For most, the growth was unforeseen.

As the pandemic swept the globe the market's prediction, led by an initial sharp downturn in global equities, was that a deep recession would follow and that asset values would flatten or even decline given the massive disruption to what was considered "normal" prior to COVID-19.

Ironically, the opposite has occurred in direct contrast to the prior behaviours of markets after other major global downturns, including the GFC, Tech wreck and the "Recession we had to have" in the '90s.

The factors contributing to this unexpected consequence are principally:

Historical Low interest environment

Massive Government fiscal stimulus

Strong local economic performance

Tasmania's Covid response

Each of the market sectors have their own idiosyncrasies and function independently of each other.

Generally, the commercial Tasmanian property market is a demand-led market with very few major developments commencing without a strong level of pre-commitment.

Many tenants now wish to be owner-occupiers as it's now considered cheaper to pay a mortgage than pay a landlord rent.

Here is a summary of the major sectors:

Strong capital gain in existing housing has resulted from demand outstripping supply given low interest rates, limited stock, limited shovel-ready land and increased mainland buyer activity.

High constructions costs are pushing the value of older existing stock.

Strong commodity prices combined with two brilliant springs and low interest rates now mean the historic low farming returns have become more compelling.

Tasmania's clean, green brand and cooler climate are seen as very desirable attributes by mainland corporates and larger Agri investors.

A rural lifestyle is now considered attractive as the trend of moving away from the big cities became evident.

Tasmanian irrigation infrastructure investment is now paying dividends and rural owners have benefitted from increased land use and capital value of their farms.

The work-from-home disruption initially brought into question the future of office usage.

However, as workforces return and organisations seek to rebuild culture, teamwork, productivity and collaboration, we see office space is now very tight.

In fact, Hobart CBD has very little vacancy as governments - state and federal - take up more space.

We predict the official PCA vacancy number to be released in January 2022 will reflect a record low vacancy for the Hobart CBD.

Renewing tenants have very few alternative options in the market, leading to potential effective rental growth going forward.

Retail sales figure are up four per cent per annum and retail vacancies in the major city centres across the state are being filled. With land and construction costs high, little new supply has been developed.

Retailers have moved more to non-discretionary uses including food, medical, pharmacies, gyms etc away from the less preferred fashion sector and more discretionary activities.

The Large Format concept continues to grow with the likes of Bunnings, Spotlight, Good Guys, Anaconda etc.

This sector has outperformed most sectors as the demand for warehousing increases, resulting from the online goods' need for improved logistics and "just in time" delivery models now occurring.

The construction industry is at maximum capacity resulting in the need for more sheds.

Limited available flat development land has seen values increase strongly.

History tells us that an effect of printing lots of money, which the whole world has been doing, is that it's followed by increased inflation, and these signs are now emerging globally.

As inflation increases so does the upward pressure on interest rates and this again is reflected in the upward movement in the 10-year bond rate in recent months.

The question is no longer "will" or even "when" but "how far" rates will move?

Notwithstanding these increased risks, Tasmania is now considered a very desirable place to invest, live and work - more so than at any time in our lives.

The world population continues to grow and places like Tasmania become more unique and desirable.

We have never seen so much capital seeking Tasmanian property.

Our Knight Frank global databases are extensive and reach buyers and capital from not only all parts of Australia, but from right across the world; we are now in, form part of and participate in a global market.

As we remind our major clients, property is a long game.

Those that have played the long game in Tasmania have done very well! However, risk management going forward is the key.

We look forward to 2022 with ongoing optimism.