Tasmania's Property Market: The Boom That Changed the Island

Tasmania's property market has undergone one of the most dramatic transformations of any Australian state in the past decade, with the combination of the sea change migration from the mainland, MONA-driven tourism creating demand for short-term rental investment, and the broader lifestyle appeal of Tasmania's relatively affordable (by mainland standards) properties and its environmental quality driving price growth that has made the state one of Australia's fastest appreciating markets over the decade to 2022. The affordability advantage that Tasmania traditionally offered relative to the mainland capitals has been significantly eroded, creating housing stress for long-term Tasmanian residents and first home buyers whose incomes have not grown at the pace of property prices.

Hobart's property prices, which reached levels that would have seemed extraordinary to the Hobart property community of a decade earlier, reflect the concentration of the sea change migration and the short-term rental investment in the capital and its surrounding coastal suburbs. The gentrification of Hobart's inner suburbs, particularly North Hobart, West Hobart, and Bellerive, has brought the quality hospitality, the boutique retail, and the professional service businesses that a wealthier residential population supports while increasing the rents and property values that the long-term residents and the arts and creative community that contributed to the precinct's character can no longer afford.

The housing supply response to the demand growth, constrained by the limited development land in Hobart's topographically complex geography and the planning system's capacity to process the approvals that the development industry requires, has been insufficient to prevent the price growth that demand excess over supply produces. The Tasmanian Government's housing policy responses, including the planning reforms intended to increase supply and the assistance programs for first home buyers, have partially addressed the supply constraints while the demand pressures have continued.

The short-term rental market, particularly the Airbnb and equivalent platforms that have converted a significant share of Hobart's inner-city housing stock from long-term rental to holiday letting, has been identified as a contributing factor to the rental market tightness that has made renting in Hobart more expensive and less accessible than at any point in the city's recent history. The regulatory responses to short-term rental, including the requirement for registration and the consideration of limits on the share of housing stock that can be used for short-term letting, have been debated as the community seeks to balance the economic opportunity that tourism-driven short-term letting provides with the housing access that residents need.

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