Hobart has become a serious national player in the residential property scene

There’s mounting activity in and around real estate in Hobart and, according to media, it’s a sudden explosion.

A Domain report says there’s an “unprecedented” surge in activity from international developers “who are now ditching the mainland in favour of Hobart”. 

It reports a big increase in hotels planned for the city’s tourism industry – and in developers actively seeking sites for residential development.

Chief executive of Knight Frank Tasmania, Scott Newton, reports big demand for Hobart development sites, which is also described as “unprecedented”.

“Hobart has generally lagged the national market but we’re certainly seeing change unfold and there’s been a catch-up take place,” he says. 

I’m not surprised at the interest in the Hobart market – and it’s not sudden and it’s certainly not unprecedented. Hobart and Tasmania have been making a strong case for attention from investors of all kinds for a couple of years now.

Hobart has become a serious national player in the overall residential property scene, with its appealing mix of the lowest prices, tightest vacancies and highest rental yields in capital city Australia, underpinned by a greatly improved state economy.

Both SQM Research and CoreLogic have published recent data showing that annual price growth is strongest in Melbourne, followed by Canberra, with Hobart now challenging the leaders.

CoreLogic has Sydney now ranked third on price growth with Hobart fourth, while SQM rates Hobart as third best on capital growth and Sydney fourth. 

Vacancy rates remain tight or moderate in all of the state and territory capital cities except Perth, but Hobart has maintained its status as the tightest rental market. 

Both Domain and SQM Research record vacancies below 2% in Hobart, Canberra, Melbourne and Adelaide. Both sources have Sydney hovering around 2%, with Brisbane and Darwin both around 3%.

“Available rental accommodation in Hobart and Canberra remains scarce, with the lowest house vacancy rates of all the capitals at just 0.5% and 0.8% respectively,” says Domain chief economist Andrew Wilson. 

Here’s the key thing: none of this should surprise anyone who’s been paying attention. The rise of the Hobart market to national prominence has been entirely predictable and has been unfolding steadily throughout 2016 and 2017.

Here’s what I wrote on Property Observer 18 months ago, in February 2016: “For six months or more, I’ve been getting blank stares or responses like “Seriously?” whenever I suggest to investors they should be considering Hobart.

“It’s really easy to get a bad reputation and extremely hard to lose it. Tasmania has the image of a basket base economy. A state that’s losing population. A property market bereft of growth. 

“For many years, all of that has been true. It’s true no longer.  But most people won’t be convinced until they read there’s a boom on. And by then it will be too late to buy well.

“Perhaps it is already. According to the latest House Price Report from Domain, Hobart median prices rose 8.7% for houses and 7.1% for apartments in 2015. The apartment result is the second best among the capital cities, after Sydney.” 

That was February last year. Eighteen months later it’s certainly too late to get the best of the buying, with some research showing that the nation’s hottest suburbs, in terms of “Time On Market”, are all in Hobart. 

This is confirmed by reports from industry professionals at the coalface, who report that houses are selling as fast as they’re listed. 

There were two core factors that prompted that prediction about Hobart prices at the beginning of last year: the steady rise in sales activity and the improvement in the state economy.

At that time, numerous reports were recording the improvement in the Tasmanian economy including the NAB business survey, a Deloitte Access Economics Business Outlook report and CommSec’s State of the States report.

But the bigger pointer for me was the research Hotspotting goes on sales volumes. Changes in sales activity are always a precursor to price movements, both up and down. Hotspotting analyses sales volumes patterns for every town and suburb in Australia every quarter – and that process forecast the price rises that are now occurring in the Hobart market.

In February 2016 I wrote:  “Cheap real estate, a market with rising momentum, underpinned by a strongly moving economy - it’s a package worth considering.’

Those who followed that advice would have bought well ahead of the price rises and done well – and will do better, because there’s more to come.

Buyers can still get into the Hobart market and achieve capital growth, but the best time to be there was 18 months ago.

Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter.