The offshore state of Tasmania is weathering the market downturn better than the mainland, but for how long?

According to Kate Forbes, national director of property strategy at Metropole Property Strategists, Hobart has been the strongest-performing capital city in Australia over the last two years. However, it won’t last forever, and some caution is advised.

“Over the last five years median dwelling prices have increased at about double the rate of household income growth,” Forbes says. “This has created a deterioration in housing affordability in the Apple Isle.”

If this prompts investors to move their aim to the next hotspot, it seems likely that Hobart’s strong property price growth will slow down in the coming year.

Economic prospects

Nevertheless, Tasmania’s employment rate is still one of the highest in Australia, according to Malcolm Gunning, president of the Real Estate Institute of Australia. Tourism is having an increasingly significant role in the state’s employment market – particularly among the younger population – and is emerging as one of its strongest industries.

While the long-term strength of the tourism sector will obviously be subject to issues such as the cost of travel, it appears that Tasmania has its own momentum at present, which is somewhat similar to northern Queensland. There is a strong interest in people relocating down there, because the state has a well-developed food and lifestyle culture.

“If you’re a self-funded retiree and you have a particular hobby or interest – bushwalking, these sorts of things – this [state] is becoming an alternative, particularly because of the cost of living in Melbourne,” says Gunning. “This is still a very affordable place to live. It has a very well-developed culture which attracts a lot of people.”

Henry Fields, property research and acquisitions coordinator at Client Best Interest, is also optimistic about future prospects of the state, particularly given the University of Tasmania’s current projects to increase the profile of the state’s education sector.

“Look at any major city or town in Australia and you’ll generally find education is one of the top three employers,” says Fields. Furthermore, education catering to foreign students is currently one of Australia’s most reliable industries.

Creating a university town will give Tasmania what it “sorely needs”, says Fields – young people.

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LEGANA: Steady growth in riverside suburb

Named after the Palawa word for ‘fresh water’, Legana offers its own distinct brand of rural charm. This small township lies just 12km north of Launceston on the banks of the River Tamar. With a population of just over 4,000, it has attracted a growing number of small businesses that provide residents with all their day-to-day needs.

Units and houses have grown strongly in value, almost in tandem, over the past five years, with the last 12 months being the first time in that period that’s there’s been more than 1% difference between the two housing types. Gross rental yield is where the distinction emerges: houses bring in a 4.4% return while units are stronger at 5.3%. Still, it’s not a big gap, and both options present prospective investors with an attractive choice.