The Tasmanian dwelling market has recorded one of the strongest gains in values among state capitals, driven by the tight competition for homes in the state, according to the latest Quarterly Economic Review by CoreLogic.

Over the three months to April, the state capital of Hobart has registered the second highest gain in dwelling values over the period at 7%, next to Sydney’s 8.8%

Regional Tasmania also hit a robust increase at 7.7%. This was the highest uplift recorded by a non-metropolitan market across Australia over the period.

"The combined Tasmanian dwelling market has not seen a single quarter of value falls since a half-a-percent fall in August 2016. Dwelling price increases across Tasmania have been particularly exacerbated by low listings levels," CoreLogic said.

In fact, as of 23 May 2021, the count of total listings across the state was 46.1% lower than the typical level of listings during this time of the year.

The low level of listings could also explain why the sales volume over the past year to April was down by 2.6%.

"Tasmania is the only state where sales volumes have fallen over the year, despite exhibiting some of the highest price increases. This implies lower sales volumes are supply related, rather than demand related," the report said.

CoreLogic expects dwelling values to continue rising across the state especially as the state recovers from the impacts of the COVID-19 pandemic. However, the report flagged two potential risks that could arise from this trend.

"If COVID-19 cases rise in the wait for wide-spread vaccinations, this relatively large segment within the economy would see a large shock to economic activity, which could subdue housing market conditions. Affordability constraints are also extremely pressing across the state, particularly in rental markets where vacancy remains extremely low," it said.