The huge positives in the Tasmanian economy - booming tourist numbers, an expanding university, and a strong jobs market - have created a huge negative: a worrying shortage of housing, says Tony Collidge, president of the REIT.

"With such a short supply of houses for sales and rent it's become a tight situation and a lot of people are hurting," Collidge told SCHWARTZWILLIAMS.

People are really struggling to find housing, he said.

Housing will be a major issue in the upcoming state election said Collidge. But he said that politicians aren't talking about housing because they're all struggling to come up with a solution.

Collidge said 5,000 more homes are needed in Hobart alone, and that is the general rate of building for a year right across the island, he said.

From the REIT on the 2017 and December-quarter housing market

Ordinarily the results that Tasmania’s residential housing market achieved in 2017 would be cause for celebration, the REIT report stated.

The strength of our market is the product of a strong economy, consumer confidence, strong employment growth, and positive population growth. However, the successes of 2017 are undermined particularly in Southern Tasmania by a gaping shortage of property to meet current rental and buyer demand.

Booming tourism, growing university student numbers, increased employment opportunities, the affordability of our housing and the emergence of Tasmania as a lifestyle destination has taken its toll.

This creating unprecedented demand on a somewhat limited housing supply. This situation presents us with an opportunity to address where we are at and find solutions that will benefit us all for the future.

As expected, the Real Estate Institute of Tasmania's December quarterly Report confirmed that 2017 was a stand-out year for the residential real estate sector.

Not only did it record the highest number of sales in a decade (11,353), the cumulative value of these transactions ($3.879 billion) was the highest ever recorded.

House and unit sales recorded their best results since 2003, increasing 13.2 per cent and 19.6 per cent respectively, while land sales recorded a healthy 22.7 per cent increase.

While Hobart ended the year with a median price of $431,000 (up 8.8 per cent) it only saw a slight increase in sales numbers (+98).

Launceston soared to its highest number of sales (1334), up 26.6 per cent since 2003 and the North West recorded its best results in a decade up 16.1 per cent with 706 house sales. Launceston’s median house price increased to $292,500 and the North West to $250,000.

First-home buyer numbers increased 9.8 per cent (or 120 sales) to 1,345 in 2017. Of these, 911 purchased houses, 158 units and, 276 land. FHB numbers have now waivered between 1,000 and 1,500 for 12 of the past 17 years. FHB accounted for 11.8 per cent of all property sales and only 15.3 per cent of all land sales.

Despite all the hype, interstate buyers (2,423) represented just 21.3 per cent of total sales. Of these more than half (1,361 or 56.2 per cent) purchased property to reside in Tasmania at a median price of $325,000 while the remaining 1,062 purchased investment properties at a median price of $270,500. Interstate buyer participation in our market was at its highest level (up 47.4 per cent on 2016) since 2004.

In 2017, investors acquired 2,455 properties at a median price of $260,000. Whilst 1,062 were to interstate investors, the majority (1,393) were purchased by Tasmanians. Unlike Sydney (+60 per cent) and Melbourne (+50 per cent), local investor sales represent just 21.6 per cent of our market. Because we have such a small local rental market (less than 30 per cent of all sales) we have been unable to meet the increased surge in demand over the past 12 months.

In 2017 we recorded a record 168 “million dollar plus” sales. Again, Tasmanians purchased 130 of these properties while only 38 were acquired by interstate buyers.

Foreign buyers accounted for 61 sales in 2017.

December Quarter

The December Quarter (of 2,871 transactions) set a new benchmark for the cumulative value of sales exceeding $1 billion for the first time. This resulted from a pickup in the number of Southern Tasmania transactions (+16 per cent) and continued strong performances from Launceston (+4.1 per cent) and the North West (+4.5per cent).

Unit and townhouse sales continued to surge in the North West (+50 per cent) and Launceston (+7.4 per cent) while numbers dropped across Greater Hobart (-16.4).

Land sales increased by 14 per cent.

On the back of increased sales over the December quarter, house prices across greater Hobart increased by 5.2 per cent, and Launceston 1.7 per cent, whilst prices remained stable in the North West.

The December quarter saw FHBs record their highest number of purchases this year recording 265 transactions at a median price of $308,000.

Investor numbers remained consistent representing 19 per cent of all sales; recording 373 transactions at a median price of $285,000.

Over the quarter, foreign buyers made ten purchases at a median price of $360,000 while interstate buyers acquired 444 properties (or 23 per cent of all sales) at a median price of $349,500. Local Tasmanian buyers still dominate our residential market recording 75 per cent of all sales.

Inner Hobart ($903,000), Sandy Bay ($883,000) and West Hobart ($806,944) headed up the top 10 median priced suburbs while Zeehan ($40,000), Rosebery ($67,000) and Queenstown ($78,750) were the three most affordable.

The suburbs recording the highest number of house transactions in the quarter were: Devonport (61), Kingston (48) and Glenorchy (43). Launceston (390) was the leading municipality for sales closely followed by Clarence (295) and Glenorchy (244).

Rental vacancy rates have continued to decrease in all regions. Hobart (1.4 per cent) now has a vacancy rate below 1 per cent in Outer Hobart, while Launceston declined to 2.1 per cent and the North West 3.2 per cent. Rents continue to record gains over the quarter. Investment yields remain steady (between 5.0 per cent and 5.5 per cent).

Like many of the other Australian Capital cities, Hobart has experienced a real surge in property value and rental demand over the past two years. No one foresaw how our economic condition would change so rapidly.

Unfortunately, there is no quick solution. It is something that we will have to work through. The problem isn’t the fault of Air’ bnb ‘owners (approximately 300), foreign buyers (61 last year), or the interstate buyers (who purchased 1062 investment properties in 2017 or 9.4 per cent of all sales), its much bigger than that. We estimate that Tasmania needs almost 5000 homes to satisfy its current affordable housing, rental and private dwelling demand.

The current situation needs to be addressed and a real opportunity exists for the government of the day to rethink how it can best support the housing sector, the report concludes.

Read more about Tasmanian real estate:

Hobart's Chigwell has the highest rental returns in Australia

Tasmanian market going from strength to strength: REIT quarterly report

Hobart property market has "changed forever": Jim Playsted, Knight Frank