Is the heat going out of the Hobart housing market?
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Aug 30, 2018
Is the heat going out of the Hobart housing market?
While Hobart has been the best performing Australian capital city in terms of capital growth, there are signs the steam is beginning to go out of the housing market.
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Petrusma Property Sandy Bay7 Date Court, Sandy Bay Hobart, for sale through Joanna King and Sam Towns for Petrusma Property, as seen on Luxury List.
Hobart has seen the strongest growth in the nation off the back of an affordable housing market, but there are early signs the market is about to weaken, according to CoreLogic data.
A combination of rising house prices, a lack of stock, and a lack of new dwelling approvals are to blame, according to CoreLogic's Head of Research, Cameron Kusher.
"With a median dwelling value of $435,833, Hobart remains the most affordable capital city in the country, however that affordability advantage has been substantially eroded over recent years," Mr Kusher said.
"Over the three years to July 2018, Hobart dwelling values have increased by 32.4 per cent, which is a significantly greater increase in values than Melbourne (the city with the second largest increase in values over the same period) in which values increased by 18.7 per cent.
"A significant driver of the growth in dwelling values over recent times in Hobart has been the distinct lack of properties for sale.
"Another contributor to increasing dwelling values have been the fact that as demand for housing in Hobart has climbed there has been very little increase in new housing," Mr Kusher added.
A birds-eye view: 7 Date Court, Sandy Bay Hobart, for sale through Joanna King and Sam Towns for Petrusma Property, as seen on Luxury List.
The volume of stock available for sale in Hobart dropped by 30.7 per cent, according to CoreLogic data.
President of the Real Estate Institute of Tasmania (REIT) Tony Collidge, told WILLIAMS MEDIA homeowners are essentially delaying selling their homes in the hopes that prices will continue rising.
"This is a situation where you've got growing demand but very little in the way of stock available for sale. I expect this will be the last year of significant growth for the region, despite some forecasters predicting otherwise," Mr Collidge said.
Pam Corkhill, a listing agent with Knight Frank Hobart, tells WILLIAMS MEDIA that while the steam is going out of the market, she doesn't believe it will crash.
"The market will slow down, but at the moment it is still very strong. If it does drop, it won't drop tremendously," Ms Corkhill said.
"None of us have a crystal ball. You can only speak for what you are finding at the moment."
Hobart's affordability compared with other states
While Sydney and Melbourne remain substantially more expensive than Hobart, the value gap compared to both cities hasn’t been this narrow since 2013, says Mr Kusher.
"It's the capital cities outside of Sydney and Melbourne where the value gap has narrowed most significantly over recent years.
1/75 Lindhill Avenue, Geilston Bay Hobart, for sale through Ant Manton of Ray White, as seen on Luxury List.
"Brisbane median values are 13 per cent higher than Hobart's, compared with Adelaide (1 per cent higher), Perth (5 per cent higher), Darwin (1 per cent higher), and Canberra (35 per cent higher).
"Affordability was a big driver of growing demand for housing in Hobart over recent years. With strong increases in dwelling values that affordability advantage has now largely been eroded," Mr Kusher said.
Change in dwelling values
Over the three years to July 2018, house prices in Hobart have increased 32.4 per cent - a significantly greater increase in values than Melbourne (the city with the second largest increase in values over the same period), where values increased by 18.7 per cent.
"While dwelling values are 11.5 per cent higher over the last 12 months, making Hobart the region with the nation's strongest value growth, it was the slowest annual rate of growth for the city since February 2017.
33 Woodcutters Road, Tolmans Hill Hobart, sold for $1.2m by Pam Corkhill of Knight Frank Hobart as seen on Luxury List.
"The trends in the data are certainly pointing to some weakness starting to appear in the Hobart market," Mr Kusher said.
Weakness emerging in market
Mr Kusher says the weakness in the Hobart market becomes apparent when looking at the most expensive properties.
"Any weakness in the Hobart market is apparent across the more expensive properties with the top 10 per cent of properties having already recorded a fall of -1.5 per cent from their peak. At this stage, values continue to rise across the most affordable properties in the city," Mr Kusher said.
Lack of stock
A significant driver of the growth in dwelling values over recent times in Hobart has been the distinct lack of properties for sale. Although value growth is starting to slow, there remains little stock for sale in Hobart which should, to some degree, support upwards pressure on prices.
33 Woodcutters Road, Tolmans Hill Hobart, sold for $1.2m by Pam Corkhill of Knight Frank Hobart as seen on Luxury List.
While total properties listed for sale remains low, advertised supply levels have started to increase over recent weeks and head back towards levels from a year ago. Perhaps this reflects that as market conditions are starting to slow a little an increasing number of buyers are now looking to sell.
Lack of new dwelling approvals
"Another contributor to increasing dwelling values have been the fact that as demand for housing in Hobart has climbed there has been very little increase in new housing.
"Belatedly, dwelling approvals are now starting to trend much higher indicating that supply is starting to increase which should also have an impact on the rate of value growth in the city.
The deterioration in housing affordability in Hobart over recent years which has led to the loss of its value advantage relative to other capital cities looks to now be indicating that a housing slowdown is imminent.
"At this stage values are increasing, albeit at a slower pace and stock for sale remains low which means, at least for now, a severe slowing of conditions such as those seen in Sydney and Melbourne is unlikely to occur.
"Nevertheless, stock for sale is rising, as is the new supply of housing, and signs of market weakness are appearing across the higher value areas of the city. Given this, we would expect that growth in dwelling values in Hobart is set to be much slower over the coming years than it has been over the past three or so years," Mr Kusher concluded.
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