As Tasmania has a population base of only 500,000 residents, many property investors may shy away from the little Australian island for their next investment. If one were to place some hard earned investment dollars in the southern most state of Australia, one would probably look to the capital city Hobart as it holds approximately 225,000 Tasmanian residents. This makes Hobart the Australian capital city with the second lowest population.
Before jumping to any conclusions, us property investors should conduct thorough due diligence and review the past performance and trends to get an idea of where the market sits today and where it is likely to go. Timing the market is crucial to the overall success of a property investment. Here is a quick recap on how the market has moved in Hobart.
In 2001 the conditions were primed and ready for the Hobart market. This lead to the market increasing in value a whopping 109% to the end of 2004. This was partially driven off the back of significant interstate migration. Even after the market doubled value in as little as three years, the market wasn’t ready to slow down.
Over the years 2005 through 2010, the market experienced a solid growth rate of 5.7% per annum. This equated to a total of 210% capital growth from 2001 to 2010. Not a bad little investment for those who timed it right!
After a 9-year run of consistent growth, affordability was stripped out of the market. The state experienced an oversupply of property and a natural correction in prices took place for the market. The capital city experienced a drop in median house prices of approximately $20,000 from 2011 to 2013.
From the end of 2013 to 2016 there was a slight recovery, seeing median house prices increase from $342,000 to $389,000, representing a 13% increase, thanks to the reduced property completions as well as improved interstate migration into the market. These improved conditions accompanied by the lower Australian dollar boosting the tourism sector in Tasmania, resulted in the market experiencing an upswing of a whopping 13.57% in house prices over the 12 months leading up to April 2018.
So, what can we expect from the Hobart market moving forward?
One key economist group BIS Oxford Economics, forecasted a strong year for the Hobart market in 2018, with an estimated 6% increase in house prices. They believe the capital growth prospects to be short lived. The economist group predict only 2% per annum up to 2020 and subdued long term growth due to lack of population growth, strained affordability and weak economic / employment conditions.
Another issues is that the high percentage of tourism dollars flooding into the market has driven rents higher than can be supported by local incomes. THIS article by the ABC gives a bit more detail about this squeeze on the locals’ cost of living. It seems that the thing, which has brought so much prosperity to the state may have also caused some troubles for the locals!
We discuss this issue in much more detail in our latest Coffee & Property video that you can watch HERE.