Is Hobart Australia’s hottest property market?
Hobart has the eighth fastest growing property prices in the world, according to Knight Frank’s Q3 2017 Global Residential Property Report.
An average price increase of 13.8 per cent during 2017 has it ranking ahead of Sydney and Melbourne. It also sits just behind notoriously unaffordable centres like Hong Kong and Toronto.
How did the Apple Isle’s capital, the smallest and most remote of all our major cities, become one of the hottest property markets in the world?
Despite growth, the median price in Hobart was just $390,000 in September 2017.
The steep climb of Tasmanian house prices
The majority of Hobart’s suburbs sit at their highest median price levels in recorded history, according to the Real Estate Institute of Tasmania (REIT). In September 2016, the city centres’ median sale price was a lowly $385,000 – in the following 12 months it grew to $436,250.
Other centres are experiencing similar movement. Launceston’s median price increased from $265,000 to $300,000 during the same period, while NW centres’ jumped by $20,000 to $250,000.
Despite this impressive growth, the median price in Hobart was just $390,000 in September 2017, according to the Australian Bureau of Statistics. That’s the lowest median price of any capital city, less than half of Sydney’s, and $55,000 less than even Adelaide (the second cheapest capital city).
Investors not solely responsible
When a property market experiences rapid growth, the media tends to simplify the issue and blame one group. In this case, investors have been pinned as the reason behind Hobart’s meteoric rise, however, data from the REIT suggests this isn’t the case.
In fact, during Q3 2017 all investors comprised 20 per cent of sales in Hobart. CoreLogic RP Data tells us that the national average is 27 per cent; therefore, investor activity in the city is actually at a fairly low level compared to the rest of Australia.
Average rent prices have surged by roughly 12 per cent over the year to September.
What’s more, Tasmanians are still buying the majority of property in Hobart – during Q3 they accounted for 76 per cent of sales.
Rental returns beat out most capital cities
The rental market in Hobart is extremely tight on the back of strong demand and shortage of available properties. Vacancy rates here are lower than in any other capital city, below 2 per cent, according to SQM research.
Thanks to that hot demand and limited supply average, rent prices have surged roughly 12 per cent over 2017, REIT data shows.
These market dynamics represent a lucrative opportunity for investors – according to CoreLogic’s Top Rental Performers Report which ranks suburbs based on their potential as investments. Five of the top ten ranked areas were in Tasmania and Chigwell – a small suburb north of Hobart which claimed the top spot.
Homes in this ‘up-and-coming’ suburb have an average gross rental yield of 7.4 per cent and a median sale price of just $260,000.
Housing and rental shortage to blame
Vacancy rates here are lower than in any other capital city, below 2 per cent.
Most Australians accept rising house prices as the norm, particularly those in Sydney and Melbourne. However, Hobart’s recent price surges have been truly exceptional and if they continue at this rate, first home and entry level buyers will struggle.
Why is this happening? The island’s economy has been booming recently, tourism has picked up markedly, more students are enrolling in the city’s university and employment opportunities have increased. This has caused demand for property to spike dramatically while supply has stayed relatively more or less the same.
The future of Hobart’s house prices
Most signs suggest the only way is up for Hobart house prices. Respondents to the recently released NAB Q4 2017 Residential Property Survey hold a similar view, but their consensus suggests growth will be at a slower rate over 2018.
Over 300 expert panellists forecasted that prices will increase by just 1.7 per cent in Hobart over 2018. That’s less than the forecast for Melbourne (2.2 per cent), the same as Adelaide and more than every other capital city.
Whatever happens with house prices on the Apple Island, and whatever you’re buying property for – you need local expertise to make the right decision. Get in touch with a real estate agent you can trust to get started on your property search, and make the most of Hobart’s stunning growth.