Hobart's rental market continues to tighten, leading to a substantial rise in rents, according to the latest report from Domain.

Vacancy rates in the city tightened to 0.4%, back to the levels reported in 2019 when rents were registering double-digit gains. The number of vacant rental properties in the city dropped by 38% during the first quarter of the year.

The tight rental conditions in the city have boosted weekly rents. House rents in Hobart have reached a record high, increasing by 2.1% to $480. Unit rents also increased, up by 5% to $420. Unit rents are now at the level first achieved one year ago.

"It was only roughly five years ago Hobart was the most affordable capital city to rent, it is now the fourth most expensive to rent a house and unit," the report said.

However, the report said the movement of rental rates in the city depends on location.

For instance, while house rents in Sorell-Dodges Ferry have soared 12.4% higher than last year, rents in inner Hobart declined by 2.7% for houses and by 5.6% for units.