After head-spinning house price growth in both capital cities – 69 per cent and 49 per cent, respectively, over the growth cycle to date – it looks like our eastern seaboard property markets may be toppled by none other than humble Hobart.
With the tightest vacancy rates in the country, a more controlled housing supply pipeline, and increased migration and tourism, Hobart is on track to be Australia’s best performing capital city property market in 2017.
Over the past 12 months, house prices in Tasmania’s capital grew by 5 per cent, half that of Sydney’s 11 per cent and Melbourne’s 9 per cent, according to CoreLogic data. However, if you take rental returns into consideration as well as the change in house prices, to capture a more holistic picture of total returns from residential property, Hobart isn’t far behind these two cities already.
According to this analysis, Hobart has achieved growth of 11 per cent, only just trailing Sydney’s 14 per cent and Melbourne’s 13 per cent.
Buyers agency Propertyology said many of its agents have indeed already witnessed growth on par with Sydney and Melbourne.
“We have been actively investing in Hobart for a while and our buyers’ agents have observed first-hand price growth of 8 to 10 per cent over the past 12 months,” Propertyology head of market research Simon Pressley said.
“We can only see buyer activity further intensifying and forcing stronger growth over the next couple of years.”
Looking ahead, CoreLogic head of research Cameron Kusher has even tipped annual price growth in Hobart to be slightly higher than in Sydney or Melbourne in 2017.
He told news.com.au that while house price growth is expected to ease in those two cities he predicts growth in Hobart will sustain or even strengthen over the next year.
THE PERFECT COCKTAIL
Strong population growth in Tasmania is said to be a major driver in the performance of the Hobart housing market. According to CommBank’s recent State of the States report, population growth is tracking at close to the fastest annual pace the island state has seen in five years.
This is due to positive interstate migration and booming tourism.
“The big driver of why people are starting to move to Tasmania is, obviously housing affordability is one factor, but businesses are becoming a lot more flexible about people working remotely. That is probably attracting people to Hobart. Realistically it is less than an hour on a flight and you are in Melbourne anyway,” Mr Kusher told news.com.au.
“By the time you get on the plane and get off the plane it is the same as if you commute to Sydney from parts of western Sydney to get into the office door to door.”
Mr Kusher said fed-up Melbournites are also eyeing Tasmanian property as a more sound investment.
“People have got a lot of equity in their properties in Melbourne and a lot of them are looking for a retirement home or a holiday home in Tasmania. There is a bit of a reluctance to reinvest in Melbourne,” he said.
In addition, booming tourism is giving Tasmania a steadier long-term investment outlook and incentivising more people to consider moving to the state.
“We know that tourism into Tasmania is really booming. Chinese tourists especially have really increased their visitation to Tasmania,” Mr Kusher told news.com.au.
“If you’ve been to Hobart recently, trying to find a hotel room at a reasonable price is becoming increasingly difficult. I suspect maybe some of the people buying properties are looking to do things like an Airbnb … [Tasmania] is kind of stacking up a bit better from a pure long term rental opportunity point of view.”
And to amplify the increased demand, there is also limited stock. Figures from SQM Research show Hobart has the tightest vacancy rate of all eight capital cities, at just 0.5 per cent.
The supply versus demand equation would tell us that means competition in Hobart will be heated and prices will continue to be pushed up. This is unlike Sydney and Melbourne where fears of oversupply loom.