Hobart Housing Market Set for Second Wind

Tasmania's low supply of dwellings, low median price, tight vacancy rate and upswing in tourism has ensured solid capital growth for the island state in recent years.

While national prices experienced their steepest drop since the global financial crisis, the nation's southernmost capital city continued to grow by 3.8 per cent over the past year.

Hobart had an 8.7 per cent rise in house prices in the year to December 2018 while Sydney and Melbourne prices drowned in a sea of red, falling 8.9 per cent and 7 per cent respectively.

In the three years before, Hobart's prices also rose by 5 to 12 per cent each year, as prices in the rest of the country either stayed flat or fell.

Just a few short months ago, residential real estate was being snapped up at a record rate across Hobart, bucking the east coast trend, but it seems things are now starting to cool.

The unprecedented growth seen over the recent years in Hobart retreated in June dipping 0.4 per cent the first property price falls in at least six years.

“There is no question that Hobart has been Australia’s best-performed property market over the past five years, and I think there’s a good chance of it gathering a second wind,” Propertyology head of research Simon Pressley said.

Hobart’s property boom was thanks in part to the remarkable improvement in the State’s economy.

“Those who understand what has been driving Tasmania’s economy and the many good things in the pipeline will have very little concern about the outlook for Hobart’s economy,” Pressley said.

“Some of the biggest projects that are in Hobart’s pipeline include a recently committed City Deal — a major federal and state government project — further expansion of the airport, a few new luxury hotels, some serious investment in infrastructure by University of Tasmania, and an exciting vision for Macquarie Point.”

For the year ending March 2019, Tasmania was ranked first for growth in state demand, second for wage growth and third for growth in retail trade.

Hobart is also the leading city for growth in job advertisements, a leading indicator for near-term economic growth and a helpful metric for property price growth.

Hobart's population has also bolstered its economy with intrastate and overseas migration was now driving up the number of residents.

A recent tourism boom, in part thanks to the arrival of the $200 million idiosyncratic Museum of Old and New Art in 2011, has also had an impact.

“In a nutshell, the initial cause of Hobart’s property boom was the remarkable improvement in the state’s economy. The extra jobs led to an increase in local buyer confidence and improved buyer financial capacity,” Pressley said.

What will prices do next?

While Hobart’s price growth has taken a breather over the last few months, a “trifecta of good news” will provide the city with a second wind, Pressley said.

“The federal election result, interest rate cuts and some loosening of lending policies will all provide fresh air for property buyers. The fundamentals for growth are still there, but APRA’s tight credit supply meant fewer buyers could transact.”

“The Tasmanian government is campaigning to encourage more people to leave the mainland, especially expensive and congested cities like Sydney and Melbourne.

“A continuation of solid internal migration is another reason why I believe there’s more price growth to come for Hobart real estate.”