Institute for Social Change News

The Institute for the Study of Social Change has prepared an updated overview of the housing situation in Hobart to inform the ongoing debate about housing accessibility and affordability.

This overview builds on the Tasmanian Housing Summit Directions Paper published in March and is part of the University of Tasmania’s ongoing commitment to analyse the key factors influencing the supply and demand of housing in our state.

The Institute’s research shows the tight housing market has been caused by a combination of factors including:

• A ‘commencement gap’ delaying the construction of new residential dwellings following an increase in the number of approvals since 2017
• A trade-off between residential and non-residential construction activity, resulting in a shortage of construction workers
• An increase in the conversion of entire properties, some of which are likely to have been long term rental accommodation, to short-term holiday accommodation
• Increasing rate of population growth resulting from:
  • An increase in the conversion of entire properties, some of which are likely to have been long term rental accommodation, to short-term holiday accommodation
  • A decline in the number of people moving out of the Greater Hobart area
  • An increase in the number of people moving in from interstate
  • An increase in international students

Read the full Housing in Hobart report (PDF 546.57KB) prepared by Richard Eccleston, Lisa Denny, Julia Verdouw & Kathleen Flanagan.

Population growth

Historically, Tasmania has lost more people interstate than it has gained from interstate. Since 2015 the balance has shifted, with interstate arrivals now exceeding the number of people moving interstate (net overseas migration has been stable since 2012, averaging 1,200 per year).

Additionally, fewer people are leaving the state, resulting in a domino effect of reduced housing turnover, higher housing prices, reduced access to home ownership, more pressure on the rental market and, finally, higher rents. This, combined with low household income growth, is pushing more people and families into housing stress.

In the 12 months to June 2017 Greater Hobart recorded a net gain of 1,036 people from interstate and other regions of Tasmania.

There has also been strong growth in international student numbers in Hobart since 2016. At the University of Tasmania in 2018, full time equivalent international student enrolments in Hobart are up 380 compared with 2017.

Overall, the rate of population growth in Greater Hobart increased to 1.1% compared with 0.9% for the previous 12 months.

Supply and demand

Between 2011 and 2016, the supply of new dwellings comfortably exceeded demand from permanent residents in Greater Hobart, with an estimated surplus of 1,405 dwellings. However, since then, increased housing demand resulting from higher population growth and a ‘commencement gap’ in residential building construction has resulted in an estimated shortage of 173 homes in the Hobart Local Government Area. This shortage does not factor in demand from short-stay visitors including tourists, contractors, temporary skilled migrants and others.

A widening gap has emerged between planning approvals for new homes and building completions, which is specific to Tasmania. While home approvals increased from 2017, building commencements have remained relatively flat since late 2016 and completions continue to fall (completions declined 24% in Tasmania in 2016-2017) following the decline in approvals from 2015 to 2017.  While the construction workforce is growing, albeit at a slowing rate, apprenticeship completion rates are declining. Combined with large scale non-residential construction activity, this has led to a building workforce that is at capacity.

Peak Airbnb?

Tasmania is experiencing a tourism boom with obvious economic benefits. However there are impacts on the supply of long-term residential rental housing, particularly in Hobart (see the Institute’s Blueprint for Improving Housing Outcomes in Tasmania).

From July 2016 to February 2018 the growth in total Airbnb listings increased in most regions by much more than 150%. Total listings state-wide rose from 1,827 to 4,459 and the largest increases were entire home/apartment listings (up from 1,198 to 3,400).

There is a growing proportion of ‘multi-listing’ Airbnb properties in Hobart, up from 39% in July 2016 to 45% in February 2018. This may be an indicator of increasing activity by commercial operators and professional managers.

The price of Airbnb listings has risen from $152 to $212 over the period, suggesting demand remains strong and that we haven’t yet reached peak Airbnb.

Net result

At the end of April 2018 the rental vacancy rate in Hobart was 0.7, having risen slightly from 0.4 in the last quarter of 2017. A vacancy rate of below 1.0% is considered a market failure and is likely to increase homelessness and negatively affect migration and economic growth.

House rents in Hobart are now higher than those of Melbourne, Brisbane and Adelaide. Hobart rents rose 17.1% over the 12 months to March 2018 (compared with an average rise of 3% across all capital cities).

The Institute calculates that an extra 1,300 additional properties are needed in Greater Hobart to restore the market to a sustainable level and a further 1,200 properties per year (assuming 1% population growth).

The Institute for the Study of Social Change intends to publish its next housing market update in August.

Read the full Housing in Hobart report (PDF 546.57KB).