There is a critical shortage of housing supply in Tasmania which is generating historically low vacancy rates and strong yields, Tony Collidge, president of the REIT, told SCHWARTZWILLIAMS.

"Local councils aren't addressing the issue quickly enough. Building companies are so frustrated with the plannings processes," he said.

"Normally January is one of our busiest months with people swapping homes, but there's a critical shortage," he said.

"People are living in caravans and tents," he said.

To illustrate the point, Collidge said his office at PRDnationwide has 430 properties on its books, and only two vacancies.

Hobart is only a relatively small market, with a population of only 200,000, and 75 per cent are owner occupiers. The small supply of rental property hasn't been able to keep up with Tasmania's economic growth and its recent surge is popularity with Chinese tourism and interstate buyers looking for a lifestyle change. 

The Hobart suburb of Chigwell has Australia's highest rental property yield, returning 7.4 per cent according to data from CoreLogic as of October 2017.

Hobart's Risdon Vale recorded the highest returns for houses within 10km of a capital city in 2017, yielding 8.5 per cent.

Source: CoreLogic.

And new data form SQM Research shows that Tasmania's rental market has the lowest vacancy rates in the country, with a rate of a record low of 0.3 per cent.

Australia's vacancy rate was 2.5 per cent in December 2017, according to the SQM Research.

Image: SQM Research.

Managing Director of SQM Research, Louis Christopher, said, “Those in Hobart and Canberra continue to face ongoing tight rental conditions and higher rents.”

Read more about Tasmanian real estate:

Tasmanian market going from strength to strength: REIT quarterly report

Hobart property market has "changed forever": Jim Playsted, Knight Frank

Tasmanian real estate boom spreads island-wide