Hobart’s property market set for recovery?
Improved housing and economic conditions put the state in a good position for recovery
In the first half of 2016, Hobart achieved an extraordinary feat when it became the top-growing capital in Australia.
Eliza Owen, market analyst at OnTheHouse.com.au, reports that in the May 2016 quarter Hobart’s housing market value rose by 2.59%, becoming the top quarterly growth-gainer. In terms of units, prices shot up by a whopping 6.66%, a percentage that was far above the other capitals’.
While Hobart’s growth has been inconsistent in recent years, the shift from a mining industry to tourism has greatly increased confidence in the region’s economy.
Indeed, property sales volume is on a steady upward trend in Tasmania’s residential property market, and the economy looks stable.
Tasmania has invested heavily in the education, tourism and food production industries in particular to sustain growth. Two local schools were recently redeveloped, and a new performing arts hub at the University of Tasmania has been approved by the Hobart City Council.
Moreover, the government is also looking to fund festivals and other tourist events while upgrading existing attractions, such as the South Cape Track. A new irrigation scheme has been approved in the Southern Highlands, and Bosch recently invested in a Tasmanian agricultural technology firm to fund expansion and globalisation attempts.
Job market presents risks
With so many positive trends moving Tasmania forward, it’s unfortunate that the job market has faltered, with just a 0.2% increase in the unemployment rate since the end of 2015. ABS statistics indicate that this sector has been stagnant, rather than in decline, and Gareth Aird of Institutional Banking & Markets attributes this to the limited population growth.
The number of building approvals has declined since 2015, although Herron Todd White ascribes this drop to the reduction in the First Home Builders Boost grant, which was generated to assist first home buyers and new builders. In January 2016 it was cut to just half its 2015 value, a move that put a damper on first-timers entering the market.
That said, in April 2016 Hobart reported the highest increase in building approvals, according to the Housing Industry Association, which suggests that the city is recovering from a potential seasonal downturn.
As the most affordable of the capital cities in Australia, Hobart is considered to be in its recovery stage and could offer opportunities to add properties with both cash flow and capital growth potential to an investor’s portfolio.
Affordability and high yield
Statewide, centrally located suburbs that contain a good range of facilities, larger infrastructure such as shopping centres, educational and health institutions, and public transport tend to be popular with renters and purchasers alike. Unsurprisingly, Herron Todd White suggests that these locations “are viewed as having the best capital growth potential”.
“In some areas, stock shortages have even seen some capital growth in the major population centres,” HTW reports.
, Blackmans Bay
, New Norfolk and Sandy Bay
are prime examples, as these have been highlighted as current top-selling suburbs in the south. The median unit price in Kingston is $295,500, and the suburb has experienced 8% growth over the past year, reports CoreLogic data. Weekly rents clock in at an average of $302, and rental yield is strong at 5%.
Meanwhile, Sandy Bay’s shopping precinct is slated for a significant upgrade. This can only improve this suburb’s value further.
In the north, Newnham is among the best sellers. Apartments here are quite affordable at a median price of $165,000, and the average weekly rent is among the lowest in the state at $225. Investors gain a significant yield of 7% as well. In the northwest, Devonport
is the best performer – the median unit price is an affordable $210,000, the average weekly rent is a reasonable $230, and the rental yield is strong at 6%.
SUBURB TO WATCH
South Launceston: Community hub’s houses keep growing
The suburb of South Launceston houses the minor residential areas of Sandhill and Glen Dhu. It is primarily populated by young, single tenants.
Units here are a good investment for professionals working in the city, given the suburb’s proximity to the Launceston CBD. Properties are affordable, and investors can get over 5% rental yield for both houses and units. Although unit prices have dropped slightly, the factors of location and affordability may work together to enhance the suburb’s appeal.
South Launceston is a community-oriented suburb, with the establishment of facilities such as the Little Athletics Centre for the youth. Childcare centres have been set up as well. Glen Dhu Primary School is located here, and there are local shops in the area catering to residents. Other amenities in the city are within easy reach, including a hospital, restaurants and cafes.
Transportation is also convenient, with Launceston being less than 10 minutes away by car and 15 minutes away by bus.
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