Lifestyle and limited supply of houses will continue to drive price growth in Hobart
The ability for more people to enjoy the lifestyle that the Apple Isle offers has led to a resurgence in the housing market. Prior to and during the peak of the COVID-19 price growth in Tasmania has decelerated. Affordability issues, with preferred alternatives in Melbourne, created a situation where the Apple Isle became less resilient and the property market experienced decelerated price growth despite low supply of dwellings.
However, the prices of free-standing houses raise sharply again with 4.4 per cent capital growth in the past quarter. Units, however, delivered only modest growth of 1.2 per cent during that period.
Lower median prices, the high rate of ownership for houses and solid equity (i.e., low effective LVR) for many investment properties that enjoyed strong capital growth in recent years, mean that further price increases are likely in the higher-demand areas in Hobart.
As in the other states, ultra-low interest rates make it cheaper to buy than rent in all of Hobart for owner-occupiers with interest-only loans.
While lifestyle changes have improved the demand for housing in Hobart, the market is likely to experience only modest price increases over the long term.
Units in Tasmania carry a higher level of risk due to the fact that houses are significantly preferred and due to the relatively high number in the pipeline compared to population growth.
The relatively high proportion of units that are investment properties also increases the risk associated with such properties, particularly with falling rental prices and increased vacancy rates.