Key takeaways
The Australian rental market has experienced a significant increase in weekly rents for both houses and units over the past year.
Nationally, house rents rose by 10.5%, while unit rents increased by 17%. The trend was more pronounced in capital cities, with unit rent growth doubling that of houses.
Unit rents became more affordable during the pandemic due to decreased demand, particularly in cities like Melbourne and Sydney. As borders reopened, demand for units increased, leading to intensified competition among renters and higher rents. With record-low vacancy rates and houses generally more expensive, units are becoming a more sought-after and affordable option for renters.
With ongoing financial pressures and low vacancy rates, weekly rents are expected to continue rising in 2024. The trend is likely to drive more renters towards units as a more economical choice compared to houses.
In the past year the Australian rental market has seen a remarkable surge in weekly rents for both houses and units.
However, according to PropTrack, nationally, weekly house rents have climbed by 10.5%, marking an average increase of $55 per week.
In contrast, unit rents have leapt by an impressive 17%, translating to an $80 weekly rise.
This trend is even more stark in the combined capital cities, where unit rent growth has effectively doubled that of houses.
While all capital cities have reported a higher increase in unit rents compared to houses, Canberra and Hobart stand as exceptions, showing flat growth rates.
Brisbane, in particular, demonstrates a significant disparity: house rents have risen by 9.09% to a median of $600, while unit rents have skyrocketed by 18.89% to $535.
Sydney, Australia’s priciest city for rentals, now sees median house rents at $720 and unit rents at $650.
Over the past year, house rents in Sydney have increased by 10.77%, whereas unit rents have surged by 18.18%.
Hobart’s rental market remains unique, with unchanged weekly rents for both houses and units year-on-year.
Canberra, on the other hand, is experiencing a market correction post-pandemic, with house rents decreasing by 1.45% and unit rents showing a modest 0.91% increase.
Exploring the reasons behind the surge in unit rents
According to Karen Dellow, PropTrack’s Senior Audience Analyst, the pandemic period saw units becoming significantly more affordable due to a drop in demand.
Cities like Melbourne and Sydney, traditionally popular with overseas students and migrant workers, experienced a notable decrease in unit prices.
In contrast, house rents steadily increased.
As borders reopened in late 2021 and early 2022, the rental market for units began to recover.
This rebound has been fueled by a combination of heightened demand and limited availability, leading to intense competition among renters.
Many are now offering above the asking price, further driving up weekly rents.
The market shift has been advantageous for unit rentals, which are now recouping the price growth lost during the pandemic.
This trend is expected to continue, propelled by record-low vacancy rates, Dellow noted.
With vacancy rates at critical lows in both cities and regional areas, and with houses generally more expensive to rent, units are becoming the more affordable and sought-after option.
Looking ahead: 2024 and beyond
Given the current market conditions, it’s anticipated that weekly rents will continue to rise throughout 2024.
Financial pressures are likely to push more renters towards units, cementing their position as a more viable and economical option compared to houses.
