Rent prices soar in Hobart, making it more expensive than Melbourne: report

For the first time, it is now more expensive to rent a house in Hobart than in Melbourne. And Canberra is the most expensive capital city for Australian renters, having overtaken Sydney for the second quarter running.

The Domain Rental Report for the March quarter, released on Thursday, shows the median weekly rent for a house in Tasmania’s capital city is $450, compared to Melbourne’s $440 – up $30, or 7.1 per cent on the December 2018 quarter.

“In just two years Hobart has gone from the most affordable market to now being more expensive than Adelaide, Perth, Brisbane and Melbourne,” Domain senior research analyst Nicola Powell said.

While Dr Powell said the March quarter’s surge could be explained by the common “seasonal effect” of a strong start to the calendar year, the annual increase for house rents (which also came in a touch above 7 per cent) and 8.6 per cent rise for unit rental prices in the Tasmanian capital signified that affordability was being “pushed to the limit”.

“There’s strong competition; tenants will certainly be finding it a challenging and tough market,” Dr Powell said.

Real Estate Institute of Tasmania chief executive Mark Berry said news of Hobart’s rising rents came as little surprise given the city’s “perfect storm” of population growth, interstate investment, stable government and low unemployment, combined with reduced supply and a vacancy rate of just one to 1.5 per cent.

“To be frank, we’re not building enough new housing to keep up with demand,” he said. “Rents and affordability surpassing Melbourne is simply the result of our supply-and-demand issues driving the sales market, which, in turn, is pushing up rents.

“There’s no doubt this climate makes things tough for renters, but if you are willing to rent further from the CBD the rental cost does reduce. Sometimes it’s a situation of expectation needing to meet reality.

“Maybe you need to live a few suburbs out of the city centre and catch the bus to work – it’s something that’s normal elsewhere but not normal here. We’re not talking the kinds of commutes in Melbourne and Sydney, we’re talking a few suburbs out.

“There’s this view in Tassie that if you can’t park right out the front of the shop you need to go to, you’ll just keep going. That said, there’s constant debate about infrastructure and how big changes need to be made for it to better service a busier city.”

Median weekly rents – houses

Hobart’s not the only city adjusting to a new climate, with house renters in Canberra forking out more than those in Sydney for the second quarter running: a record-breaking $570 per week compared to Sydney’s $540.

Dr Powell said Canberra had seen consistent rental growth over the last few years, driven by record numbers of migrants, tourism placing demand on short-term rentals, and the country’s highest national gross rental yields for unit investors, which were up 6.14 per cent in the March quarter. Factoring in mortgage and tax challenges facing investors, circumstances were unlikely to change in coming months, she added.

The report contained good news for Sydney tenants. According to Dr Powell, while most other rental markets were tightening, Sydneysiders were finding themselves in the unusual position of being able to negotiate.

“My advice to Sydney renters is do your market research and if what you’re paying is higher than average, negotiate a better deal,” Dr Powell said.

Median weekly rents – units

The only other market to experience a cooling-off was Darwin, where rental prices have fallen up to 7.4 per cent in the past 12 months.

In the west, Perth recorded some of the nation’s strongest year-on-year gross rental yield growth, with house rents edging higher for the second quarter running – from $360 to $365.

“The results illustrate a period of stability and suggests that the market is turning around,” Dr Powell said. “Stability in the rental market is one of the first signs of a market trying to improve.”

In other capitals, rental prices remained relatively steady. Adelaide house rents were up 2.6 per cent for the quarter from $380 per week to $390, while the median weekly unit price was again listed as $310. The report found no quarterly change to the Brisbane market, which recorded house rents of $410 per week and a unit weekly asking price of $380.