2019 will be the ‘reckoning of Tasmania’, says property expert
As the markets of Sydney and Melbourne started to soften after years of unprecedented property boom, Hobart became the next ‘hotspot’ flocked by investors. Will good fortune follow the Tasmanian capital in 2019?
According to Suburbanite’s Anna Porter, though Hobart allows investors to enter the market for as low as $250,000 to $300,000 with an average rental return of $350 a week, its property market remains volatile as it is largely driven by investors instead of economic fundamentals.
“On paper, it looks too good to be true. But having worked with big portfolios, huge investors and even distressed assets, what I saw was, when a market is driven by investors, it's incredibly volatile.”
“Right now, Tasmania's had a good year, so much so that most newer guru in the market think that it’s a really good opportunity. But, investors drive the market. It's not being supported by job growth, or population growth, or employment drivers. Locals are not paying higher prices because they’re earning more money.”
For every five people that move to Tasmania in the next three years, there'll only be one job created—which is not enough to sustain a good balance between the supply and demand for dwellings, the property expert said.
“The fundamentals are wrong. Investors are pushing the prices up and the locals can't sustain that. Soon, a bit of vacancy will kick in because there's not a big enough population there, then rents get discounted, interest rates go up, the economy tightens, [and then] you start getting distressed asset sales. Then, the whole market collapses.”
Due to the volatility of the market, Ms Porter advised her clients to stay away from the Tasmanian capital until it is supported by economic fundamentals.
Without the right foundation, the Tasmanian property market could very well face its reckoning this year, she said.
“There’s a lot of experts putting all their eggs in the Hobart basket but we're saying stay well away from it because of that volatility. 2019 will be the year of reckoning for Tasmania. It's had a good year, but that will be wiped out towards the back end of 2019 into 2020 through that boom-and-bust effect,” she highlighted.
Investment strategy
Those who are chasing yield may find great returns in Tasmania as its property market continues to be one of the hottest in Australia. But for Ms Porter, a good portfolio comprises of a balance between yield and capital growth.
While yield properties can support capital growth-properties during market downtime, growth properties ensure the longevity of the portfolio.
The property expert strongly encouraged investors to avoid limiting themselves to studying the current movements of the market. Instead, understand the underlying factors that serve as the foundations of the market, particularly its economy because, while nobody can predict the future of the property market, certainly, they could determine the possibility of a volatile investment environment.
“Look at Adelaide as a contrast to Tasmania. It has long-term sustainable projects into the billions, which creates thousands of jobs. When people move to an area that is supported by both home buyers, local buyers and investors, you've got yourself a really good, sustainable market and a really good growth story for the next three to five years,” Ms Porter said.
At the end of the day, the sustainability of investment opportunities could mean greater results than the quick benefits of being in a rising market.
Tune in to Anna Porter's episode on The Smart Property Investment Show to know more about the areas to buy and avoid in 2019.
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