Hobart is the most profitable city in Australia to buy real estate

by Mike Wood25 Mar 2021

Hobart was the most profitable place in Australia to buy real estate in Q4 2020, according to CoreLogic, with 97.2% of homes fetching a profit.

The Tasmanian capital lead the nation in CoreLogic’s Pain and Gain report, with a number that exceeded the national average for capital city real estate markets by almost 10%.

“Hobart has seen remarkably strong capital growth for a sustained period of time. For example, the 5-year annualised growth rate across Hobart was 8.7% as of February this year, which is higher than any other capital city,” said Eliza Owen, Head of Research at CoreLogic. “Demand across the city has been driven by the rise of Hobart as a tree-change destination, and a holiday destination from international and domestic visitors alike. Alongside the rise in demand, housing supply has remained fairly subdued across Hobart, which has created strong increases in prices and rents.”

Australian Broker has reported previously on the vacancy rates in Hobart, which have long been very low as a result of few new developments. As property prices rise, profitability tends to follow in lockstep – though, according to Owen, there are caveats to this.

“On the aggregate level, when you are analysing tens of thousands of sales, there is a fairly apparent correlation between market value movements, and the incidence of nominal gain on a dwelling resale,” she said.

“Rising prices and market upswings essentially increase the chance that sellers will make a gain, while falling markets increase the chance sellers will make a loss, especially for more recent purchases. At the individual level however, a turn in the market is no certainty that you will make a profit. It just depends on when you purchased. Perth is a good example where values have risen consistently since July 2020, but sellers who bought at the peak of the market in June 2014 would still probably be making a nominal loss.”

Hobart was the best performing capital, but more regional areas like Geelong, non-Sydney New South Wales and South East Queensland were not far behind in their numbers.

“That is probably a part of it,” said Owen of the tree changer effect. “The Sunshine Coast, for example, has been one of the top destinations for internal migration for years. I think what’s been particularly profitable about these areas is that they’ve enjoyed a kind of ‘spillover’ of growth from price increases in the main capital cities over time. Centres like Geelong, the Sunshine Coast and Newcastle are commutable, secondary cities, relatively affordable lifestyle offerings. Over time these cities have seen a more diversified economies and have developed a fantastic character of their own.”