Hobart sailing into contention for property investors

Pitched to mainland Australia in a recent television campaign as the place you go to ‘come down for air’, Tasmania is not just a holidaymakers’ paradise, but a real estate investment opportunity.

Since March 2020, Hobart has been the strongest performing capital city, post Covid, with prices up by 44.4 per cent, according to PropTrack’s Home Price Index December 2022, released this month.

However, despite seeing a price rise of 0.11 per cent over December, the city has not been immune to the impacts of the rising interest rates and prices have fallen 2.4 per cent from their peak in April.

Local resident and Hobart-based Director of real estate agency Wolf Property, Cam Rogers, is confident Hobart will remain a target for investors, having watched its evolution over the years and consistent appeal to buyers from around Australia.

“We have migration from Queensland, Melbourne, Sydney, Perth and it is pretty consistent across the board,” Mr Rogers told API Magazine.

“Buyers from those markets tend to gravitate to the more well known suburbs, so any time we list something in Battery Point, there’s a lot of interstate interest, and Sandy Bay as well, anywhere around the city and you also get a lot of interest from the lifestyle properties.

This Sandy Bay property is listed for $2 million

“I had a house on the water listed in Clifton Beach recently, which is half an hour from town and we had more than 100 inspections and enquiries and it went with eight offers.

“A quarter of the enquiries were from interstate.

“So those sorts of special properties in special locations really do attract the mainland buyer, as well as the properties that are right in the thick of it; in and around the city.”

Suburbanite Principal and Property Advisor, Anna Porter, said interstate buyers were a key component of the Hobart real estate market but had been reluctant to enter the market lately.

“Hobart has certainly had a number of years of very strong growth, as have most of the markets across Australia,” Ms Porter told API Magazine.

“It’s been really heavily propped up over the last few years by interstate buyers and interstate investors to a great extent as well.

“What we’re starting to see now is a real retraction by interstate buyers and investors in most markets, including  Hobart.

“This is certainly starting to look like it will be softening off in that market base on that.”

Some Hobart suburbs buck price trend

The McGrath Report 2023 highlights the inner city suburbs of Sandy Bay and Kingston Beach, which are 15 minutes from the CBD, as the top picks for Hobart.

Sandy Bay is “revered for its convenience, amenity and natural beauty. Panoramic water views, prestigious schools and a mix of historical and modern mansions have made it a magnet for the well-heeled”, the report says.

“But it also has another side, student-friendly apartments and a vibrant restaurant scene that caters to all budgets.

“If sailing at The Royal Yacht Club of Tasmania isn’t your thing, there’s always a stroll along the waterfront footpaths into the CBD.”

Kinsgston Beach, Hobart. (Photo credit: Our Tasmania)

At the same time, the report shows median house prices in Sandy Bay cooled by 0.8 per cent to $1,433,837, while in more affordable Mount Nelson next door, there was an uptick in median prices of 1.7 per cent to $999,320.

Kingston Beach is described in terms of its popularity as a lifestyle hub populated with ocean swimmers, runners heading to the local Alum Cliffs trail, dog walkers on the beach, an idyllic 18-hole Kingston Beach Golf Club, a 1970s refurbished beachfront pub, hip cocktail bar and great cafes.

“Sandy Bay is, I think, still the second highest median suburb price in the state behind Battery Point, which is a small suburb that adjoins it and has a little over 1,000 homes,” Mr Rogers said.

“Sandy Bay is quite a big suburb for Hobart, with more than 12,000 residences, so we have seen a bit of a dip in the market just based on supply.

“There are more four-bedroom houses available in the area than there has been in the last few years.

Cam Rogers, Director, Wolf Property

“It’s got some of the best schools, it’s very close to the city and it’s a prestigious suburb, so, it’s a solid place to invest.

“I think there’s potentially other areas as well, which are providing equal proportionate growth around Hobart, which perhaps have a lower entry point too,” he said.

CoreLogic data has shown over the three months to December, however, that Hobart's quarterly change in house values saw a steeper rate of decline, falling 5.0 per cent, but Hobart’s median house value remains high at $725,736.

“Just one suburb, Kingston Beach (1.5 per cent), recorded a quarterly rise in values, while the other 48 suburbs analysed recorded a decline,” CoreLogic’s Mapping the Market tool revealed.

“Despite 79.6 per cent of house suburbs recording an annual decrease in values, a few suburbs, including Acton Park, Sandford, Taroona and Mornington, recorded increases of more than 3.5 per cent.”

Northwest and south of the city border are also identified as sound investment opportunities.

“I’m still talking in the blue chip areas here - if you’re looking further afield, if you’re looking for a good investment options, it’s North Hobart, West Hobart, South Hobart, and then once you push past there, you’ve got Mount Stuart, Newtown and even further, Moonah; that northern corridor is a really good area for real estate investment potential,” Mr Rogers advised.

Semi-rural Tasmanian properties

Further afield in the half-hour to 45-minute drive from the CBD are properties steeped in lifestyle appeal.

“As someone that lives down here and sees the little details in growth, the semi-rural properties are really popular and they’ve already seen good growth.

“An area like Dodges Ferry, for example, is about 45 minutes from town and if you look at the increase in the last five years, it’s really shot up, and I think there’s been a shift towards owner-occupier lifestyle properties, probably as a result of people putting their health and wellbeing at the top of their mind in recent times,” Mr Rogers said.

Unit prices retreating

Hobart unit values fell 4.4 per cent over the December quarter and by 7.9 per cent over the year, taking Hobart's median unit value to $528,256, the CoreLogic data shows.

All ten unit markets analysed across Hobart recorded a drop in values over the quarter, while only one suburb, Brighton (4.0 per cent), saw values rise over the calendar year. The largest annual decline was recorded in Moonah ($474,254), with unit values falling by 15.0 per cent over the year.

PropTrack’s Rental Report December 2022 found rental enquiries per listing year-on-year in Hobart fell 48.4 per cent compared to Melbourne at 61.5 per cent, but that could be attributed to the fact the city had one of the lowest vacancy rates in the country (0.9 per cent) in December.

The Real Estate Institute of Australia’s Real Estate Market Facts: A 20-year report found that over the past 20 years the median rent for three-bedroom houses increased in all capital cities, with Hobart the clear standout.

The rent rises ranged from 30.6 per cent in Melbourne to a massive 84.0 per cent in the Tasmanian capital.

Lifestyle and affordability

Lifestyle and affordability may not ultimately offer Hobart or Tasmania the resilience against the strong tide of interest rate rises.

“When the market is heavily driven by interstate buyers and investors, the recent retraction could be a bit concerning for the Hobart market and is likely to have a fairly strong impact on that market over the next 12 months,” Ms Porter said.

“We’re certainly seeing a nervousness from buyers and investors that is really heavily based around that rising interest rate environment.

“When we do look at the December data from last year, housing values in Hobart declined by 2 per cent for that period. If you take a bigger picture look at that for the year to December, it was down 4.1 per cent and the quarter was down 4.4 per cent.

“So, we’ve certainly seen a retraction from the peak in May 2022.

“It’s down nearly 8 per cent since the peak, so for anyone who bought a property in May, the value has declined since they purchased that property, so it’s certainly heading in that downward trend, and we don’t see that stopping while interest rates are moving up and investors are nervous.”

Mr Rogers, however, remains confident.

“From my perspective, whenever you’re investing in property, ultimately, at the crux of it, it needs to be somewhere someone wants to live or needs to live, or is affordable,” Mr Rogers said.

“I think Hobart, while it’s gotten more expensive, has all those base foundation factors that influence where people live and I think that’s why so many more people have migrated to Hobart and that was really emphasised throughout Covid.

“As well, in terms of facilities, and things like food and hospitality, and entertainment, Hobart and Tasmania really punches above its weight.”