Something that I never expected to say: Hobart has some very juicy opportunities
There are two standout opportunities in capital city Australia to buy well with good prospects for near-term growth – but most investors won’t do it because of entrenched attitudes.
The opportunities are Hobart and Adelaide, our two most affordable capital cities.
Investors tend to shun Tasmania and South Australia. They are regarded as states which lack growth drivers, such as strong population trends, expanding economies and infrastructure spending.
I think South Australia is totally underrated and that perceptions of it as a place without growth catalysts are simply wrong. There are some big-ticket events coming up in its resources sector and Adelaide has a high level of infrastructure development under way or in planning.
But I’ve written extensively about Adelaide and South Australia recently, so today I’ll focus on Tasmania and Hobart.
Tasmania has a thoroughly deserved reputation as the struggle state of Australia. As a population and as an economy, it has gone nowhere in recent years.
But things are changing and it’s time to re-consider Tasmania – and, in particular, Hobart.
After years of recording Tasmania as last or second last on every significant economic indicator in my various reports, I can now do something that I never expected to do: report that Tasmania now ranks number one in the nation on one very important economic indicator - housing finance for owner-occupiers.
Home finance rose 15.5% in the year ending July, compared to the national average rise of 9.1%. Tasmania clearly is rising from a low base, but for the state to rank number one for growth in a key indicator is a significant change.
Tasmania has also improved markedly with residential building approvals. Approvals for new homes are up 18.5% in annual terms, slightly better than the national average.
This is evidence of improving confidence in Tasmania. There is a new government running the state, some long-delayed projects are now happening in Hobart and there appear to be some prospects for economic growth (personally, I would prefer that they achieved it without chopping down old-growth forests, but that’s another story).
The greatest reason for optimism that Tasmanian property markets are headed for some overdue growth is that sales activity has been rising – not rapidly, but steadily – over the past six months or so.
There are growth markets scattered around the state, but most of them are in the Hobart metropolitan area.
In keeping with the usual pattern in real estate cycles, the upturn appears to be happening first in the inner-city areas – suburbs such as Sandy Bay, New Town and West Hobart – and some of the better waterfront areas.
Kingborough, a bayside municipality on the southern fringe of Hobart, has long been one of the best markets in the Hobart area over time – and it is producing some of the current growth areas, including Kingston, Kingston Beach, Blackmans Bay and Margate.
The Hobart apartment market has good momentum. The unit market has been rising steadily since late 2012, with sales in consecutive quarters numbering 94, 110, 135, 137, 144 and 150.
If investors can overcome their perceptions of Tasmania as the recession state, there are some juicy opportunities to buy in Hobart at very affordable prices (median prices $330,000 for houses and $248,000 for apartments), with genuine prospects for growth in the near future.