Hobart's house prices grow 17.3 per cent over the year to December: Domain Group

Hobart has been declared the unlikely star of Australia’s 2017 property market, charting a stellar 17.3 per cent growth rate in house prices, putting the usual mainland glitterati into the shade.

Even Melbourne, the next strongest performer for the year to the end of December 2017, could manage only 11.3 per cent growth, while both southern capitals roundly thrashed Sydney’s weak growth of just four per cent, the Domain Group’s latest house price report has revealed.

“But down here, we’re not surprised at all that we’re doing so well,” says Hobart senior property consultant Hans Waldhoff, of Elders Brown & Banks. “We’re the sleeping giant of the industry.

“Australians are visiting Hobart on holiday and realising what a wonderful place this is to live in, and what a marvellous city to invest in with prices only a fraction of what they pay elsewhere. As a result, they’re buying up big time and with so little product left for sale on the market, that strong price growth will continue well into the future.”

Domain Group data scientist Dr Nicola Powell agrees. The strong inter-state migration to Hobart for both lifestyle reasons and the affordability of homes is driving up prices steadily to today’s record Hobart median house price of $443,521, she believes. And with the latest December 2017 quarter alone showing a price surge of 10 per cent, there’s no relief in sight.

“We’re now starting to see a real undersupply of houses further fuel price growth,” Dr Powell says. “We’re starting to see a supply response in terms of a rise in building approvals and construction but that will still take some time to ease the high level of demand.

“With the Tasmanian economy robust and population growth still strong, we might not see price growth for Hobart easing until the end of the year.”

Meanwhile, Melbourne has also been faring strongly on the back of rising population and jobs, with 21 quarters of consecutive price growth – something not even Sydney has seen in the past. That’s led to a median house price exceeding $900,000 for the first time, at $903,859. Unit prices also rose eight per cent to a median of $506,079 on the Domain Group figures.

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“Sydney led the charge on the way up and then the market became a lot more speculative than other cities, with a greater involvement of investors,” says AMP Capital chief economist Dr Shane Oliver.

“So it was much more vulnerable than Melbourne when APRA tightened the rules around investors. In addition, Melbourne prices only rose 50 per cent over the past five years, where Sydney rose 80 per cent.”    

Canberra house prices have also moved forward 8.4 per cent over the year, reaching a record median of $753,516. That’s been a result of a recovery from Government cuts a few years ago, and seeing people, often from Sydney, move back to the nation’s capital.  

“I think Canberra benefited from Sydney’s gains,” says Dr Oliver. Dr Powell believes people are certainly comparing what they can buy in both cities for $1 million. “And in Canberra, that can buy you the whole Australian dream of a quarter-acre block and a four-bedroom house … quite different to what you can buy in Sydney for that.”

In contrast, Sydney’s median price has slipped back from a June 2017 median high of $1,198,624 to a new median of $1,179,519, with the last quarter showing only a half-percentage point rise. Units over the year rose only 1.7 per cent, slipping 0.4 per cent in the last quarter, to a median of $736,879.

“Sydney is in a transitioning mode with prices moderating,” says Dr Powell. “That’s been a result of APRA and fewer investors and less demand, and a rise in first home buyers which is only affecting entry level prices.”

Brisbane could also only manage a 0.4 per cent house price rise for the year to a median of $548,918, while its units slid down minus-4.5 per cent to $385,955, largely as a result of an over-supply.

But the resources slump turned Darwin into the country’s worst performer with a 7.4 per cent drop in its median house price to $565,696 and a 14 per cent plunge in its unit price to $395,279. It also hit Perth, with a house median fall of 2.5 per cent to $557,567, and its units 1.7 per cent to $369,402. 

Hobart’s medians are still appreciably less, but coming off a much lower base. “We’re just seeing a lot of people who rent in Sydney and Melbourne coming down here to buy a house so they’ll have an asset they can afford,” says Joe Kowaluk of Ray White Hobart.

“And we’re also seeing first-home buyers coming here to live, and some downsizers. We might see Hobart’s price growth slow a little but we certainly won’t see it drop anytime soon.”