Money Property Buyer beware: The high cost of Hobart’s property price bubble
Updated:

Buyer beware: The high cost of Hobart’s property price bubble

Houses in inner-city Hobart.
Rents and property prices have risen rapidly in Hobart over the past year. Photo: Getty
Share
Tweet Share Reddit Pin Email Comment

Mainlanders considering Tasmania as a cheaper alternative to their home cities have been warned to tread carefully, as the state grapples with a lack of affordable housing.

Hobart’s rental and home prices have risen rapidly over the past year, with a growing number of Tasmanians unable to find affordable homes in the state’s capital.

As Sydney’s property price boom comes to an end, with home values falling 4.5 per cent over the past financial year, Hobart’s housing market — one of the nation’s smallest — has heated up.

Home prices in Hobart increased by 12.7 per cent over the 12 months to June, according to CoreLogic, while rents rose 10.7 per cent, the highest annual increase of all capital cities.

Buyer beware

Hobart’s housing price boom and growing affordability crisis have created an untenable situation, according to Riskwise property advisory chief executive Doron Peleg.

“The market has started to show some decelerated price growth and there has been a marked reduction in inquiries,” he said.

“A significant increase in dwelling prices in recent years, less affordable housing, decelerated price growth, fewer people turning up to open home inspections and fewer inquiries on listings, indicate that housing affordability has an impact on dwelling prices and that the current growth rate is unsustainable.”

Mainlanders considering purchasing property in Tasmania should adopt a “buyer beware” attitude, Mr Peleg said.

“Tasmania is an extremely small market, which means it is much more exposed to external events that reduce intrastate investors’ demand for housing,” he said.

“The unit market is mainly driven by investors, of which intrastate buyers make up a relatively high proportion. If there are better opportunities in, say, Melbourne, Sydney or Brisbane, there could be a huge shift and this could have a significant impact on the market.”

A chart comparing home values around Australia.
Home prices fell in Sydney, but soared in Hobart over the last financial year. Source: CoreLogic

‘Housing crisis’ is not a term favoured by University of Tasmania housing and community research director Keith Jacobs.

“That gives the impression that what’s happening is a temporary phenomenon, and everything’s going to go back to normal,” he said.

“But I would say it’s a feature of the [private rental] system: it’s designed to create scarcity.”

According to Professor Jacobs, Hobart’s high rents and home prices are creating not only social but economic problems.

“If young people end up paying huge amounts in rent, they’ll spend less income on goods and services,” he said.

“Hobart would be far better economically if rents were lower and house prices were lower.

“It’s a weird situation in Australia: people love to see the value of homes go up, but there are real economic consequences.”

Desperate times, desperate measures

Tasmania’s new Liberal government has been eager to appear proactive on the issue of affordable housing, but those at the coalface say new measures aren’t sufficient.

In April, the government announced it would pay private landlords between $10,000 to $13,000 if they make their properties available to low-income renters, among other measures.

In May, Anglicare’s latest rental affordability index (RAI) – an indicator of rental affordability relative to household incomes – showed that Hobart had overtaken Sydney to become the least affordable capital city in Australia on a housing cost-to-income basis.

While the affordability crisis has been “particularly dramatic” in Hobart, the same factors are playing out across Tasmania, according to Anglicare Tasmania’s social action and research centre manager Meg Webb.

“Even the traditionally more affordable areas of the state, such as the north west, are experiencing a big jump in people seeking help with housing,” Ms Webb said.

“We are aware of families moving from Hobart to other regions of the state, expecting to find it easier to get an affordable rental.  But the reality is, every region of the state is experiencing this crisis.”

Greater investment from state and federal governments will be required to “even begin to solve this issue”, Ms Webb said, describing the federal government as “missing in action” when it comes to affordable housing.

“There is no national plan to provide a co-ordinated approach, a total absence of any effective investment in affordable housing initiatives and a lack of appetite to address the taxation settings, which have been a major factor in leading us to this point.”

Comments
View Comments