TAS Hobart is absolutely flying

I have different expectations . Based on Sydney having a last cycle of around 14 years 2003 - 2017 . Roughly doubled in that time frame . The majority of that came in the last years .

Last cycle Hobart peaked around 5-6 years after Sydney .

As per your figures , Claremont came close to doubling in the last cycle . I'd consider that time frame one cycle , but that semantics

I'd expect expect similar this time around . Out side markets such as mining town which I didn't touch , most of the markets I've ever looked at come close to double each cycle .

Exactly how soon that happens , is guess work , up given how strongly Hobart is moving at the moment it might be sooner than the five or so years I expect .

Cliff

 

So you're saying Claremont doubled in one cycle (7 years) that's a 10% annual return for 7 years. I'm not sure where that data is?

From my experiences in order to get an annual return of 10% per annum you need to buy a unique property where you can add value, in a blue chip suburb or be an expert at timing the market before some speculative hot spot booms, good luck with that.

 

Claremont Investment Property Market Data

According to this Claremont has achieved a growth of 1.5% annual return for past 10 years. The data I sourced was incorrect on saying that it had achieved 4-5%. So 1.5% annual return is quite risky for a 6% yield.

But the future may offer better returns and if the timing is perfect who knows.

 

Read what I said , not what you think I said .

Cliff

 

Hi John
the REIT stats show that house price increases in Claremont went from $79000 in 2001 to $24000 in 2008. This was the period of our last boom. Since then they have dipped slightly or gone sideways and should be about to experience a second boom as these conditions ripple out from the inner suburbs.
The REIT stats also show that the previous boom in Hobart generally was quite sustained lasting about 8 years

 

Thanks for posting that Pam

John , the figures that Pam posted along with yours show exactly the reason why I looked in hobart and when I couldn't find something in the price range I was looking ( under around 280 ) in our preferred suburbs of moonah or glenorchy ( we were looking every where from moonah out to Claremont , excluding chigwell ) we were happy to buy in Claremont .

Having bought in Hobart in 2001 ( still hold that property due to initial 10 % return and current return on purchase price of close to 25 % ) I was aware of the price growth in the last cycle . The lack of growth in the last ten years is one of the first thing I look for when I'm choosing areas so , for me , the lack of growth in the last ten years you quote ( which I was aware of ) is part of my decision making process

Why didn't I dig out those figures that Pam quotes ?

First , I'm not always going to respond to everything and Once people start using emotive language like " speculative hot spot booms " I start tuning out . . It's not a speculative hot spot boom . It's a predictable recurring feature of the Australian property cycle .

As Pam did respond and she is someone who lives there and seems to know the Hobart market as well as anyone on the forum I thought I should respond

Cliff

 

@See Change I also viewed the previous decade of latency as a positive. I did a fair bit of analysis of the previous cycle and bought in May last year in Rosetta, near Glenorchy.

This house paid its way from the first month and Im happy with growth so far. Market indicators still show plenty of growth left in this cycle. Real estate agents also calling me trying to get me to sell because they cant list them fast enough to meet demand.

 

Nice timing .

We looked at Rosetta as well . You would have seen good growth since then . SWMBO had a look at one in Rosetta . Nice house but on a busier road . Agent was doing a " quiet listing " to gauge interest ( and save owners advertising ) but It was obvious it was going to go above the agents quoted price so we didn't bother with it .

Cliff

 

Yes I cant deal with agents in a rising market...hard work...urrgh...

 

Yeah . It's a pain and we rarely do it , but we had cash in our super for one more . We started of with a list of over 20 properties and by the time we got to buy there were only two real options left . Every thing else was gone .

Normally when we go into buying mode , by the time we're ready to make offers , most , if not all of our potential list are still available .

The back up plan is the medium term 5-6 year time frame , however the hope is that we'll have significant growth in the next 2-3 years .
If that happens and some of the other places I'm watching haven't boomed , we'll sell and roll the funds over and borrow to buy 3 and watch those close to double in the following 5-6 years.

Cliff

 

That's an important lesson for me, @See Change . Next time I see an opportunity like hobart, I'll try to get 3 houses while its still easy, not one.

Cycles are predictable and there are ways to mitigate risk. Going hard at it will get me out of the 'mum and dad' level of investing and into the lifestyle I am after (early retirement).

 

That is an annual compounding growth of 17%, and if it was repeated would put the median price of homes in Claremont at nearly $1million dollars in 8 years. Claremont has a median household income of $870 and this isn't expected to increase by more more than inflation. So there is no way households with a income of around $1,000 per week will be able to afford a median house price of $1million dollars. Maybe a house price of around $500k they could afford, but I think more likely $400k. $500k at 5% is $620 per week repayments. That is 60% of a $1,000 income. So that is really pushing it.

The median age of people in Claremont (Tas.) (State Suburbs) is 38 years. Children aged 0 - 14 years made up 19.5% of the population and people aged 65 years and over made up 18.4% of the population. That's 40% who will not be earning an income or getting and increase in income on the next 5-8 years. The expected population growth for Claremont is negative. Traffic congestion from Claremont to Hobart is unbearable as it is and with the majority of all new jobs expected to become available within the City, people are going to want to move closer to the city. From 2001 to 2008 there were more employment opportunities in the blue collar outer ring industrial suburbs and congestion was not as a big of a concern. Claremont offered a 1/4 acre block and a 4/2 home, which was attractive. This has been changing over the past 5 years. Trends are forecasting that People are looking to move closer to the city and downsize. Claremonts major employer Cadburys is reliant on State funding and is laying of more people than they are putting on and making more workers part-time and casual.

For me these are concerning trends and factors to consider when looking at future growth potential in a suburb and is why I personally would focus on inner ring suburbs of a city.

Personally I think Pnce the Hobart/Tas rising cycle has run its course suburbs such as Claremont will see an increase of around 5% - 6% per annum. Putting the median price at around $380 a $420k in 8 years time. After inflation, holding costs, entry and exit costs makes the return on investment average at best.

This is my personal opinion not an attack on anyone's investment choices. Only time will tell.

John

 

Hi John

I don't think that anyone is predicting 17% per annum for the next 8 years . The point of show that level of growth in the past was to point at that Claremont is capable of having periods of significant growth .

My observation is that the is almost a standard bottom price for entry level houses in many places of Australia . There is obviously some variation .

Take Mt Druitt . Current cycle entry levels ex houso's places are around 500 k . Previous cycle they peaked around 240 and cycle before 120 .

Logan / goodna peaked at around 280-300 in the last cycle , but that occurs around six years after Mt Druitt so if you allow for inflation over that six year period on 240 it gets up to around 280 , give or take a bit .

Claremont 240 last cycle , maybe around 480 - 500 this cycle .

That's the sort of price I'd expect , and probably in around 5-6 years time .

The only fly in the ointment ( and it's a positive fly ) is that this time Hobart seems to be moving into boom time before Brisbane . Last time Brisbane boomed prior to Hobart . Our first purchases were in Logan as the middle and inner rings had gone up significantly ) , followed by a block of units in New Town and my recollection is that Logan was moving up strongly when we bought in New Town ( Hobart ) .

When Hobart moved last time , there was very little positive economically about Hobart or Tasmania in general . Now tassie's on the tourist map , Mona / Dark **** are regulars on Sydney TV and I've personally I've heard a lot of positive comments about Tasmania . Friends recently went on a cruise to Tasmania ( seriously I asked , they have cruises to tassie now ...) . I have met multiple people who want to retire there . Cashed up Sydneyites ...with not enough in super .

So maybe , just maybe , we'll see a price around 450 - 500 in places like Glenorchy and Claremont sooner than I expect .

Cliff

 

Agree with what you are saying. And Tasmania is a beautiful location and is getting a lot of tourism hype which is great. And it's great to hear that people in Sydney are looking at migrating here. All positive.

Just out of general curiosity what is your long term exit strategy and goal for investing in property. You sound like you are an experienced investor and you invest on some solid principles. I am always interested to hear how what people's exit strategies are and what motivates them to invest in property and if hey have done a long term breakdown on the figures. Would be great to see you're breakdown of figures, but understand if you don't want to share on a public forum.

Cheers

John

 

I hear and see people saying they invest in property so they can achieve early retirement or financial independence so they don't have to work etc. I'm not sure what the point of that is personally as what would someone do when they are financially independent?

But just curious what is the figure you'd need to become financially independent and retire early. Eg. Annual passive income derived from your investments and if you have sat down and fully done the sums and how to get to the desired outcome etc.

For example if you needed $50k per annum income you would need about $1.5million unencumbered debt yielding 4% after costs and taxes.

I ask for learning purposes as lots of people I speak to don't have a plan in place to get there.

Cheers

 

Ha ha good one @John Ferguson whats the point of early retirement, how would I fill the hours. Crack up.

Great start with your numbers. Go for it...or not, if you like working so much.

 

One other variable I forgot to mention is that from 2001-2008 lenders restraints were very lose. Investors were burrowing up to 100% of the purchase price plus costs in some instances. I believe this prolonged Hobarts growth cycle. Which meant investors were buying multiple properties in higher yielding suburbs in shorter time frames (Nathan Birch). APRA has ensured this won't happen again, thank god! Some common sense prevails. So I believe this growth cycle will be a lot shorter than the 2001 cycle.

John

 

Could you please point us in the direction of the reading?

 

18 months ago ...

Google is your friend

Cliff

 

What were the key things you were trying to find out/research?
- economy?
- unemployment?
- government investment?
- non gov investment?
- construction (eg apartment construction like eastern states, but unlikely in tassy I guess)

Anything I've missed?