Although some values continue to go up, Hobart may have peaked, as other cities have started catching up
Hobart had a nigh-unchallenged run at the top of the mountain throughout the national property downturn, but as things pick back up in major markets, the city may have already started burning out.
CoreLogic’s Home Value Index indicates that over the three months to July 2019 Hobart had to share the spotlight for best-performing capital city with Melbourne, as both were the only capital cities in Australia to record positive growth during that period. In the month to July, Hobart’s 0.3% growth was outstripped by Darwin’s 0.4% increase.
“Affordability is becoming more challenging. Despite an undersupply and strong population growth, growth in median house price in Hobart is estimated to have slowed to only 3% in 2018–2019,” explains Angie
Zigomanis, associate director of BIS Oxford Economics, in the company’s Residential Property Prospects 2019 to 2022 report.
“With net migration inflows expected to begin to ease as the affordability of the Tasmanian market becomes less attractive, house and unit price growth is expected to remain modest and total 4% in the three years to June 2022.”
The loss of affordability is certainly a blow to Hobart, which initially gained fame for being the most affordable capital city in the country. CoreLogic research analyst Cameron Kusher affirms that rising prices have caused the share of properties sold at a price point of under $400,000 to plummet – the proportion of such houses nosedived from 43.0% in the 2017/18 period to just 31.8% in 2018/19.
This issue was not limited to Hobart, as the spillover effect caused values in regional Tasmania to rise as well. In 2017/18, almost all units in this market sold at under $400,000, but over 2018/19 only 85.8% sold at that price point. Returns have also fallen sharply in Hobart over the 2018/19 financial year, from 17.4% to just 8.1%.
“Hobart has been the bestperforming property market in the last three years, but it looks like the boom is now over, with prices peaking in March 2019,” says Kate Forbes, national director of Metropole Property Strategists.
“Homebuyers create a property market – they make up 70% of buyers. And investors create property booms – which is what’s happened in Hobart. But it is too small a market to be a long-term ‘investment-grade’ proposition.”
SUBURB SPOTLIGHT
NEWNHAM:
After several years of unparalleled growth, Tasmania is slowing down, and the suburb of Newnham clearly highlights this.
As of 2016, both house and unit values were increasing at double-digit rates. However, in the 12 months to July 2019, the growth rate dropped to just 1.4% for houses and 4.1% for units. This has kept values low, at below $300,000, but does suggest that Tasmania’s honeymoon period is over.
Nonetheless, there is still evidently strong rental demand in this area, as rental rates have continued to soar by around 6% for both types of properties. Returns are also high for landlords, at 5.7% for houses and 6.7% for units.
Affordability: Both house and unit prices are in the $200,000 range
Yield: Returns are at 5.7% and 6.7% for houses and units, respectively
