Tasmania May 2017

The month in review: Tasmania

By Herron Todd White
May 2017

Tasmania is currently experiencing a rising market, which can be attributed to many investors rushing to buy a piece of the Tasmanian property market. It is evident that investors have increased their push into the market. Rates of investment in the Greater Hobart region in particular are at a record high, with nearly a quarter of all properties sold this year to investors, the highest rate recorded in a decade.

According to the Real Estate Institute of Tasmania (REIT), one in five property sales are for investment purposes. As more investors enter the market, the percentage of owner-occupiers has decreased and is expected to continue to decrease. With this expectation, the investment rate will continue to increase.

Data from REIT shows that throughout the state in 2016, investors purchased 1,870 properties at a median price of $235,000, with two-thirds of the investors being Tasmanians.

It is also expected that more investors will continue to move into the market as mainland buyers look for affordable investment opportunities now that many of the larger mainland capitals are no longer affordable.

The interest in the Greater Hobart market has increased prices as demand for renting or purchasing a home currently outweighs supply.

Recent reports from March this year show that rental demand is higher in Tasmania than many locations throughout Australia, which is also one of the main drivers behind investors purchasing property within the state.

A few factors could play a role in moving the market in the opposite direction from the current rising market. These factors include an increase in interest rates, an oversupply of properties placed on the market for sale or lease, and an increase in unemployment, which could lead to a population decrease as people leave the state in search of employment. If these factors were to be present at the same time we might see property prices decrease significantly more than if only one of the factors were present.

Investment in infrastructure within the Hobart CBD is high at present, which can be mostly attributed to the surge in tourism throughout the state. This is causing a flow-on effect throughout the suburbs within the Greater Hobart region, as they are relatively close to the CBD yet still affordable in comparison to other inner city suburbs throughout Australia. There have been reports that a lack of rental property availability is due to many investors purchasing properties to be used as holiday rental accommodation, which currently offers a healthy return as there is a shortage of holiday accommodation due to the higher number of tourists. In response to the high levels of tourism and lack of accommodation, we are seeing multiple hotels currently under construction, which, once completed, may lead to a decrease in private holiday accommodation. This may lead to additional rental properties being made available, which will bring supply and demand closer to equilibrium.

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