The Hobart property market’s upward trajectory may be supported by tightening supply, as the city has reported the most significant drop of all the capitals in terms of total listings over the last year: 2016’s stock on market has dipped 26.6% compared to the previous year.
Moreover, fewer than 1,000 properties were approved for construction in the year to September 2016. The housing approval rate alone fell by 22.7% year-on-year, while unit approvals slipped by 10.8%.
CoreLogic’s Hedonic Home Value Index notes that Hobart’s property market has been steadily increasing in value. Although the changes in the past month and over the September 2016 quarter were slight, at less than 1%, the capital’s year-on-year rise amounted to 8.7% – just below that of Sydney, Melbourne and Canberra. In fact, Hobart’s quarterly growth for 2016 was higher than that recorded in September 2015.
Government efforts to improve infrastructure
Hobart also offered the highest gross returns of all the capitals, at 14.6%. This may have been boosted by the Tasmanian Government’s support of the Tasmanian Planning Scheme, which aims to implement initiatives that considerably limit red and green tape to encourage investment activity.
To this end, the Property Council of Australia has been encouraging the importance of property relative to the job market, which in turn helps boost the state’s economy.
“Property creates approximately 30,000 direct and indirect jobs in Tasmania, contributing $869m in wages,” says Brian Wightman, executive director of the Property Council of Australia in Tasmania.
“Investment drives confidence and delivers increased employment opportunities. Political and community leaders must remain cognisant of the role they can play in delivering investment enabling infrastructure which will allow families to secure their futures in our state.”
In line with the federal government’s City Deal, a proposal has been made to relocate the University of Tasmania to Launceston and Burnie. This move could heighten demand in Northern Tasmania as well as encourage development in infrastructure and amenities.
“Education is key to Tasmania’s future, and an investment in infrastructure is welcomed, particularly with a focus on ensuring that higher education is a realistic goal for our young people,” Wightman explains.
Despite the drop in listings, a lot of construction work has been happening in the region north of Campbell Town. Tasmania tops the National Ranking Summary for non-residential construction, which is great news for Wightman.
“This is clear evidence that there is a construction boom, particularly in Hobart, driven by private investors and off the back of improving confidence,” Wightman states.
“The challenge now is to set Tasmania up for continuous economic growth, and for that to occur we cannot continue to avoid structural reform.”
Buyers favour middle market
In Northern Tasmania, buyers currently tend to opt for properties in the $250,000–$350,000 price range, and the suburbs of choice are those less than 5km from the Launceston CBD, such as South Launceston, West Launceston, Newstead and Invermay. Yields are exceptional for investors and can reach up to 6%.
Meanwhile, most homebuyers in the greater Hobart region are keeping their eyes on properties in the $300,000–$400,000 range. The majority of sales are occurring in centrally located suburbs in the city, where the purchaser demographic ranges from upgraders and downsizers to investors.
In Howrah, properties at this price point are small modern homes. Southwest of the Hobart CBD, Kingston has been regarded as the most rapidly growing area of Greater Hobart, where buyers can get older-style dwellings on larger allocations (140–180sqm).
In Moonah and Lutana, homes in the $300,000–$400,000 range are favoured by investors because of the accompanying high rental yields ranging from 4.5% to 6%.
Properties available at the low end of the market are in low demand because repairs need to be done prior to renting them out, thereby extending their time on the market. Moreover, there is limited potential for capital growth in the future, even if the market-entry barriers are low and the returns are significant.
SUBURB TO WATCH
Invermay: Units power ahead of houses in Launceston’s culture stop
A stone’s throw away from Launceston is Invermay, the home of York Park stadium. This suburb is in the unique position of having a house market that is cheaper than its unit market.
Both markets are highly affordable, even with considerable growth over the past year. This, along with being within walking distance from the Launceston CBD, means Invermay offers a golden opportunity for professionals in the area to purchase inexpensive housing. Investors can even get returns of over 6%.
The Inveresk precinct in the suburb also houses many of Launceston’s cultural attractions, including the Tramway Museum and the Queen Victoria Museum and Art Gallery. Invermay is also the site of the University of Tasmania, which could account for its strong unit market.
