Hobart Australia’s Frontrunner In Global Cities Index

Hobart’s dramatic home price rise has lifted it to the top 20 of Knight Frank’ Global residential Cities Index – outranking all other Australian capitals in terms of growth.

While much of the headlines this year have been fixated on Sydney’s price rise, the Tasmanian capital’s 24.6% growth in home prices during the year to June lifted it to 14^th place from 23rd on the global ranking of 150 cities by annual price change.

The Canadian city of Halifax topped the list with a 30.8% price rise in the last 12-months to June while other Canadian cities Hamilton and Ottawa also made the top 10 as Canadian housing supply levels hit low levels.

Sydney, not to be left out, climbed from 55 in March to finish at 28 – reflecting the city’s annual growth from 8.6% in the first quarter to 18.7% in the second.

The NSW capital’s current median value for dwellings surpassed $1 million in June and has risen another $16,500 over the month of September.

Around the country, Melbourne and Brisbane also saw ascendant moves from 70^th to 89^th on the index to 44^th and 54^th on the list respectively.

Canberra climbed the global rankings up from 17^th to 15^th — just behind Tasmania – with a 23.5% lift in property values.

The report also puts the price movement of local cities in a global context and shows the slowdown affecting other markets globally.

A look back at 2016’s report shows 15 Chinese cities averaged 23% growth year-on-year when tracked by Kight Frank’s index. Today the only Chinese city to break 10% growth was Guangzhou.

There has been a substantial increase in the number of Australians earning high incomes who are renting their homes instead of owning them, and this may be another element contributing to higher market demand and continually rising rents, according to new research.

The portion of households with an annual income of $140,000 per year (in 2021 dollars), went from 8 percent of the private rental market in 1996 to 24 percent in 2021, according to research by the Australian Housing and Urban Research Institute (AHURI). The AHURI study highlights that longer-term declines in the rate of home ownership in Australia are likely the cause of this trend.

The biggest challenge this creates is the flow-on effect on lower-income households because they may face stronger competition for a limited supply of rental stock, and they also have less capacity to cope with rising rents that look likely to keep going up due to the entrenched undersupply.

The 2024 ANZ CoreLogic Housing Affordability Report notes that weekly rents have been rising strongly since the pandemic and are currently re-accelerating. “Nationally, annual rent growth has lifted from a recent low of 8.1 percent year-on-year in October 2023, to 8.6 percent year-on-year in March 2024,” according to the report. “The re-acceleration was particularly evident in house rents, where annual growth bottomed out at 6.8 percent in the year to September, and rose to 8.4 percent in the year to March 2024.”

Rents are also rising in markets that have experienced recent declines. “In Hobart, rent values saw a downturn of -6 percent between March and October 2023. Since bottoming out in October, rents have now moved 5 percent higher to the end of March, and are just 1 percent off the record highs in March 2023. The Canberra rental market was the only other capital city to see a decline in rents in recent years, where rent values fell -3.8 percent between June 2022 and September 2023. Since then, Canberra rents have risen 3.5 percent, and are 1 percent from the record high.”

The Productivity Commission’s review of the National Housing and Homelessness Agreement points out that high-income earners also have more capacity to relocate to cheaper markets when rents rise, which creates more competition for lower-income households competing for homes in those same areas.

ANZ CoreLogic notes that rents in lower-cost markets have risen the most in recent years, so much so that the portion of earnings that lower-income households have to dedicate to rent has reached a record high 54.3 percent. For middle-income households, it’s 32.2 percent and for high-income households, it’s just 22.9 percent. ‘Housing stress’ has long been defined as requiring more than 30 percent of income to put a roof over your head.

While some high-income households may aspire to own their own homes, rising property values have made that a difficult and long process given the years it takes to save a deposit. ANZ CoreLogic data shows it now takes a median 10.1 years in the capital cities and 9.9 years in regional areas to save a 20 percent deposit to buy a property.

It also takes 48.3 percent of income in the cities and 47.1 percent in the regions to cover mortgage repayments at today’s home loan interest rates, which is far greater than the portion of income required to service rents at a median 30.4 percent in cities and 33.3 percent in the regions.

Hobart Australia’s Frontrunner In Global Cities Index

The southern city outranked the country’s more populous capitals.

This may be contributing to continually rising weekly rents