Weak economy and a lack of apparent growth drivers drag the market lower
It would seem that even attractive yields and cheaper prices are not enough to lure investors to the Apple Isle. The latest stats from CoreLogic RP Data show that median dwelling values fell by 1.9% in September alone. During the past three months, values dropped by 2%. Median house values slid by 2.3% in September and lost 2.3% during the quarter.
While the unit market performed better, surging by 6.7% during the month, buyer activity remained weak. Notwithstanding that, Hobart is a small market where results can be very volatile; the trend has been on the downside, according to Andrew Wilson, senior economist at Domain.
“Hobart started the year on a strong note. But then it fizzled,” says Wilson. “There’s not a lot of positive energy in the Hobart market. It certainly is the most affordable market in Australia. It has the lowest vacancy rate, some of the highest yields, but its economy is weak.”
Wilson points out that the economy needs a boost to kick-start its property market.
“What looked like a good start to the year is now looking like it needs something to lift it up again. A massive improvement to the local economy is badly needed,” he says.
Going forward, Wilson expects a subdued growth outlook for the housing market.
“It’s a market that’s running out of steam. There’s a lot of trepidation in this market,” he says.
Some bright spots
Although there have been on-again, off-again signs of an improvement in Hobart’s housing market, the constant positive has been the strong rental returns being achieved in the city.
House rents rose by 1.2% over the past 12 months and unit rents are 4.2% higher, pushing local gross rental yields to become the second highest of any capital city. Rental yields sit at 5.3% for houses and 5.2% for units.
Despite the overall slowdown, there are areas that are defying the downturn, according to Linda Phillips, head of research at Propell.
“Suburbs within the municipality of Hobart have currently achieved new peak median house prices since 2010, with shorter selling periods and some properties transacting before they reach the marketplace. However, these current levels of demand are only being experienced within the inner-city metropolitan suburbs. The outer and regional suburbs are experiencing a totally different market dynamic, with minimal capital growth, increased price volatility and longer selling periods that can extend to greater than six or 12 months. Accurate pricing of properties for sale within these regional locations is crucial to achieve a sale,” she explains.
There are also some positive developments in the tourism sector, with some encouraging numbers, according to Phillips.
“Tasmania is seeing a resurgence in tourist numbers, partially led by the government’s marketing initiatives, including the recent refurbishment of the Spirit of Tasmania,” she says.
She notes that Qantas has recently announced an increase in scheduled flights to the state, and it’s expecting a record cruise ship season in the coming months. There are also a number of large accommodation projects commencing and mooted for the Hobart CBD.
“Tasmania no longer has the highest unemployment rate in the country, with the Tasmanian unemployment rate trending more closely to the national rate with a gap of only 0.6%,” says
Phillips.
Affordability is still a strong drawcard, in her view. “The Hobart median house price is approximately 45% below that of the nation’s, offering first home buyers an opportunity to enter the real estate market,” she says.
SUBURB TO WATCH
Bellerive: Seaside living in high demand
Well known for its lush and leafy surrounds, Bellerive has consistently attracted buyers and renters to the area. The sea views, beautiful beaches and a community village atmosphere are just a few of the features luring residents to the suburb. Its proximity to Hobart’s CBD just 4km away is also a strong pull.
It’s not a surprise then to see Bellerive defying the overall sluggishness of the Hobart property market. According to OnTheHouse.com.au, the median unit value surged by an eye-popping 8% in the past 12 months. Unit values have grown steadily since 2013. With stock very low at 0.33%, competition is tight. The rental market is strong, with just a 0.2% vacancy rate.
The suburb enjoys a broad range of amenities, mostly located along Cambridge Road where banks, supermarkets, restaurants, community centres and the Bellerive Yacht Club are located.
The main commercial hub, Eastland Shopping Centre, sits just outside the suburb. Several bus routes service the area and the Tasman Highway takes commuters directly to the CBD. A regular ferry service operates daily.
A wide variety of property caters to all demographics. Sought-after areas include Victoria Esplanade and Dillon Street due to their unparalleled panoramic views of Hobart and the harbour.
