Hobart finished 2019 as the capital city with the highest growth rate in the 12 months to November, capping off what was a spectacular run at the top of the national property market.
“Although the pace of growth has been cooling across Hobart over the past two years, both Hobart and regional Tasmania stood out in dwelling values,” says CoreLogic head of research Tim Lawless in his outlook report for 2020.
“Despite the slowdown and several months of falling values through the year, Hobart values were 4.2% higher over the 12 months to November, while regional Tasmania saw values rise by a higher 4.9%.”
Hobart’s favourable housing conditions are being supported by high levels of migration and a blossoming economy, which has sparked housing demand.
The demand is being sustained by the low housing supply, which is tightening both the short- and long-term rental markets.
However, Hobart’s Cinderella run looks to be definitively over for a while.
Housing affordability weakens
CoreLogic’s Home Value Index reports that in the November 2019 quarter dwelling values increased by only 2.8% – lower than in Sydney, Melbourne and Canberra. One contributing factor could be the declining affordability of the city. According to the Housing Affordability Report published by the Real Estate Institute of Australia in December 2019, the proportion of income required to repay home loans rose by 0.4% to 26.2% in the three months to September 2019.
“Housing affordability has worsened substantially since the surge in housing values commenced in mid-2015 – as affordability constraints become deeper seated, it’s likely the rate of growth will soften across both Hobart and the regional areas of the state in 2020,” Lawless says.
“However, with migration remaining high against an undersupply of dwellings, there is a strong likelihood that Tasmania’s housing markets will continue to be one of the best performers.”
The slip in affordability has yet to turn away first home buyers, the number of which increased by 1.4% over the September 2019 quarter. Such buyers make up 22.3% of the Apple Isle’s owner-occupier market.
Despite the high rental demand, rental affordability is still poor, with the proportion of income required to pay median rents dropping by just 0.3% to 29.6% over the same quarter.
SUBURB TO WATCH
PROSPECT VALE:
The Greater Launceston suburb of Prospect Vale is showing a good level of demand for units. The market saw prices soar by 9.3% in the 12 months to November 2019 – and in the last fi ve years values have recorded an overall boost of over 30%. Nonetheless, the median price is still quite low, not even reaching the $300,000 mark.
While house values increased as well, nearly hitting $400,000, their growth was slower in comparison. Renters choose houses, however: the weekly rent for houses rose by 8.6%, compared to 3.8% for units. The average rental return from leasing out houses was also higher at 5.4%, while units brought in a yield of 4.7%.
Growth Unit: prices rose by more than 30% in the five years to November 2019
Yield Houses: generated greater rental returns than units, at an average of 5.4%
