Hobart for rent
Hobart property has been on somewhat of a charmed run in recent times, with property values rising sharply and investors blessed with both strong demand and incredibly low vacancy rates.
However, the flood of short-stay rentals that has hit the market in recent weeks might just be a turning point for a market in desperate need of more stock.
Recent data from Domain has shown that there has been a 41 per cent spike in the number of rental properties hitting the market this year. Given Hobart has become one of Australia’s premier tourist destinations, huge numbers of investors have turned their properties into various forms of short-stay accommodation, through platforms such as Airbnb, in search of high yields.
With tourism being one of the biggest losers from the border closures and travel restrictions, owners have been forced to push their properties back into the rental market.
Vacancy rate to triple
Prior to the Government crackdown, Hobart had a rental vacancy rate of 0.8% according to SQM Research, making it the tightest in the country.
President of the Real Estate Institute of Tasmania (REIT), Mandy Welling, thinks the upcoming data for the rental market could show the vacancy rate nearly tripling to 2.9%. But that might be just what Hobart needs.
“So far, the previous quarter’s data is not really reflecting any of the impact of COVID-19. The first case wasn’t confirmed in Hobart until 2 March, so there wasn’t any impact until later in the month, which is when we saw the Airbnb owners look for more secure long term rental income options.”
“Hobart is very tourism-driven so we’ll be severely affected by this, albeit with the surge in rental properties actually causing some relief.”
“We had such a severe shortage of rental properties and it’s alleviating that, but the problem at the moment is many of them are furnished and we don’t have a strong market for that.”
Despite the huge numbers of properties hitting the rental market, rental prices across the state haven’t budged.
“At this stage, we’re not seeing it affect prices, as we are still absorbing the shortfall.
“We had a home put up for rent recently and had 16 groups come through.”
“Speaking to the other directors from across the state, only two tenants from all the companies have been in a position where they can’t pay rent, so we’re not really having an issue at the moment.”
“We certainly need properties to come onto the market, to help tenants who were desperately looking for a home.”
“But there’s still the concern from tenants about how long these properties are going to stay in the long-term rental market.
“That’s a question agents are being asked because they are likely not a long-term possibility.”
Trendy suburbs in firing line
Property expert and researcher, John Lindeman of The Lindeman Report, feels that even though rental prices have not been hit yet, it’s only a matter of time.
“Hobart's rental vacancies have doubled in the last few months, and the same trend is also being experienced in other major urban markets,” he said.
“This is due to the collapse of student, tourist and business short term rental demand due to the restrictions on movement and has impacted owners of such properties, typically let through platforms such as Airbnb and Stayz.
“Not only has rental demand plummeted, but owners desperate for revenue are listing their properties in the longer-term rental markets and competing for tenants with other property investors.”
“The effect will be a substantial short-term reduction in asking rents in locations where students, tourists, hospitality workers and those in the accommodation industry have been residing.”
Mr Lindeman said Hobart should quickly rebound once social distancing measures were reduced.
“The demand for rental accommodation will recover but this is likely to occur in two stages; firstly, as restrictions on movement between states is restored we can expect rental demand for business and holiday rental accommodation to recover, and then as overseas arrivals are permitted to travel here, rental demand in student and tourist precincts will rebound.”
While Hobart property prices have been a strong performer over the last five years, Mr Lindeman said there will be segments of the market that will see sharp price falls.
“Many property investors purchased their investment properties in the expectation of a bonanza in rental income from short-term rental accommodation relying on platforms such as Airbnb and Stayz to deliver tenants.
“With the collapse of this market, some will be forced to sell their properties, even at a loss, because they can't manage the holding costs, such as maintenance, repairs, insurance, rates, management fees and loan repayments.“
“The addition of such properties to the number being listed is likely to result in a fall in property values, especially units in Hobart's trendy inner suburbs and houses in the suburbs preferred by holidaymakers and tourists, such as the popular riverside suburbs from Wrest Point Casino through to MONA.”