Things are slowly looking up in Tasmania’s capital city, Hobart.
With a relatively small population of just 225,000, Hobart offers the conveniences of a city without the noise, traffic and crowds of bigger metropolises. Its location on an island and its physical separation from mainland Australia means that it is a capital city with a very strong character of its own. As the second oldest capital city of Australia after Sydney, it is renowned for its restored colonial architecture. Here is where a beguiling mix of old and new can be seen, with ancient warehouses and colonial cottages sharing space with high rise apartments and modern homes. The city enjoys a thriving art and music scene, strong food culture and proximity to some of Australia’s most beautiful natural landscapes. All in all, it offers great diversity for anyone from young professionals, who make up about 35.1% of the population, to older residents.
Despite all that it has to offer, Tasmania’s capital city is failing to attract investors. Buyer activity is weak and Hobart’s property market is currently facing a slowdown. The median home price in the city dropped by 1.9% in September last year, with that for houses falling by 2.3%. This downturn is all the more unexpected considering the strong start to 2015 the city had enjoyed, even though the city is still faring worse than the other capital cities in the post-GFC recovery. In 2010, the state’s large forestry industry (Tasmania is 22% forest) came to a halt as the government gave in to pressure from environmentalists concerned about land use. The death of one of the city’s main sources of income added to the woes of its economy. Dwelling values are 3.9% lower than they were in 2009. Industry insiders point out that Hobart is a small market with weak to negative population growth. As such, it is often volatile.
It’s not all doom and gloom for investors, however. Despite – or because of – its weaker economy, Hobart remains one of the most affordable markets in Australia with a median property price of about AUD 350,000, which is approximately 45% lower than that of the nation’s. Waterfront living here is definitely less expensive than in bigger cities like Sydney and Melbourne. Properties also enjoy relatively low vacancy rates and high yields.
No matter the economic situation, one of the constant, unchanging strengths of Hobart’s housing market is rental returns. Over the whole of last year, house rents rose by 1.2% while unit rents saw a much more impressive 4.2% increase. As a result, Hobart’s rental yields are the second highest of all Australian capital cities at 5.3% for houses and 5.2% for units.
There remain pockets of areas that are defying the downturn. The inner city suburbs, in particular, have been achieving new peaks in median house prices since 2010, with some properties transacting even before their release in the marketplace, commanding prices above expectations, and seeing shorter selling periods overall. There are even fears of a shortage of stock in these areas. The same cannot be said of the outer and regional suburbs, where longer selling periods of more than six months are common and the successful sale of a property hinges very much on its pricing. Properties in the northern suburbs, for example, are about 10 to 15% below peak median prices.
One up-and-coming suburb worthy of notice is Bellerive, a seaside town located just 4km from the CBD and connected to it by the Tasman Highway. The suburb offers an appealing lifestyle, with its main commercial belt being Cambridge Road, where banks, supermarkets, restaurants, community centres and the Bellerive Yacht Club are located. Eastland Shopping Centre located just outside the suburb provides further entertainment and retail options. Median unit price there has surged by an impressive 8% over last year, and has been growing since 2013. With a low stock of just 0.33%, demand is relatively high and the rental market strong with a vacancy rate of 0.2%. Particularly in demand are the properties at Victoria Esplanade and Dillon Street, prized for their unblocked views of Hobart and the harbour.
In the near future, Tasmania’s property market may look forward to a possible boost from the thriving tourism sector. The government appears to have grand plans for the island, beginning with the recent refurbishment of Spirit of Tasmania, the super fast ferry service that plies the sea between Melbourne and Tasmania. Qantas has recently added more flights to the state, and accommodation projects are popping up all over Hobart’s CBD.
The thriving food manufacturing sector is also helping to reduce unemployment rates in Tasmania. At 6%, it now has an unemployment rate that is on par with the rest of the nation, a first for the state. With its fertile land, clean air and unpolluted waters, Tasmania’s dairy, beers, wines, meats and seafoods are finding international fans beyond the borders of Australia.