John McGrath – Now Is The Time To Buy In Hobart

Tasmania’s charming capital city of Hobart has emerged as a shining star in Australia's economic landscape in the past decade, underpinned by its affordable and robust housing market.

Hobart home values soared by 45% during the pandemic boom, making the city one of the country’s top performers of that period. This was followed by a sharp market downswing, with double-digit falls in both house and apartment prices. That’s not surprising after such strong growth.

The correction in Hobart ended in March this year and home values have risen by just 0.8% since then, according to the latest available CoreLogic data. This is because, in contrast to the big mainland cities, supply has been sitting above the five-year average for most of the year, giving buyers more choice and scope to negotiate on price.

This subdued market setting provides an opportunity for mainland investors. Mainlanders heading to Tasmania over the summer holidays might like to look around for investment opportunities and/or a future seachange or treechange home. The median house price is currently just above $700,000 and the gross average rental yield is 4%. The apartment median is about $525,000 with a yield of 4.4%.

As discussed in this year’s McGrath Report, one upside of Hobart’s weaker market this year has been the improvement in affordability levels. This has paved the way for many first home buyers to get into the market. Aided by record-low unemployment and a generous $30,000 State Government-funded First Home Owner Grant, more than 700 first time homeowners have taken advantage of the conditions and incentives to buy or build a new property in the past two years.

Irrespective of Hobart’s housing market performance, Tasmania more broadly is performing well above the national average in several key areas, including dwelling starts, housing finance and construction.

Big projects such as the Hobart Airport redevelopment, which could mean direct flights to Asia and Europe, will improve accessibility, and an ambitious plan to deliver $1.5 billion worth of new houses and apartments by 2032 is aimed at helping more Tasmanians into the home ownership and rental markets.

Despite the challenge of economic headwinds such as high inflation and the rising cost of living pressures, Hobart's outlook remains promisingly healthy, thanks to its strong growth forecast, booming tourism industry, export market and low unemployment levels. Combined, it all bodes well for a housing market that looks to be well placed for future gains.

Tasmania’s second-largest city, Launceston, has also been the recipient of some major spending initiatives and is also shaping up as a future star performer, thanks to government investment and a still relatively affordable housing market.

Even after a substantial 53% rise between March 2020 and the peak in May 2022, Launceston real estate is still more affordable than Hobart’s. The median dwelling value (that’s all property types combined) is currently sitting at about $520,000 in Launceston compared to $656,000 in Hobart.

Tasmania's best performing regional market is Devonport, where dwelling values posted a 4.3% increase in the June quarter. Rental conditions have eased a little across the region, with the vacancy rate rising from 1.7% in June 2022 to 2.3% in June 2023, however, that’s still well below the decade average of 3.7%.

Despite softer market conditions for now, there’s an air of positivity around the region as it stands to benefit from several major multimillion-dollar spending initiatives and urban renewal projects – from all levels of government. It’s expected that the investment and renewed activity will usher in a new era of education, innovation and wealth for Tasmania’s entire north.