Tasmania’s real estate market moves from manic to normal

In the Tasmanian real estate market, the fear of missing out – FOMO – has disappeared. Here’s why this means good news for buyers >>

In the Tasmanian real estate market, the fear of missing out – FOMO – has disappeared.

Buyers know they can – and are prepared to – wait until they find the right property for them.

In many ways, the Tasmanian market is now more balanced, not favouring either the buyer or the seller.

Perhaps the best way to describe the current market is that it has moved from manic to normal.

This contrasts greatly to a year or more ago when Tasmanian real estate, across all levels, was selling at a previously unseen rate.

In 2023, it is much more usual to see properties on the market for 30 days and even more, as compared to homes being snapped up within literally days of being listed.

The causes for this softening market across Tasmania are the same as for the national market – rising interest rates and the overall cost of living have affected all Australians.

18 Thelma Drive West Hobart is currently for sale via expressions of interest. Photo: Peterswald

Buyers, because of the ongoing pressures, are more likely to make their offers subject to both finance and/or the sale of their existing home.

They are also looking at longer settlements and investigating multiple properties and are generally more cautious.

The rental market has also changed. For properties in the mid to high range of rental prices, they remain available, but at the lower end, there is a tremendous shortage of homes – again, mirrored across the nation.

There is no doubt that the Airbnb sector has had an impact on rental property availability statewide.

The obvious solution is to build more houses to overcome the lack of stock on the market.

But building costs have increased substantially and finding qualified tradespeople has become more and more difficult.

Tasmania’s commercial real estate market continues to be relatively buoyant with a good level of activity and transactions in Q1 2023.

While purchasers are a little more cautious than they were this time last year, there remains good demand for quality commercial property investments and owner occupier opportunities.

The market has become more rational, with purchasers looking more closing at a property’s fundamentals such as lease term, quality of the tenant and location when determining the level of return they expect to receive versus the risk.

Knight Frank agent, Mathew Chugg.

History has shown that Hobart’s property market has been very resilient, as recently evidenced during the Covid-19 pandemic and is seen by many investors as a safe haven, while receiving slightly higher returns than the major capital city markets due to our regional nature.

Property has always been seen as a good long-term investment and a good hedge against rising inflation particularly where leases are subject to annual increases to the Consumer Price Index.

While Hobart’s commercial property market has experienced record price and rental growth in the past five or so years, and increasing demand from tenants, there has been limited construction activity with supply not keeping up with demand, with record low vacancy rates across the retail, industrial and office sectors.

This is evidenced by the recent release of the Property Council of Australia Office Market Report 2023 which recorded Hobart’s market as having a vacancy rate of a mere 2.5 per cent, significantly stronger than the national average of 12.5 per cent and the strongest capital city in the country.

This lack of supply is in part as a result of the increasing cost of construction, with rental levels not providing developers with an appropriate level of return to justify development.

As a result of a lack of availability of options in the market for tenants/businesses this is having a negative impact on economic growth as we are seeing businesses turn their attention to other interstate markets to expand in as there is no accommodation solution for their business.

Mathew Chugg is the department manager of residential sales at Tasmanian real estate company Knight Frank and Richard Steedman is a partner in commercial sales and leasing at Knight Frank.

Originally published as Tasmania’s real estate market moves from manic to normal