Hobart is still shining in the national property market, but dark days could be on the horizon
Hobart remains one of Australia’s strongest markets, but investors need to keep a careful eye on where the wind is blowing.
Being one of the smallest capitals in Australia – the Greater Hobart region has a population of around 220,000 – the city is susceptible to more volatility than its larger counterparts to the north. This is why Henry Fields, property research and acquisitions coordinator at CBI-Client Best Interest, believes it’s important for investors who are contemplating buying in Tasmania to consider the broader economic picture.
“You can see the effects of macroeconomic conditions most starkly in Hobart suburbs,” Fields says.
“It’s a highly volatile property market, which reflects its fragile economic history. I’ve been doing some research lately on the long-term average growth rates, and throughout Hobart some suburbs were as low as just 3% per annum over a 10-year period, and yet 9% per annum over the 15-year period.”
While generally performing better than major capitals Sydney and Melbourne, Hobart could already be affected by the nationwide slowdown. According to CoreLogic’s Home Value Index for July 2018, the annual growth rate fell to 11.5% – the slowest recorded since February 2017. Growth is still holding strong, but buyers need to consider where to find the best markets.
Diminishing rental returns
The Apple Isle’s rental market also soared by 10% in July 2018, which CoreLogic has chalked up to the limited supply of properties being leased out compared to the number of incoming tenants. This bucks the national downward trend, in which rents per week dropped by 0.2% in a month.
Those who have invested in Hobart are reaping the fruits now – the city had the highest total returns in Australia at 17.1%. Meanwhile, regional Tasmania recorded total returns of 12%. However, both figures are lower than they were in the previous year, supporting the idea that the state’s long-term growth prospects could be shaky.
Nevertheless, Tasmania’s low prices and stock levels could keep demand going for a while yet, as Hobart still has the country’s most affordable capital city property market. The total number of properties on the market in 2018 has also declined since 2017.
SUBURB TO WATCH
MOONAH: Units in high demand
A suburb that embodies Hobart’s overall performance, Moonah provides growth and high returns to investors. Both houses and units are in hot demand. Houses spend an average of just 28 days on the market, while it’s barely three weeks before units are snapped up.
The money seems to be on units in this suburb – they are highly affordable at a very low median price of $263,103, having seen double-digit growth over the five years to July 2018.
The vendor discount is quite low as well, highlighting the level of demand for these properties. Rental yields are also very strong, hovering around 5%.
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