Affordability crisis hits state’s first-home buyers
Tasmania, once an affordable hotspot, has become one of Australia’s most challenging property markets, particularly for first-home buyers.
According to property data provider PropTrack, Hobart and regional Tasmania experienced strong property price growth during the pandemic. Between February 2020 and April 2022, Hobart’s home prices surged by 48%, the fastest rate of any Australian capital city, while Regional Tasmania saw even greater growth, with prices up 53% over the same period. However, the market has since shifted significantly.
Over the past two and a half years, Hobart’s home prices have fallen by 8.3% since their peak in March 2022, making it the weakest capital city market in Australia. In regional Tasmania, prices have remained relatively flat.
“Tasmania’s status as a low-income state coupled with the substantial price growth both before and during the pandemic has been a major factor contributing to a sharp deterioration in housing affordability,” said Eleanor Creagh (pictured above), senior economist at PropTrack.
“Now with interest rates sustained at high levels, the purchasing power of first-home buyers has deteriorated both with respect to the deposit hurdle and from a loan serviceability perspective. Wages growth has picked up and household incomes have grown but not by enough to offset either of these increases.”
Tasmania now ranks as the second least affordable state in Australia, behind New South Wales. A median-income household in Tasmania can only afford 9% of homes sold over the past year, compared to 50% in 2016.
First-home buyer activity has declined sharply in the state. As a share of the population aged 25 to 34 – the typical age group for first-home buyers – Tasmania has seen the largest drop in new home loans compared to the decade average. Other states, such as Western Australia and Queensland, have also experienced declines, but Tasmania’s fall has been the most pronounced.
The Tasmanian government introduced stamp duty reforms in June 2024, exempting first-home buyers from paying stamp duty on properties priced under $750,000. This policy, retroactive to February 2024, is one of the most generous in Australia. It is estimated that over 70% of properties in Hobart and nearly 90% in regional Tasmania fall under this price threshold.
Despite the challenging environment, the number of new loans to first-home buyers in Tasmania has increased in recent months. Creagh said the stamp duty exemption may be providing some relief, allowing buyers to enter the market sooner by reducing upfront costs. Additionally, an increase in housing stock is giving buyers more options, with total listings in Hobart 46% above the five-year average as of September 2024.
With interest rates expected to fall in 2025, the Tasmanian property market could stabilise, potentially leading to a resurgence in first-home buyer activity.
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