Hobart’s strong performance could be localised
With its low property prices and strong efforts in the tourism industry, the Apple Isle is getting a lot of attention as the next property hotspot. However, some experts are wary about its long-term potential.
“Hobart property prices look cheap when compared to other mainland capitals,” says Michael Yardney, CEO of Metropole Property Strategists.
“However, I would be wary about buying Hobart property as the price differential between Hobart and the mainland capitals has always been significant. Even though economic growth and tourism have picked up recently, with minimal population growth there are few long-term growth drivers in this isolated property market.”
Without a significant shift in the economy to add to employment opportunities, the city is unlikely to sustain its growth in the future. PropertyBuyer.com.au’s CEO, Rich Harvey, shares similar sentiments.
“It’s getting a jump at the moment, but caution is best for the long term with Hobart. It’s a market that’s a lot smaller – it will get a short-term spike, but it’s generally a slow burner,” he reports.
Tight rental vacancies
An additional concern regarding Hobart’s long-term prospects is the fact that growth is primarily centred in the metro.
“If you look at Tasmania more broadly, there’s probably more positives for Hobart rather than for the rest of Tasmania,” says Angie Zigomanis, senior manager of residential property at BIS Oxford Economics.
“In 2015, Hobart pretty much accounted for all of Tasmania’s population growth, so the rest of Tasmania was flat. Hobart’s population increased, so it’s been attracting people from overseas, state and regional Tasmania as well.”
At present, property prices have considerable growth potential; this potential is supported by the low vacancy rates in the city. As a result, buyers could end up looking to other areas of Tasmania.
“I suspect that part of the demand for Hobart is interstate investors looking for affordable markets to enter into, and people who think they might have missed some of the growth in Hobart may start looking for other areas in Tasmania,” Zigomanis theorises.
“Some people who have been priced out of Hobart may also look at other parts of Tasmania as well.”
Herron Todd White confirms in its Month in Review report for March 2017 that properties outside the CBD can offer good value for money, especially for first-time buyers entering the market.
“Properties that are dated or in need of renovation can be a cheaper option provided the home is structurally sound,” the report states.
“Properties located close to a good range of facilities, larger infrastructure such as shopping centres, educational and health institutions and public transport tend to be popular with young first home buyers.”
Rental values drop
Investors can also reap high yields by leasing out properties situated in the Greater Hobart region, so many buyers are choosing to rent out dwellings rather than occupying them personally.
“With the strong yields in the rental market many properties are or are near positively geared, which allows owners to pay down their mortgages so payments are manageable when they choose to move into the property,” HTW indicates.
As a whole, though, rental rates have fallen in Tasmania.
“[This] could mean investors come under pressure with an influx of rental stock on the market. Landlords should be cautious when looking to invest here and carefully consider the potential to find tenants for the properties that they are buying,” says Charles Tarbey, chairman and owner of Century 21 Australasia.
Cameron Kusher, research analyst at CoreLogic, notes that the amount of rental stock in regional areas has been falling relative to that in the metro. This is attributed to the general drop in housing supply within these pockets.
Despite the concerns surrounding Tasmania, however, its current economic conditions and favourable status in the national property market are strong enough to warrant hope for the future.
SUBURB TO WATCH
Acton Park: Convenience drives interest in rural suburb
A 20-minute drive east of Hobart will take you to the suburb of Acton Park. Despite its designation as a rural suburb, it is popular among buyers because of the easy access it off ers to the capital.
Bus services are available to commuters, while residents remain in close proximity to amenities like beaches. Roches Beach and Seven Mile Beach lie to the east of the suburb, as does Single Hill. The Hobart airport is just 10 minutes away via Acton Drive. Sports facilities and parks are located in nearby suburbs such as Oakdowns. A shopping centre and primary school are situated in neighbouring Cambridge.
With all these factors adding to its appeal, Acton Park’s housing market has sustained reasonable growth over the past five years.