Tasmania is no longer Australia's best kept secret. With mountain and river views from every suburb, fine dining on Tassie's famous produce, and rainforest walks only a 15 minute drive from the city, it's not surprising that the city has become a top destination for national and international guests. In Hobart you have the best of everything. But does the same apply for real estate?
Continue reading to see what the property market in Hobart looked like in 2019 and what analysts are forecasting for 2020.
What did the property market in Hobart look like in 2019?
2019 marked Hobart's plateau in the property market following an impressive boom in the years before. A steady rise of interstate migration coupled with housing shortage were direct contributors to the market.
In the three years leading up to June 2018, we saw an incredible increase in the median house price in Hobart which grew by 10.6% per annum, according to QBE. This increase slowed considerably in the last half of 2018 to the third quarter of 2019 to 2.5%, resulting in a median house price of $499,300 across the city.
Rental yields have shown similar strength and increased across the Hobart region, with houses rising by 7% and 12% for units until the third quarter of 2019, reported in Christopher's Housing Boom & Bust Report 2020. While vacancy rates were sitting at a very low 0.5% in September 2019, this was an increase from the extreme low of 0.2% in October 2018.
According to Domain, Hobart has seen the highest rise in median house prices nationally with an average of 38% across all suburbs in the period between 2015 and 2018. And in the last five years, the suburbs which have experienced the highest median house price growth have been Bellerive at 61%, on Hobart's Eastern Shore, New Town at 55%, and Blackman's Bay at 51.30%.
Hobart property market forecast 2020
The contributors to Hobart's above average growth are steady interstate migration, investments and increased employment opportunities with the growth of tourism.
Historically, Tasmania has been popular for retirees from Australia's mainland capital cities looking for a tree change. These days the demographic for interstate migration to Tasmania is younger as housing remains more affordable than Sydney, Melbourne and Brisbane.
Tasmania's education exports have also risen, with increased numbers of international students choosing the University of Tasmania for their tertiary education. This has further decreased the vacancy rate of properties in the city and put pressure on the government to prioritise development for both housing and infrastructure.
According to CoreLogic, the combined pressure of these market influences has left prospective buyers with very little room to negotiate, and contributed to the swell in property prices.
"QBE forecasts median prices in the Greater Hobart region and Launceston to experience a rise, as buyers look outside of Hobart for affordable properties and demand from the capital spills over surrounding areas"
QBE's Australian Housing Outlook 2019-2022 forecasts median prices in the Greater Hobart region and Launceston to experience a rise, as buyers look outside of Hobart for affordable properties and demand from the capital spills over surrounding areas. This was reflected across 2018 and 2019 as house prices in Launceston spiked 16% and price growth in Hobart slowed down to 2%.
QBE's projection is also mirrored by Property Observer, stating that the boom in Hobart has now plateaued, and instead we can see Launceston take its turn in the spotlight.
According to Christopher's Housing Boom & Bust Report 2020, a key influence that may bring positive or negative effects over the next year is the value of the Australian dollar.
Over the past 10 years, the tourism industry has emerged as Tasmania's greatest export. And unlike other parts of Australia, Tasmania has benefited from a decrease in the value of the Australian dollar. As the dollar rises again, the tourism market could take a hit potentially affecting Tasmanian economy.
How are Hobart house prices expected to change in 2020?
Moody's Analytics have projected property price growth across every capital city except Hobart, which they actually expect to see a decline of -1.6%.
On the other hand, Domain predicts that there will be moderate growth between 2-4% in house prices across the Hobart region, which is on par with the national average.
"Domain forecasts moderate growth between 2-4% in house prices across the Hobart region"
House prices in the Greater Hobart region, including Claremont, Margate, Howrah and Austins Ferry, remain some of the more affordable in Hobart, with the average price of a 3 bedroom house in these suburbs sitting at around $450,000.
What's the Hobart apartment market like?
Unlike other Australian capital cities, Hobart is experiencing an undersupply of apartments and medium density housing. According to QBE's Housing Outlook, unit prices are expected to rise by 2.8% over the next three years until June 2022, to reach a projected $420,000 median price.
Given the undersupply of units across the region, you'll find the highest quantity of available apartments in Hobart, North Hobart, West Hobart, South Hobart, and Sandy Bay. These suburbs are an easy walking distance to the city and amenities, and are attractive to prospective renters, with the proportion of renters to owner occupiers in Hobart and North Hobart reaching 72% and 75% respectively.
While demand is currently greater than supply, it's important to note that development is top on the agenda for Hobart and is expected to increase the vacancy rate, taking the pressure off tenants while bringing more stability to property prices. This focus on development has meant that investment opportunities are arising to buy new apartments off the plan.
Best suburbs to invest in Hobart
With rental prices comparable to Melbourne, Hobart remains a strong choice for those looking to invest.
South Hobart is considered a high demand market, with 2525 views per property against the average of 1190 views for the rest of the state. Contributing to this steady popularity is proximity to the CBD, heritage style houses, as well as access to schools, shops and river views. According to realestate.com.au, the average price of a 3 bedroom house is $580,000, with the overall median house price for the suburb at $678,000.
Sandy Bay remains affordable for waterfront living comparative to its mainland constituents, with its spacious contemporary houses averaging at $910,000, and rents attracting an average of $649 per week with a 3.7% yield.
"While property prices in many of Hobart's suburbs have slowed, there is still room for long term growth in Hobart's Northern Suburbs"
Slightly further from the city, Sandy Bay's neighbour Taroona has comparable, if not better, water views. Taroona's visits per property remains almost double the average for the state's 'visits per property', averaging at 2225 for each listing. The median house price for a three bedroom home in Taroona is at $740,000, which has risen 11% since January 2019.
While property prices in many of Hobart's suburbs have slowed, there is still room for long term growth in Hobart's Northern Suburbs including Lenah Valley, Moonah, Glenorchy, Claremont, Austins Ferry and Berriedale – home to the infamous Museum of Old and New Art.
Development is on the cards for the underutilised Glenorchy riverfront, and if all goes to plan, patient investors could reap the rewards of a long term revitalisation of the area.