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TAS Time to Hype Hobart Thread?

Discussion in 'Where to Buy' started by C-mac, 10th Jul, 2016.

  1. C-mac

    C-mac Well-Known Member

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    Hi folks,

    I noted there was an official Tasmania thread, and several other threads related to Hobart as well, but not an official Hobart thread.

    Hobart has been the surprise performer in the first 6 months of 2016. Arguably, and going by purely CG % numbers for the last 6 months, Hobart has been one of the best performing markets nationally; if not the best performer.

    How sustainable this is, and how much more it'll run, is of course uncertain. Historically speaking Tasmania (as a whole state) has been in the doldrums for about 10 years; with the last property boom being even longer than that ago (about 2003 if I'm not mistaken).

    Anyway, I don't have strong feelings/ideas one way or the other but wanted to stimulate discussion around future prospects for Hobart specifically (not the rest of Tas). I am leaning more towards Hobart being a sustained performer at least for the next 2-3 years.

    Here's how I'll make the case for this (call it 'Hyping' if you like, but I am just stating positive facts!):

    • Jobs and population numbers improve a lot. Take a look at the attached chart from August's API magazine. Jobs are popping into positive for once at a state level (I'd argue that Hobart is driving the bulk of this)
    • As per the above, check out what is happening 'within' Tasmania, migration-wise. We must remember that unlike mainland states (where anywhere from 50% to 80% of that state/territory's population is located in the state's capital city. I.e. highly urbanised states); Tasmania is an exception. Tasmania's 2015 population is listed as 517,000. In 2015 Hobart's population was 204,000 (only 39% of the state's population). I can only imagine as Hobart's economy warms up, we'll see this % trend upwards as rural job-seekers across the state move to Hobart to get jobs. I love this because...
    • ...Hobart has the geographical Sydney / Hong Kong / Singapore / San Francisco effect. Meaning, it is a city that is physically constrained for land. The river derwent splits the city. The CBD is on the left bank, and immediately left of that is not only Mount Wellington (which dominates, keeping the city size compact) but State Conservation areas in either direction north/south (these are as good as a 'national park' in status because it means they can't be touched for property development!). We all know what happens when populations grow (demand) in geographically constrained areas where new housing can't easily be built (supply)! This leads me to the subject of infill development...
    • ... If a city can't grow out much, it'll grow up, right? The last decent chunk of infill land in the city area is Macquarie Point. Check out what's happening as that progresses, here. If Hobart grows 'up versus out'; land values increase because re-zoning means houses get qualified for a higher-use. Investors could do well should this happen if they own decent size land plots. But guess what else I love about Hobart? It is Australia's second oldest city, meaning... heritage, heritage, and more heritage. This means that the developers have less houses they are 'allowed' to rip up. Heritage can be a great constrainer on supply as a result. If demand persists; values are likely to go up, no? I've also heard that Hobart City Council is developer-weary (conservative), though I don't have any first-hand confirmation of that. If so, again maybe another boon for those who hold well-located houses there?
    • Hobart Airport extension. I literally only just discovered this. You can read about the announcement and what it means/what it'll enable for, here, here, and here.
    • Hobart offers sustainable tourism growth. Extending the airport is a sign that Tas Gov wants those direct-flights from China for Tourism. The Chinese tourist dollar is huge in Tasmania. This is pure observation/speculation (I've blogged and vlogged about this a bit before), but Chinese mainland tourists are different to westerners! Whilst most westerners love to sit on warm Bali beaches with clubs, alcohol, adventure sports aplenty; Chinese tourists seem to favour nature, tranquility, quality local food, clean air etc. Just look at the thriving Blue Mountains, Gold Coast Hinterland, Daintree Forests etc. They are ALL Chinese Tourism hotspots. Tasmania's tourism potential for foreign tourists cannot be understated enough. This is probably why Hobart has a shortage of hotel rooms and is rapidly building a LOT more. Tourism (though seasonal in many locations) is a much more sustainable economic stimulator for a city or town, than mining, apartment-construction, or other 'short-term' project-based economies
    • And just on accomodations, check out this new 196 room hotel being built in Hobart. It'll actually become the CBD skyline's (if you can call it that!) tallest building; matching the height of Wrest Point Casino.
    • And by the way, I'm not suggesting that there's linkage with the airport extension and the announced Wrest Point Casino $70 Million Re-development... but one can't help but wonder... Australia's oldest casino stays largely untouched and daggy since its 1970s construction; then suddenly with the influx of Chinese national tourists, it only now, 40 years later, beings a massive upgrade and overhaul.... Hhmmm. Though personally casinos sicken me (and I couldn't think of anywhere more repulsive to spend my leisure hours), this can only be a win for the Hobart economy and a drawcard for further tourism (both national and international alike)
    • Hobart hospital redevelopment (read here). Sure, plenty of retiring boomers will move to Tasmania and require specialist health care, so I've no doubt that hospitals will require upgrades and expansion. But this one is pretty mammoth for a city of about 206,000 in 2016. It is openly being promoted as a hospital that will meet demand of the coming generations, so, a long-term view of a growing Hobart population over time.
    • This one's a curve-ball and would be a very 'indirect' benefit (at best!), and I say this lightly as one doesn't tend to think of 'benefits' when I mention this name... but... You can't deny that Jacqui Lambie securing a seat in the recent election (so long as she doesn't lose it should there be a re-election!), can only help but benefit Tasmania's economy. Whilst her views/policies on certain subjects are highly divisive (the ones that aren't to do with economics and/or housing); she is clearly passionate about strengthening her home state's economy. Having a voice for Tasmania at a national political level will surely help give Tasmania greater political (and possibly economic) exposure now, and Hobart could be a beneficiary of this
    Of course, feel free to make the case against Hobart but based on the above I think this market could be a great entry point for short-term modest capital growth, for investors who don't have the $$$ to 'play' in the bigger, bolder CG-growth markets.

    Whilst there are negative arguments against Tasmania (I.e. the whole 'your money can work harder elsewhere, right now'; higher property management rates; tenant quality issues; development and topographical challenges etc.), for the right investor at that lower $$$ entry-point, I can't think of many places where you'd do better in the short-term!

    :)
     
    Last edited: 10th Jul, 2016
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  2. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Ohhh... go C-Mac! Thanks for sharing your thoughts. What got my attention was the constrained land....

    I think Hobart is a very alternative investment to the mainland, I am not entirely sure how the economy in Tasmania will go in 5, 10, 20 years down the track. But you might well be onto something...
     
  3. C-mac

    C-mac Well-Known Member

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    Oh and how could I forget Art Tower.

    Doubt it'll ever get built but Detached did finally submit a DA to Hobart City Council for it! Whilst I question the structural integrity and practicality issues, it would certainly be a landmark (art-mark?) for Hobart and further stimulate tourism interest. It would connect nicely with the vibe that MONA began; helping to re-establish Hobart as an Arts and Culture destination. Pretty cool.
     
  4. Whiteman

    Whiteman Well-Known Member

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    Thats a great summary of the positives for Hobart, thanks C-mac ... I bought down in Sandy Bay in May and settle in August and I was aware of some of these points but not all so I was feeling good before, but better now ... Thanks
     
  5. legallyblonde

    legallyblonde Well-Known Member

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    10% PM fees, rates, land tax, insurance, maintenance and water require a very decent yield when dealing with lower purchase prices.
     
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  6. C-mac

    C-mac Well-Known Member

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    @legallyblonde do you currently hold any stock in Hobart or in Tasmania? If so, how has your experience been, in terms of any capital growth you've had? Also, how is tenant quality?

    The higher PM and (comparative) stamps costs + lower land value threshold (for land tax) are a bit of a turn-off. I've also been advised that Tas suffers the 'island effect' of repairs/maintenance/services all costing more than the mainland too.
     
  7. WattleIdo

    WattleIdo renovating Premium Member

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    Excellent points C-mac. I know a few great people who now live in that neck of the woods and have often thought of migrating myself. There is a great alternative and mainstream lifestyle there now. It's definitely on my radar. Thanks for the great thread.
     
  8. legallyblonde

    legallyblonde Well-Known Member

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    I hold two IP's.. Have held one for two months and the other less than two years. Too soon to tell but I am happy with the purchases.
     
  9. C-mac

    C-mac Well-Known Member

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    @legallyblonde this is great, I think I may have PM'd you a while back but I'll send you a message with a couple of questions I have :)
     
  10. samiam

    samiam Well-Known Member

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    Thanks for great post @C-mac
    'hype' word is apparently banned here ;)
     
  11. HUGH72

    HUGH72 Well-Known Member

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    Nice post @C-mac , hype away. I don't know anything about this market but are keen to learn more.
     
  12. MTR

    MTR Well-Known Member Premium Member

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    I am guessing you live in Tassie? If so what are you seeing? when you say too early, do you mean no growth yet?
     
  13. MTR

    MTR Well-Known Member Premium Member

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    Definately, too many spruikers, :p running a muck....then we only get BS instead of facts and that makes for poor threads/posts, rather than quality, not referring to c-Mac.

    I am interested in hearing from thise on the ground, are we seeing a rising market, stats are not reliable that is why I ask
     
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  14. Bozley

    Bozley Active Member

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    I live in Hobart and have 1 IP in North Hobart and 2 in West Hobart. I use the West Hobart places as airbnb accommodation and have over 80% occupancy rate. I have another IP in Lenah Valley about 15 minutes drive to the city. Its an exciting time here in Hobart. The atmosphere is very positive generally. There is lots of construction work happening, retail spending is growing, tourism is booming (on the back of a vibrant arts and foodie scene and a clean green image) and the economy is finally turning around.

    As for house prices there is very little on the market in the inner city and this is creating competition and some house price movement. This doesn't seem to have spread yet to areas a bit further out. If I was buying again I would probably look in the Moonah, West Moonah or Lutana area (disclaimer I live in Lutana)
     
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  15. Dylan33

    Dylan33 Well-Known Member

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    I'm here right now looking for a PI. Freezing rain ATM ! Not much to look at in the dead of winter though. We plan on moving down next year. Love the life down here.
     
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  16. Bozley

    Bozley Active Member

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    Hi Dylan - good choice! I love it here and have been watching the Kettering Incident which showcases Tasmania's beauty in a spectacular way! Snow is forecast for tomorrow to low levels so rug up
     
  17. larrylarry

    larrylarry Well-Known Member

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    Go up to Mt Wellington for snow. Was there in August last year...absolute beauty!
     
  18. legallyblonde

    legallyblonde Well-Known Member

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    Hey MTR, Nothing to exciting going on. Basically ignoring the portfolio for now, since I have no borrowing power and both are let out without issues.
     
  19. albanga

    albanga Well-Known Member

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    Steve McKnight is a mentor of mine and early last year he talked favorably of Hobart having it ranked as the number 1 city if he HAD to invest in Australia. He used a very basic fundamental that it was the only capital city behaving normally in which is as unemployment decreases, house prices increase. This is in contrary to every other capital which has seen prices rise along with unemployment.

    This year he changed his tune slightly and favored Canberra but what I find interesting is he has now sold all his American real estate (with the exception of his funds property) and for the first time in a while invested back into Australian commercial in Launceston. Not quite Hobart but Tassie has him interested.

    If one of the great property investor minds has talked it and is now walking it I feel it's worth paying close attention.
     
  20. albanga

    albanga Well-Known Member

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    And for my 2 cents on the economy (if Tassie government is listening) would be to invest heavily into making Tassie the biggest data centre state in the Asian pacific.

    Cold and remote, probably the 2 best traits for data centers.
     
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