I first tried to read The Hobbit to my daughter when she was 7. This failed. She was clearly frustrated by her lack of understanding, both of individual words and of the story, and constantly stopped me to ask questions. I put the book aside until she was 9. Then I read it again, and she loved it. If you can push through the first chapter, most of the rest of the book is easier.
My son is now 7, and I decided to see if he was ready. While his reading and comprehension skills are slightly behind his sister at the same age, he's more comfortable not understanding certain things, and more happy to flow with the narrative. He didn't say a word as I read him the first chapter, though he seemed to enjoy it and grasp most of it. Yesterday, I read him the second chapter, with the trolls, which he liked even more.
He was drawing while I read, and at the end of the chapter, he presented me with this picture. It's me, reading The Hobbit.