Hobart Market Update: Tight Rental Supply Underpinning Prices
In another solid performance by the Hobart market, the median dwelling price rose by 0.9% in the month of October.
Hobart property owners are beginning to get used to the consistent and steady increase in values, holding its place as the strongest capital city in terms of growth over the past five year period, up 39.1% over this time. Currently, prices are at record high levels and the vacancy rate remains at an incredibly tight 0.6%.
Even against a backdrop of surging prices in both Melbourne and Sydney, it is still Hobart that has achieved the highest growth over the past 12 months. With median house values in Hobart sitting at $498,734 and units at $375,831 according to the latest data from CoreLogic.
Median Dwelling Values - Source CoreLogic
With much of Hobart’s growth perpetuated by heated interstate and local investment, a mass investor exit during 2019 will likely have a significant impact, moving forward.
In 2019, investor activity has seen a 22.2% decline, resulting in 550 fewer rental properties available for rent, according to the latest data from the Real Estate Institute of Tasmania.
In addition, a notable shortage of stock is putting a handbrake on sales. Given the lack of options and a red-hot market, sales have slowed significantly.
In 2019, house sales numbers are down 4.3%, units have dropped by 2.2%, and land sales suffered an even greater decrease, down 7.6%. While the average days on market increased by 7 days.
According to immediate past president of the REIT Tony Collidge, this decrease can be largely attributed to both a limited supply of established property and a slow down in the release of new land coming onto the market.
This lack of supply is also impacting first home buyer sales which are down 8.5%, while there was a massive 28.1% decrease in first home buyers acquiring land in 2019 compared with the previous year.
An acute shortage of rental accommodation has seen rents increase in Hobart by an average of $30 per week, up 6.1% for houses and 7.1% for units.
Mr. Collidge believes that this tight rental supply will see property prices remain strong in the short-term.
“Demand will keep pressure on property prices. Whilst the market has “flattened” I believe that we will continue to see slight increases in prices and rents over the short to mid-term,” said Mr. Collidge.
At the same time, however, Mr. Collidge is worried that the tight rental supply will have a negative flow-on impact going forward unless the underlying issues are addressed.
“Lack of stock and decline of investment in residential property in Tasmania should be of concern to all levels of government in this state.
“It’s now highly probable that we will see a continuance of the rental crisis over the busy summer /festive season. There is no end/softening insight. As tertiary student numbers grow and the tourist market continues to flourish further demand will be placed on an already overburdened rental sector.
“Lack of land and development opportunities are impeding our ability to grow as is the limited ability of the building sector to meet current building demand," said Mr. Collidge.