Propertyology, a leading property market analysis company, has tipped Hobart to become Australia’s best performing capital city property market in 2017.

Hobart has much going for it: an underrated economy, limited properties for sale, the tightest vacancy rates in Australia, a more controlled housing supply pipeline than in mainland cities, as well as increased buyer activity. These factors are expected to drive property prices and rents higher.

“We have been actively investing in Hobart for a while and our buyer’s agents have observed firsthand price growth of 8 to 10 per cent over the past 12 months,” noted Simon Pressley, head of market research at Propertyology.

With so much going for it, double-digit price growth “is well and truly on the cards for Hobart in 2017.”

“The significant retraction in properties listed for sale has made it increasingly difficult for our buyer’s agents to find suitable properties for our investors. Properties are generally selling within a week of listing and often going for prices well above our own appraisal range. The market is red hot,” assured Pressley.

With the highest rental yields and the lowest residential vacancy rates among all the capital cities, Hobart is set to become “an investor’s paradise” next year.

A safer investment than Sydney or Melbourne

Aside from the underrated improvement in Tasmania’s economy over the last couple of years, the latest quarterly population data from the Australian Bureau of Statistics shows that the state is experiencing its highest population growth in five years.

Of greater significance to housing demand than population growth is affordability and economic improvement. Hobart’s median house price is less than half of Sydney and Melbourne’s, making it a significantly safer investment than Australia’s two largest capital cities.

Hobart has sustainable building approval volumes

Big mainland cities have become notorious for the high volumes of new properties in the supply pipeline. Hobart, in contrast, has building approval volumes that are more sustainable.

“There is an imbalance which threatens Sydney and Melbourne property markets, especially if interest rates rise and/or Asian investors need to get their money out of Australia. Hobart’s supply and demand metrics certainly look more balanced,” said Pressley.

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