Hobart’s growth cycle today is comparable to where Sydney was in 2014. All of the metrics which Propertyology analyse suggest that, all things being equal, the 15 per cent price growth from the last 12 months will be surpassed next year and that there’s currently no end in sight.
There’s potential for Hobart property prices to grow by in excess of 20 per cent this calendar year and next year. This would be well above the best years produced by both Sydney and Melbourne during their boom.
Sydney’s property market is clearly cooling – parts of Sydney has recently seen auction clearance rates below 50 per cent which, in the past, has resulted in declining values. We feel that Melbourne’s cycle is about 6 months behind Sydney and that it will increasingly cool as 2018 unfolds.
Hobart’s growth cycle didn’t commence until 2016. Both Domain and Core Logic have recently confirmed that Hobart’s change in median house price over the last 12 months ending July 2017 was officially higher than every other capital city.
Hobart now has an enormous head of steam. The number of properties listed for sale now is less than half what was available a few years ago. When Propertyology commenced investing in Hobart in 2014 the market was flat and we had the pick of the litter. Since 2016, our buyer’s agents frequently missed out on properties to people who were prepared to pay up to 10 per cent more than us. It’s like a flock of seagulls fighting over a chip.
Of the seven city councils which make up Greater-Hobart, Clarence, Glenorchy, Hobart City, and Kingborough are the tightest markets.
Affordability and the significant improvement in Tasmania’s economy are driving housing demand while supply is incredibly tight. 0.4 per cent vacancy rates in August 2017 has been confirmed by SQM Research as the lowest for any capital city since they began keeping record back in 2005.
There’s no such thing as an empty property in Hobart right now. If a tenant of a property indicates that they are not renewing their lease at the end of the term the property manager will have a long list of waiting applicants. Property investors are in an enviable position wherein current yields are probably already covering all of their costs and rental income is now destined to shoot higher.
Most Australians don’t realise that Hobart’s increase in job volumes over the last 12 months is 4 times the national average and more than double that of the next best capital city. Tasmania is building an international reputation for world-class agriculture, unique tourism experiences, and advanced manufacturing. Hobart is also a university city. The economy is firing up.
The list records which Hobart has achieved over the last couple of years is impressive. Employment growth, retail spending, interstate migration, job advertisements, domestic and international visitor numbers, vacancy rates, and Australia’s strongest property market, the list keeps growing.
Propertyology’s decision to invest in Hobart a few years ago was after correctly anticipating the resurgence of Tasmania’s economy.
The transformation has already been remarkable and we feel that few people appreciate that even more exciting times are ahead. The pipeline of infrastructure and major job-creating projects is diverse and extensive.
Big international brands like Hyatt, Marriott, Fragrance Group and others are expected to commence work on several new luxury hotels over the next year or two. There are plans to extend the Hobart airport runway to accommodate direct flights from Asia, which has already produced record volumes of visitors from business delegates and tourists to Tasmania.
The state’s biggest tourist attraction, Museum of Old and New Art (MONA), has plans for jaw-dropping expansions that include a luxury hotel wing that hangs over the Derwent River and a high-roller casino.
Submissions have been sought for a multi-billion dollar proposal to redevelopment waterfront land in Hobart’s heart, Macquarie Point, in to an iconic cultural precinct that will draw people from all over the world for a truly unique experience.
Other major job ceating projects include a $700 million upgrade of the state’s biggest hospital, a new university, and a $400 million technology hub in the CBD with facilities for up to 3,000 students.
Greater-Hobart’s population growth rate of 0.9 per cent in 2016 was higher than New South Wales’ Central Coast and Adelaide. Housing demand in Australia’s most affordable capital city is largely driven by local confidence from the rapid job improvement. Now that the capital growth is there for all to see, mainland investors are appreciating that Australia’s highest rental yields mean that the cost to hold a property in Hobart is effectively nothing.
We believe that rental pressure will intensifying even further. Whereas big cities like Sydney, Melbourne and Brisbane are now seeing record volumes of new supply hitting the market, the building approval volumes in Hobart suggest that the supply pipeline will remain lean for some years yet.
With a median house price that is approximately one third of Sydney’s, Hobart is a considerably less risky bricks-and-mortar proposition.
“Hobart is the only location in Australia which has the combination of an affordable entry price, an economy which is already strong (and still improving), hardly any impact on investor’s annual cash flow, and a tight supply pipeline for as far as the eye can see,”
[Propertyology Head of Market Research, Simon Pressley]
The 15 per cent headline capital growth rate over the last 12 months is dragged down by the lower rates of growth in Hobart’s urban fringe. Our clients have already seen as much as 35 per cent price growth over the last few years. With rates of supply tighter than anything we’ve seen, it’s quite conceivable that property prices in metropolitan Hobart could exceed 20 per cent next year and beyond.
Hobart Market Fundamentals
- Most affordable capital city in Australia
- 35 per cent price growth already occurred in metro-Hobart across 3-years ending June 2017
- Highest rental yields of all capital cities
- 0.4 per cent vacancy rate is 4x tighter than Sydney and Melbourne (the lowest ever for any capital city)
- Building approval trends are lower than mainland capital cities, suggesting the supply pipeline will remian extremely tight for some years yet
- The rate of improvement in Hobart’s unemployment rate is far superior to every other capital city
- Employment volume growth is 4x the national average (twice as good as next best capital city)
- Job advertisements are at an all-time high
- Tasmania’s growth in international visitors and visitor spending is Australia’s highest
- Population trend has rebounded strongly
- Significant pipeline of job-creating major projects
- Growing international reputation for premium produce, unique tourism experiences, and advanced manufacturing
Propertyology is a national property market researcher and buyer’s agency. The multi-award-winning firm’s success includes being a finalist in the 2017 Telstra Business Awards and 2016 winner of Small Residential Agency of the Year in REIQ Awards For Excellence. Managing Director Simon Pressley is a REIA Hall Of Fame Inductee and a three-time winner of the REIA and REIQ Buyers Agent of the Year award.