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Despite its reputation for being Australia’s best performing capital city market in terms of value growth, the evidence suggests Hobart’s housing market is set to weaken, according to CoreLogic research analyst Cameron Kusher.
Data from the firm shows that Hobart remains the most affordable capital city in the country, with a median dwelling value of $435,833. But in recent analysis, Kusher found that the value gap compared to the pricier cities of Melbourne and Sydney has reached its narrowest point since 2013.
“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,” said Kusher.
He also pointed out that Hobart dwelling values have increased by 32.4% over the three years to July 2018 – significantly higher than Melbourne’s comparable 18.7% figure. Citing data from Corelogic’s Hedonic Index, Kusher said Hobart’s weakness was apparent in its more expensive properties, as the top 10% of them having already recorded a fall of -1.5% from their peak.
Kusher said a significant driver of the growth in dwelling values over recent years 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. While the 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,” he added.
“Perhaps this reflects that as market conditions are starting to slow a little an increasing number of buyers are now looking to sell.”
Very little increase in new housing has helped drive up dwelling values over the past few years, but Kusher pointed out that dwelling approvals there are now starting to trend much higher, indicating an increase in supply.
“[S]tock 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 Kusher.
