Hobart's run as the home of Australia's fastest rising rents is over: Domain report

Long-suffering residential tenants struggling to cope in the city with the fastest rising rents in Australia could finally see a glimmer of hope on the horizon with a huge rise in the number of properties suddenly being dumped onto the market.

The Tasmanian capital of Hobart has become a beacon of unaffordability for many of its residents. The latest Domain Rent Report, released Thursday, showed it to have Australia’s tightest vacancy rate – a minuscule 0.6 per cent – and the strongest rental price growth.

But now the collapse of tourism from the coronavirus pandemic has seen a massive number of homes being transferred from the short-term holiday letting pool to the long-term rental market. That’s a whopping 60 per cent rise in the three weeks to April 5 this year compared to the same period in 2019.

“Hobart has had an extremely tight rental market which has been tough for tenants,” said Domain senior research analyst Dr Nicola Powell. “But over the last two weeks of March, it saw a strong lift in available rental listings.

“Hobart is driven by tourism, both interstate and overseas, and with that ceasing, a lot of short-term rental accommodation has been converted to the long-term rental market instead which should to help to alleviate the really tight rental conditions.”

The median rent for a house in Hobart is currently $470, the latest Domain Group report on rents over the March 2020 quarter has revealed, up 4.4 per cent over the last year, and 2.2 per cent on the quarter.

Unit rents have grown an astonishing 9.2 per cent on the past 12 months to $415 and 1.2 per cent on the quarter.

In the last two weeks of March and the first of April, there were 453 new property listings on the market, compared to 284 on the same period last year.

“Landlords have had a good run in Hobart because rents have been growing much faster than the inflation rate for a number of years,” said Dr Powell. “It’s also had the lowest average wage of all the capital cities in the past few years, and it went from being the most affordable city to the fourth most expensive in terms of renting a house or unit.”

ReaI Estate Institute of Australia national president Adrian Kelly, who’s based in Tasmania, said in the past the rental market had been good for property-owners, particularly with the strong returns they could earn on leasing them through Airbnb, but it was not so good for renters.

“But the problem is now that most of the Airbnb properties coming onto the market are at the higher end of the market, rather than the lower end where people really need homes,” he said.

“So the extra properties might not help those who need them the most, especially with the unemployment problems we have now.”

Hobart is the worst-ranking capital city in Australia for youth unemployment at 16.9 per cent, well above the national youth unemployment rate of 11.2 per cent. With the tourism industry and hospitality – the drivers of much of the local economy – now both hard hit by COVID-19, that rate is expected to climb still higher.

There is some building of new homes going on in some areas, however, says BIS Oxford Economics property analyst Angie Zigomanis. “That will help as the pipeline works its way through, but it does depend on how long the lockdown lasts,” he said.

“But helping with the supply of housing, overseas migration will be low for a couple of years yet, while the University of Tasmania is dropping a lot of its courses, so that will make it less attractive for students too.

“Coming from a very, very tight market, though, it doesn’t mean Hobart will ever get outrageously over-supplied with property. Instead, it’s more likely it will come back to a situation that’s more normal.”

And long-term, who knows? Maybe Hobart will one day, post-coronavirus, return to being Australia’s best-performing property market, says Mr Kelly.

“Once this whole crisis is over, people might well be looking for a safe, clean, greener place to live and will choose Tasmania and Hobart to come and settle,” he said. “Then our hospitality industry and our tourism industry could bounce back.”

Mr Zigomanis agrees. “People could be find it very attractive to live on an island of an island,” he said. “A lot of people could move to Hobart, especially older people.”