rental yields exceed 5% for both types of properties. In addition, the vacancy rate is an extremely low 0.5%.
“Unit sales are very solid,” says James Leslie, director of Century 21 Leslie and Banks Devonport
“It’s a small town that has all the facilities and some lovely beaches, being a coastal area. The property values here seem to be strong and always achieve slightly higher growth than the larger centres. Federation-style homes seem to be very popular with local buyers and tend to move faster that the average.”