Aussies looking to get a foot on the property ladder outside of bigger cities like Sydney and Melbourne have been turning to Hobart as an affordable alternative in recent years.
According to research from CoreLogic, Hobart still holds its title of “most affordable capital city”, with a median dwelling value of $435,833, although recently Hobart’s substantial dwelling value growth has been impacting its reputation.
Cameron Kusher, Senior Research Analyst for CoreLogic, noted that affordability was a “big driver” of growing demand for housing in Hobart over recent years.
In the three years to July 2018, Hobart dwelling values have grown by 32.4 per cent. The sudden increase in demand for housing in Hobart, paired with little actually being built, has contributed to these figures. However, in a sign the market may be weakening, July 2018 quarterly data showed that values increased only by 1.1 per cent – the “slowest rate of quarterly growth since July 2016”.
Quarterly and annual changes in dwelling values, Hobart
Source: CoreLogic
A sign of weakness in the Hobart market was also demonstrated in its annual rate of growth. Although the capital city’s dwelling values grew 11.5 per cent higher over the past 12 months (making Hobart the region with the highest value growth in Australia), this rate was the slowest Hobart had seen since February 2017.
Value premium for other capital cities relative to Hobart
While Sydney and Melbourne are still more expensive than Hobart, the value gap between all other capital cities and Hobart has been narrowing in recent years.
| Capital city | Median value gap compared to Hobart | Time since value gap was as narrow |
| Adelaide | 1% Higher | 2009 |
| Darwin | 1% Higher | Mid-2005 |
| Perth | 5% Higher | Mid-2004 |
| Brisbane | 13% Higher | 1988 |
| Canberra | 35% Higher | 1998 |
Change in dwelling values from peak by deciles, to July 2018
Source: CoreLogic
“Looking at CoreLogic’s Hedonic Index across valuation deciles, it becomes even clearer that some weakness is beginning to emerge in the Hobart market,” explained Mr Kusher.
“The above chart breaks Hobart properties into 10 even segments based on their value with the 1st decile reflecting the most affordable ten percent of properties and 10th decile representing the most expensive properties ten percent of properties.
“Any weakness in the Hobart market is apparent across the more expensive properties with the top 10% 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,” said Mr Kusher.
What can we expect for the Hobart Housing Market?
A housing slowdown is “imminent” according to Mr Kusher, who stated that the “deterioration in housing affordability in Hobart over recent years has led to the loss of its value advantage relative to other capital cities”.
“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 is rising 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,” said Mr Kusher.
