Hobart: Where to from here?

The new Icon Centre has helped Hobart CBD consolidate as a retail hub.

In the article I contributed 12 months ago there was mention the US Federal Reserve may start increasing rates over the next twelve months and that further interest rate rises could not be discounted. The US Federal Reserve did increase rates but Australian monetary policy settings remain much the same. Interest rates are static.

Access to debt funding is a primary contributor to ongoing investment in property markets. It is becoming apparent the bank approved loan to value ratio is a key issue in addition to the cost of funds.

The level of funds available to buyers influences asset prices. This in turn influences property values by the extent of funds available. The outcomes of the Royal Commission into Banking, Superannuation and Financial Services Industry will be particularly relevant to the property sector as measures to restrain lending practices are likely to be implemented.

The property sector in Tasmania has attracted investors that have a lower requirement for bank funding. So, despite the potential for changes to lending, the market will continue to move along by the contribution of market participants with lower borrowing requirements.

Property with the appropriate investment fundamentals should remain suitable in the market place.

The Hobart retail sector has consolidated its position with the opening of Icon Centre Shopping Arcade and completion of Myer in May. The opening of H&M in the Cat and Fiddle Arcade complex has assisted the ongoing position of the CBD as the primary retail precinct in greater Hobart. These developments have firmed up the position of other retailers as more customers shop in Hobart with the greater offering available. From a property valuation perspective, this helps to underpin value.

The strength of the residential and visitor accommodation real estate sectors have positively influenced the state of the commercial property sector with a number of disused commercial sites, for instance, all of a sudden finding opportunities for alternative development to either hotel or residential. The strength of the residential development sector in the inner areas of Hobart has fairly quickly created value for sites that were previously languishing without a use. Developers have become more interested in realising development opportunities on such sites in the light of housing supply shortages.

The Greater Hobart residential market has not been able to keep pace with demand. In a short period of time, land values have increased rapidly as a consequence of limited new or potential land supply. There are challenges for developers and home builders as they await delays in the provision of infrastructure and service provider ability to resource the burgeoning circumstances. Without additions to land supply, values are likely to keep increasing as buyers pay a premium to build a home.