At Work Or Home, Hobart Property Continues To Play

Whether you’re a renter looking for a home or a business looking for premises, the squeeze in Hobart is making the search a difficult one.

While Sydney and Melbourne might have been the strongest performers in the past three months, it is Hobart that has seen the biggest gains in the last year.

Dwelling values are up 2.5% in that time, a market performance that has been replicated by the commercial market.

QBE’s Australian Housing Outlook report anticipates a four per cent rise in Hobart house prices and a three per cent rise in unit median prices over the next three years.

QBE found that, relative to local incomes, Hobart was one of Australia’s least affordable capital cities, only more affordable than Melbourne and Sydney. The Tassie capital, with a median house price a thousand dollars short of the half-million mark, was twice as expensive as Darwin, and nearly double Canberra as well.

In a bold show of confidence in the commercial sector, Super fund TasPlan recently sold the Telstra Centre in the heart of the Hobart CBD to a Melbourne-based investor for around $35 million, in the city's second-largest office property sale to date.

Tim Johnstone, director at Edwards Windsor, who marketed the premises, told the Financial Review that Hobart was something of a commercial hotspot.

“[They plan to] reposition the building to take advantage of the current low vacancy rate for office accommodation that exists within the A-grade Hobart CBD office market,” he said.

“Tassie's a bit of a hotspot as the returns here are probably higher than you would get in mainland capital cities,” he said.

Managing Director of Devine Property, Mark Devine, said that the Hobart commercial property market had gone from strength to strength in the past few years and showed no signs of slowing down.

“The medium-term outlook is for more of the same, and from an agent’s point of view the difficulty is actually getting stock into the market because we've had a lot of turnover compared with the last few years,” Mr. Devine said.

It was a scenario that mirrored that of the domestic property market and pointed to a strong overall Tasmanian economy.

President of the Real Estate Institute of Australia Adrian Kelly said Hobart City continues to attract interest well beyond any flavor of the month sentiment.

""While the stats may say that average days on market is around three to five weeks, in reality, it is closer to one week when you factor in that the data includes the time it takes to wait for inspections and other things to be completed - properties are receiving multiple offers within that one week window,” Mr. Kelly said.

“Lifestyle properties on the outskirts of Hobart are attracting interest from Perth and Brisbane, perhaps as the cooler climate appeals as summers elsewhere become longer and hotter.

“Investment properties are maintaining their market appeal too, with Hobart rents delivering the second-best yields of all the capitals, behind only Darwin, due to the latter’s defence properties.”

September 2018 sales prices vs. September 2019

In the table below, Ripehouse Advisory Analysist, Will Farrell shows the shift in capital city market values, comparing the First, Median and Third Quartile sales prices for September 2018 with September 2019.  

The graph below shows the retraction of the Sydney, Melbourne and Brisbane markets, while Hobart and Adelaide have made solid gains across the First Quartile, Median and Third Quartile when comparing September 2019, with the previous September.

Devine thoughts

The Tasmanian economy is benefiting from healthy construction activity, some population growth, and solid fundamentals that are expected to continue, leading to consumer and investor confidence. 

“The fabric of the retail environment in the city has changed from a fairly conventional sort of fashion, consumer goods and retail enterprises to more of a hospitality focus and I think once the new hotels open up over the next 12 to 18 months, that'll continue,” Mr. Devine said.

The Hobart market is being seen as an affordable market for those priced out of the Melbourne, Sydney, or the major metropolitan markets.

“Maybe people externally have discovered that Hobart and Tasmania as a whole is a reasonable place to invest.”

With the competition in retail still high, it is the office market that is performing in terms of commercial leasing, as evidenced by the Telstra Centre sale.

“In the retail leasing area it's pretty patchy because there’s not a lot of that sort of fashion type retail activities, so most of the commercial leasing that we're doing has been in that food or entertainment type of area, so securing tenants, retail-wise, is not as strong,” he said.

In the office market, it’s performing better and industrial is quite strong.

“In the newer industrial estates like Cambridge and Kingston there’s still quite a bit of construction going on and there seems to be a reasonable amount of tenant demand in those areas.”