Hobart: How the city became Australia's most affordable capital in which to rent a house

Hobart has emerged as the most affordable city in which to rent a house – the first time since 2016 the southern capital has ranked on top.

The median weekly rent for houses in Hobart is $530, a 47 per cent increase from 2016, while the weekly median rent for units is $450, according to the latest Domain Rent Report.

Despite the huge increase in price, recent shifts in the Hobart market, combined with higher demand in other capitals, have led to its top affordability ranking. It is followed by Melbourne and Adelaide, where the weekly median rent for houses is $550.

Hobart’s median rent remained unchanged over the last quarter but declined by 1.9 per cent year-on-year. It was $20 below the peak that was reached earlier this year.

So what has happened in the city’s rental market in the last seven years?

Population shifts changing the market

Independent Tasmanian economist Saul Eslake says Hobart’s year-on-year decline in rent prices can be attributed to a shift in population.

“Tasmania is going in the opposite direction as the rest of Australia as far as population trends are concerned,” he says.

“Australia’s population growth has picked up from 0.1 per cent in 2021, when the borders were still closed, to 2.2 per cent this year. Whereas Tasmania’s [population] growth has declined from a peak of 2.1 per cent in 2019 to just 0.4 per cent this year.”

Eslake hypothesises that, during the pandemic-driven lockdowns in Victoria and NSW, locals fled to Tasmania where the rules weren’t nearly as strict.

In 2020 and 2021, Tasmania recorded a net interstate migration of 0.2 per cent and 0.7 per cent, respectively. In 2023, that’s fallen by 0.3 per cent. 

“We had a spike in interstate migration during the COVID period,” Eslake says. “It was happening pre-COVID because Tasmania’s economy was doing well, but I have a suspicion that Tasmania acted as a refuge for people fleeing from protracted lockdowns.

“And now that lockdowns are over, interstate migration has reversed, with many moving back to the mainland.”

$685 per week

1/41 Hill Street, West Hobart TAS 7000

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Yevonne Lowe of Charlotte Peterswald Property Management says changes to online university courses have seen the city lose many international students this year to the bigger capital cities.

She says the Chinese government banned all university students from studying online and required students to attend university in person, which “created a big void in the middle and changed the structure of everything … a lot of the international students had to go back to the big universities in Sydney and Melbourne to do in-class learning.”

This changed the rental market dramatically in Hobart, Lowe says.

Domain data shows Hobart’s vacancy rate was 1 per cent in September, an increase from its record-low rate of 0.2 per cent in February 2022.

Lowe says the absence of university students has skewed the rental market in tenants’ favour in recent months.

“Tenants have more choice now,” she says. “We’re getting ghosted [by them and] not getting callbacks … landlords are now looking at applications that they wouldn’t have previously considered because they’re not getting the applications they were getting before.

“Landlords … are getting confused because they’ve been told there’s a rental crisis, as has the rest of Australia, but it’s the opposite in Tasmania. Landlords are asking why they have to drop their rent but if they don’t drop it, the property will sit vacant.

“I’ve been telling landlords and prospective landlords that there are over 500 properties for rent in Hobart right now so they’re competing with 500 other properties.”

$600.00 Per Week

2 Strahan Street, North Hobart TAS 7000

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Changing economic conditions post-pandemic

Before the COVID pandemic, the local economy looked very different, Eslake says.

“The gap between the unemployment rate and the national average had narrowed quite significantly and Tasmania’s economy had grown faster than the national average,” he says. “Population was also growing at a faster rate than the national rate, with fewer Tasmanians leaving and more people coming in.”

Hobart’s rent prices had increased every quarter from 2016 but only saw price drops during and after the COVID lockdowns. 

“We were getting 30 people applying for a $450-a-week unit near the university,” Lowe says. “Sometimes tenants would physically come into the office and try to convince us why they were the right tenant for the property. During COVID, nobody was moving as much, but now everything has just stopped.”

However, while the housing market experienced the same price-boom trend as Sydney, it was primarily driven by owner-occupiers.

“Investor activity was stronger pre-COVID, and even during the boom, I personally had a lot more investor inquiry than normal,” says Marnie Hill of PRD Hobart.

“Buyers can see where the next boom is, and I think that’s going to be in Western Australia … we’ve been seeing a lot of investors struggling to make their repayments … we’re losing rental properties.”

$1,500 weekly

2/220 Murray St, Hobart TAS 7000

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Eslake says that, should population growth continue to slow, rent prices will continue to decline.

“Slower population growth appears to be driving a slowdown in Tasmania’s economy, [and] with interest rate rises over the past 18 months, the slowdown appears to be more pronounced in Tasmania than on the mainland,” he says.

“And if it’s slowing, that’ll be further reinforced by fewer people coming here, and less demand for both rental and housing and home ownership. So, I expect this to continue for some time.

“It’s unusual for Tasmania’s property market to be tighter than the mainland – it’s very unusual – but we’re probably reverting to a more normal historical pattern.”

For Lowe, this slowdown in rent prices is part of the property cycle.

“I’ve been in the property market for the last seven years and it’s been busy this whole time,” she says. “This is the first time I’ve seen a change but staff and long-time landlords who have been in the industry for a long time say it’s part of the cycle.

“There’s always a cycle; you have change, you have a small drop and then some time for it to settle and accept it, and then it’ll change again. It’ll come full circle again.”