Following Hobart’s property price growth struggles over the last half-decade, it appears the city is finally growing again, as house values jumped 1.05% in the July quarter.
This capital has typically followed Sydney’s lead in terms of property market movement, and the current market cycle may be no exception.
“The movement of capital growth of houses and rent in Hobart growth is becoming more aligned,” states Eliza Owen, market analyst for OnTheHouse.com.au.
“Nonetheless, Hobart rents have historically shown more volatility in growth than Australia-wide rents. The last two years have also seen a distinct divergence between growth in Australia-wide and Hobart rents.”
Compared with the rents recorded in Hobart in 2015, those in 2016 are trending higher. These are matched by a corresponding significant rental yield of 5.5%.
“With yields so low now in Sydney and Melbourne, we may start to see investors turn their attention to other cities in which housing is more affordable and rental returns are superior,” Owen says.
With prices in regional Tasmania dropping by 3.18% in the July quarter, the rising rents may be reflecting the increasing value and growth of Hobart and other parts of Tasmania as an inexpensive option for homebuyers.
Rental rates reflect state’s appeal
For tenants, the state’s affordability is reflected in the Hobart median weekly rent for apartments, which fell by 17% in August 2016 to a low $278, compared with the value reported in July 2016. At the same time, Rent.com.au data indicates that house rents in the capital soared by 12% over the July–August 2016 period to a median weekly value of $393.
Overall, house rents in Tasmania increased from $280 in July to $288 in August, representing an increase of 3%, while the overall unit market reported a 1% boost in weekly rents to $243.
The state has also reported significant decreases in the supply of stock on the market. The number of total listings fell sharply by nearly 30% as of the week ending 11 September 2016, and the number of new listings in the same period dipped by 5.6%. This low stock may serve to maintain demand and avoid oversupply.
Scott O’Neill, director of Rethink Investing, highlights Hobart as one of the top three capitals when it comes to cash flow. However, investors with a long-term view should note that the city’s growth drivers may not be strong enough to sustain it in the long term.
Hobart homebuyers trade up
The buyer demographic that has been influencing the Tasmania market consists mainly of upgraders and second home buyers aiming to either expand or relocate.
“In this residential property market segment, houses have been the predominant property type transacted, of which there is a broad range and variety,” notes Herron Todd White in its Month in Review report for September 2016.
“Period homes, particularly renovated and extended period homes, have generally become more sought after and are often located in the inner, higher priced suburbs, where you could expect a second home buyer to be purchasing.”
Period homes situated within the Hobart CBD are built on smaller pieces of land and sell for upwards of $500,000, reflecting the high cost of living near the capital.
However, similar homes command a considerably lower price of just over $350,000 in centrally located Launceston suburbs. These dwellings can be bought in near-original condition while being close to excellent amenities such as medical centres, shopping hubs, dining establishments, sports facilities and parks.
SUBURB TO WATCH
Battery Point: Hobart’s southern neighbour thrives
Located less than 10 minutes south of Hobart is Battery Point, regarded as one of the most prestigious suburbs in the metro, known for its historic houses.
The suburb experienced a leap in growth over the past 12 months – the median house price jumped by 12.8% to $942,500, while the median unit price rose by 6.9% to $588,500. Despite this increase, the rental yield for units remains high at 4.8%, thus this market represents a profi table opportunity for investors.
Battery Point’s closeness to Hobart means that residents have easy access to all the amenities the capital has to offer, including shopping and dining choices. The suburb of Sandy Bay is also just a five-minute drive south, and brings Battery Point locals within reach of beautiful beaches as well as bus services.
