The Aussie city we’ve ruined
ONCE upon a time, Hobart was one of the country's most affordable cities - but times are changing. Today, the Tassie capital is booming after experiencing a staggering 12.7 per cent increase in home prices over the 12 months to April 2018, according to CoreLogic data.
During that same period, the number of homes on the market also dropped by 30.7 per cent as owners clung to their properties in the hope the meteoric rise in prices would continue.
The news is also grim for renters, with rents surging by 12.2 per cent in the past year, making it even harder for first home buyers to save a deposit and enter the market.
And meanwhile, Tasmania's tourism industry has exploded, with the deluge of visitors prompting Hobart Lord Mayor Ron Christie to sensationally claim that mass tourism was "going to kill our city" last month.
In other words, Hobart is suddenly hot property - and our second smallest capital is struggling to cope with its sudden popularity.
PRDnationwide's national research manager Dr Diaswati Mardiasmo said Tasmania had been almost completely caught off guard by rising property prices.
Dr Mardiasmo, who has just launched the Australia Economic Property Report 2018, said Hobart was now one of the more unaffordable places in the country.
"In Sydney and Melbourne there has been explosive price growth since 2014, and then the same thing happened across NSW and Victoria, so a lot of people started looking for alternative options when it came to investments as well as people buying their first home who were looking for something they could actually buy without being priced out of," she told news.com.au.
"At the time all that was happening, other states outside NSW and Victoria, including Queensland, South Australia and Tasmania, were more affordable so many people were opting to invest in those areas.
"But the thing is, Queensland and South Australia expected this to happen and so they began planning for increased interest to absorb that interstate investment demand.
"Tasmania, however, hasn't really planned that well … and so affordability decreased there the most out of all the states."
Dr Mardiasmo said while Tasmanian home prices still offered "bang for buck" compared with many other parts of the country, the rapid price rise had seen first home buyers priced out of the market by mainland investors, and because there had been a critical lack of development.
She said there had also been a spike in Baby Boomers who had sold their lucrative properties in Sydney and Melbourne to retire in the Apple Isle.
Meanwhile, investor, affordable housing expert and founder of the Australian Housing Initiative Ian Ugarte said renters were feeling the squeeze the most - and holiday-makers were at least partly to blame.
"It's the perfect storm for investors, but it's not good for residents," he said.
"Two years ago we started speaking with councils and the government because we saw there was going to be a problem with affordability and housing prices … but I didn't think it would get to the point it is at now.
"Right now there are families, couples and singles living in the showgrounds in Hobart, not because they can't afford rent, but because they can't find anywhere to rent. It's a horrible state of affairs."
Mr Ugarte said the Tasmanian rental market had always been tight, but that when private investors started leaving Sydney and Melbourne, they were drawn to Tasmania because of the state's low vacancy rates and supply and demand issues, which forced rental prices in an upward direction.
"Some people's rent went from $250 to $400 per week literally overnight, and while most said no, they didn't realise they might not be able to afford another place," he said.
Another cause of the rent explosion was Airbnb.
"We've got 800 short stay availabilities on Airbnb in the Hobart area, which effectively removes long term rentals from the market," he said.
"They're investment properties that sat on the market long-term but are now short term rentals, which has had a big impact."
And another cause is a "market mismatch" between people looking for rentals versus the type of rental properties that are actually available.
Mr Ugarte said 68 per cent of Hobart homes were occupied by single or double households who only need one or two bedroom dwellings, but that many are forced to rent entire houses.
"80 per cent of stock are three, four or five bedroom houses. There are too many large homes and not enough smaller homes, which has created another supply and demand issue," he said.
Mr Ugarte is working with the government to fast track a process to convert some of those large houses into smaller, micro apartments more suitable for smaller households.
It's a solution which he said would ease pressure on the rental market by freeing up homes as well as helping renters save for their own deposits, as the cost of rent would be slashed.
He said there was an epidemic of single women in their 70s who were effectively homeless and forced to sleep in their cars as they can't afford to rent in Hobart.
He predicted that Launceston would be the next Tasmanian property hot spot.