Ripehouse

Tasmania’s rise as an investor heartland

Tasmania’s rise as an investor heartland

Tasmania has quickly emerged onto property buyers’ wishlists for its high-yielding, lower-priced real estate, with interstate purchasers starting to take notice. But it requires a discerning approach for those who want to gain the upper hand in Hobart before the opportunities are all bought up.

Much of the reason the Tasmanian property market has been through a renaissance in the past ten years has been due not only to a significant improvement in local economic conditions but also to the rise of technology, Real Estate Institute of Tasmania (REIT) President Tony Collidge said.

Websites offering detailed market analysis, the history of sales and the ability to research unfamiliar areas are commonplace in 2016, opening up national investment opportunities to all investors.

“Going back to 2005, you had the internet in its infancy, not a lot of agents [were] using it, mobile phones were just starting and therefore a lot of local investment activity and interest was a word of mouth … and we were probably a hidden secret,” Mr. Collidge said.

While a couple of “astute mainland investors” had put Tasmania on their list of property hotspots to consider, particularly due to low prices and double-digit yields 10 years ago, it was not commonplace.

“[Technology] creates so many more options and makes today’s investors and buyers so much more informed,” he said. This has firmly put Tasmanian real estate on the map of local and interstate buyers.

{{tech_optin}}

“You could pick up properties going back in the early-2000s for around $85,000 for a brick home in Hobart in the northern suburbs. Today, you’re paying $250,000 to $270,000 for the same product,” he said.

But with the highest rental yields in Australia, at 5.6 per cent according to Domain Group data, and SQM Research recording a significantly tight vacancy rate at 1.2 per cent, the same attraction is still evident in the 2016 market even with higher prices.

In 2005, the average achievable rent on a three-bedroom was $230 a week, compared to $350 a week in 2016, REIT data shows.

“Analyzing [2005 to 2016], I found it really fascinating because if you go back to 2005 in Hobart there were 549 house sales and the median price was $271,000,” he said.

“In the March quarter 2016 there were 557 sales, eight sales more, but the median price had grown to $385,000.”

This equates to about a 40 per cent increase in property prices. Given between 2009 and 2012 house prices across Tasmania fell significantly, this growth is remarkable.

In Hobart, prices fell up to 15 per cent over this period, while in Launceston and the outer regions property prices dropped up to 25 per cent and 40 per cent respectively. All of these areas have recovered “and then some,” he said.

“We’ve recovered and we’ve still made growth on top, a bounce back,” he said.

But investors are still not quite at the levels seen on the mainland. In Sydney, up to 60 per cent of the property market can sell to investors during a boom period. In Tasmania, over the March quarter when prices growth was strengthening, 14 per cent of homes sold to investors.

And the majority of these were local investors, looking to spend around $260,000, rather than interstate buyers looking to diversify their portfolios.

For the growing number of mainland investors who are looking, there’s little available now in the inner Hobart area for under $400,000, leaving the surrounding suburbs more attractive.

In particular, West Hobart, New Town, Moonah and Claremont have all made their way onto investors’ lists, Jacob Field founder of Ripehouse said. Hobart has, in fact, been on the top of Ripehouse’s national lists for investor interest, along with bread and butter suburbs such as Victoria’s Geelong.

{{top_five_optin}}

Unsurprisingly, over Christmas 2015 and shortly after Mr. Field noticed this trend of investor interest, West Hobart saw rents go “through the roof” and sales activity heat up quickly. But as quickly as the momentum came, the investment options dried up with prices quickly getting too hot for budget buyers looking for high rental yields.

“Then the activity moved to New Town in February and March, largely driven by locals,” Mr. Field said.

Two months later, the momentum moved into Moonah before heading further north past Glenorchy and onto Claremont, where some good property purchases are still possible.

“Claremont was the last to come into the mix, but only 10 to 20 per cent of these suburbs are good for investing,” Mr. Field said.

The best streets for investors are those with less than 15 per cent public housing, above average rent and yield and “lots of three-bedroom homes”.

But there’s a real danger with generalization in Hobart, particularly for interstate investors who come in looking for a quick win with high yields, he said.

“It’s only a very specific slither of Hobart that’s in demand, and it’s a long time between cycles – about 10 years. If you get it wrong, you’re left with a substandard product that won’t perform for a long time.”

Subscribe to our newsletter

Weekly updates Weekly headlines, delivered to your inbox

Join the conversation!

Suggested Stories:

Explore By:

Most Popular