Hobart quickly shot to the top as one of the strongest performers in the country, but its dream run may not last
For many experts, Hobart is a great place to invest in, especially following its strong performance over the past 12 months. This city has been defined by its affordability, and many investors are looking to the burgeoning tourism industry as a sign of things to come.
However, Metropole Property Strategists CEO Michael Yardney warns buyers to be careful.
“While Hobart property prices look cheap when compared to other mainland capitals, I would be wary about buying Hobart property as the price differential between Hobart and the mainland capitals has always been significant,” he says.
“Even though economic growth and tourism has picked up recently, with minimal population growth there are few long-term growth drivers in this isolated property market.”
CoreLogic data show that property values in the city have increased by just over 12% over the past 10 years. And Yardney points out that the most recent figures suggest that Hobart’s run at the top could be short-lived.
“Without a big economic shift to boost employment and sentiment there is little to suggest things will change in the long term,” he states.
Tassie battles oversupply
For the next few years, however, Hobart is still on track to perform well. According to the BIS Oxford Economics Residential Property Prospects 2017 to 2020 report, it is expected to be among the top growers in the national property market over the next three years.
“Hobart is expected to be the main destination for the improving interstate migration, as well as for migrants from the rest of the state,” says Angie Zigomanis, senior manager at BIS Oxford Economics.
“Together with low interest rates, this should help to support further price rises in the city, despite the oversupply at the state level.”
Indeed, BIS Oxford Economics’ findings indicate that, overall, Tasmania is in oversupply as a result of limited population growth, a stage that is expected to last a couple more years. This is because the majority of growth is concentrated in just Hobart itself, despite construction activity rising throughout the state. The majority of migrants come from NSW and Victoria – they aim to capitalise on the chance to sell their homes and make a profit while downshifting to Tasmania. Still others have returned from mining states like WA and Queensland following the decline of the resources sector.
Thus, Zigomanis believes that demand in Hobart could spill over into the northwest, Davenport or Burnie when the capital gets too expensive. Launceston is another potential strong performer as a bigger city in Tasmania.
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SORELL: Affordability supports housing market growth
With its low prices, Sorell is unsurprisingly showing itself to be a strong performer in the Tasmania market.
House values rose by nearly 10% in the year to July 2017, CoreLogic reports. This continues a positive trend observed over the past five years. The average rental return also remains quite high at 5.2%, which will certainly be favourable for investors on a budget.
Regarded as one of the oldest farming towns in the state, Sorell is also a regional centre, as it is the last town on the route to the Tasman Peninsula. It is quite accessible as the turnoff point to Port Arthur and the East Coast.
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