Hobart house prices: Interstate buyers fuel boom, prices skyrocket by 32 per cent

In just under two years, Hobart has gone from the cheapest Australian capital city in which to buy a house to one of its most expensive, leapfrogging Darwin, Perth and Adelaide, and remaining only $4200 behind Brisbane’s median price.

In the last quarter alone, house prices have jumped 10.5 per cent, while in the past year alone there has been an unprecedented rise of 31.9 per cent, on the latest Domain figures.

“It’s amazing,” said Adrian Kelly, the Tasmania-based national president of the ReaI Estate Institute of Australia. “We’ve had a lot of people buying here from Sydney and Melbourne but when our border opens again – in theory on December 15 – we’d expect even more growth as they come here physically to look and buy property.

“Up until now, there’s been so much demand, both locally and from interstate, and very low supply. But by then, hopefully, more price growth could be countered a little by people who’ve been holding off putting properties on the market, feeling more relaxed about putting up their properties for sale.”

The extraordinary rate of price growth of houses in Hobart was a standout of the new national Domain House Price Report for the 2021 September quarter. It shows the Hobart house price has now hit a new record of $698,601, only a fraction short of a once-unthinkable $700,000, having risen $67,000 in the space of just three months from July.

Hobart now has its own million-dollar club – which only a couple of years ago would have seemed unthinkable – with the inner-city suburb of Sandy Bay up 35 per cent over the past 12 months to a record-breaking median house price of $1.295 million. Other inner city suburbs like West Hobart, New Town and South Hobart are edging closer to the million-dollar mark.

“The annual increase has been the strongest in 17 years,” said Domain chief of research and economics Nicola Powell. “Hobart house prices have almost doubled in the past five years. That’s an extraordinary rate of price growth.

“All price points are rising by double-digits with entry-level prices recording the strongest rates of growth, while supply continues to remain tight, and buyers continuing to absorb new listings quicker than they are listed for sale.”

The demand in Hobart has mostly been driven by purchasers from Sydney and Melbourne buying property sight-unseen in search of a more relaxed post-pandemic lifestyle in a state that’s been barely hit by COVID-19. They’ve also been joined by people from Brisbane, Western Australia and expats planning to return to Australia.

The latest figures available from the Tasmanian Government’s Department of Treasury and Finance found there were 1143 people in the year to the March quarter 2021 who came to settle from interstate. That number is likely to increase sharply, however, when the Tasmanian border opens again to people from NSW and Victoria.

Over the same period, there was also a net overseas migration inflow of 87 people – again severely restricted by the international travel bans.

“We’ve had $4.7 billion worth of property transacted in Tasmania over the past nine months,” said independent Hobart-based economist Saul Eslake. “When you live here, you can see it happening, and those price rises are fabulous if you already own property, or are coming from Sydney and Melbourne where it still looks affordable.

“But it’s hard for many other Tasmanians. Both prices and rents have gone up so much, yet incomes here are still, on average, 13-15 per cent less than on the mainland.

“We’ve been hearing about a council general manager on the east coast living in a caravan! It’s incredible now to think that it’s now more expensive to buy a house here than in Perth, Darwin and Adelaide, and almost as much as in Brisbane.”

Professor Peter Phibbs, an urban planner from Sydney University, moved to Hobart to be with his Tasmanian partner, associate professor Daphne Habibis, last year. The pair live in Hobart’s exclusive Sandy Bay and he commutes between Hobart and Sydney for work.

“You see the For Sale signs going up and down all the time. Those people who have a house, or who bought a while ago, [are] sitting pretty and can’t believe their luck,” he said. “But obviously it’s a struggle for anyone trying to get into the market, or who were biding their time waiting to get in.

“The rise in house prices has now become a dilemma. It’s all part of the regional effect too, with Hobart being, for Melburnians, like going to Orange for people from Sydney.”

Units in Hobart have also hit a new record median price of $532,284 after an eye-watering 23.8 per cent rise over the past year, taking it to the third most expensive capital for apartments. Incredibly, that price is now higher than the medians in Perth, Darwin, Adelaide, Brisbane and Canberra – and is only $44,500 behind Melbourne’s $576,879.

With little land left to be developed around Hobart, there’s little hope of a major jump in the supply of new properties. Developers are now mostly looking to smaller developments, turning to infill areas like North Hobart, which had light industrial areas in the past, and converting old warehouses and unused factories into modest apartment buildings eight to 10 storeys high.

But for home owners in Sydney, Melbourne and Canberra, Hobart property prices still look like a good deal. With a median house price in Sydney of $1,499,126 and a median unit price of $802,475, a house or a unit in Hobart is still alluring. It’s the same in Melbourne, with a house price of $1,037,923, and in Canberra, with a $1,074,187 median.

“I think once people come and look at Hobart, they never return to where they’re from,” said Mr Kelly. “But at the moment, agents aren’t even putting prices on their properties for sale; it’s all ‘Offers over x’.

“So purchasers are making up their own minds about what to offer … and they’re continuing to push up prices even further.”