TAS Someone please explain Hobart's property market

Hey property chat,

I want to get out of victorias rental game and I've been looking at Tasmania, Hobart mainly.

So far the market in Tasmania seems to good to be true, as in low buy / high rental yield? With my research, houses are at a 5.5% return on a house around $350k-$400k and a 5.8% on units at around $300k-$320k

Is this to good to be true or should I sell out of victorias market and buy into Tasmania?

 

Thats a low yield for tas though. Brisbane would give you yields like that.

 

Brisbane's at highest is 4.5 for houses on average, but main goal here is to get out of victoria

 

Are you looking as an investment? For growth or cf, as a ppor etc?

 

Hobart is nearing its peak. It tends to have massive increases for several years then does nothing for a decade or more. I'd say it's about the worst time in Hobarts' cycle to invest there right now.

 

Why

The transaction costs will be huge

 

different cities have different yield cycles. Sydney and melbourne tend to have lower yield cycles. 5ish for hobart is a low yield (meaning prices are high) but 5ish in sydney would be a high yield (meaning prices are low). Brisbane is in between.

 

I'm actually looking at the rent as another source of income, but maybe as an investment with good capital growth

 

Thanks Peter, where would you suggest to invest

 

I have a couple properties, one I'm only getting $260pw and I could sell for around $350k and invest else where

 

Admittedly I know very little about the Hobart, but the consensus seems to be that its market is just peaking. I would say yes, too good to be true, you're probably a couple of years too late.

If you want good yields but don't care about capital gains, why not try the battered mining markets e.g. Pilbara WA? Easy to get 8%+ yields at present.

 

Hey mate,
Hobart is at the peak of its prices right now, but the market is slowing.
Still getting the same high prices, but houses are on the market longer.
Rentals are in high demand here, but I feel that is slowing also - I haven't researched that, but can feel it just from living here and talking to mates in real-estate.

I wouldn't be buying in Tassie now - maybe give it a year and it would be better.
Definitely worth having a Hobart property on your portfolio, but I wouldn't be filling mine with it!

 

Can you increase the rent soon? This might be less costly than the fees associated with selling it and then buying another one.

 

Buying at the peak is never smartest move & Hobart is heading fast into that territory (if not already) ..

 

Cheers for the advice, I might hold off for a year and see how the demand for rent is along with seeing if prices drop... No need to rush in the property market

 

Unfortunately when I got the property it had an elderly lady living in it for much of her senior years and my morals have gotten the better of me (I know a landlord with morals) and I couldn't bring myself to kick her out as she wouldn't be able to afford the increase in rent.

 

If you sell it, what do you think the next owner will do. If she has vacated already, then you are free to give it a quick spruce up and increase the rent.

 

You're are right, but I would put conditions or a clause in the sale of the house that she is to be looked after. No need to make a profit at the expense of our elderly. I know it sounds daft

 

Can you put a condition like that in a contract? What exactly does "look after" mean? Can you enforce upon the next landlord that they cannot increase rent? I'm guessing no.

Perhaps you could get the tenant to sign a long-term lease before sale? 5+ years? Of course, that probably reduces the value of the property.

 

Concur with others here re: the suggestion that it is tpo late to enter Hobart's market in pursuit of capital-gain (this cycle, anyway).

Also, re: yields... be VERY mindful that all those numbers being bandied about on this thread are GROSS yeilds only. Much of Tas doesn't look so great as NET yields due in most part to two very simple reasons:

1) you get WALLOPED by high property mgmt rates in that state (some of the highest in the nation). Im talking: 9.9% incl gst, 11% incl gst and even higher in some parts! This EATS away profits and nets out a lower net-yield thereafter

2) Annualised land tax thresholds are one to watch in this state. Ladt I checked is that TAS has an unimproved-land-value land tax system that COMMENCES at just $25K land value. That amazing growth in Hobart metro? That will have plumped up land values and kicked many owners into that first, or even second, land tax threshold bracket. Whilst some may respond to my post here with 'yes, but that first bracket is a proportionally low amount of land tax', remember that land tax is an ANNUALISED cost (not a 'one time only lump sum' as other states' stamp duties are), which will rise over your holding years in line with running-inflation (or, sometimes even higher than headline inflation..)

Lesson: do your NET yield calcs after deducting the two annual costs about, then see what your net yields look like. Then, decide if you are happy with that over the next 10 years because.. if tas repeats another 10-year lull following the great boom it has just had, the small yeild each year is the only income you'll get for some time.

If yeild is your play, I'd consider much higher-yielding areas that also offer great fundamentals and a proportional risk-profile. There are markets that offer this; its just there arent many such markets in this country currently