Gap in national unit and house rents narrows

The mismatch between supply and demand has seen the capital city unit rents continue to rise in April, leading to a narrowing gap between median house and unit rents which were, on average, only $39 a week cheaper than houses.

According to CoreLogic’s monthly Australian Unit Market Update, the gap between median house and unit rents dropped from $64 per week to $39 per week in the space of a year, causing a significant shift in demand towards the house sector.

In April, the unit rents continued to outpace house rents across capital cities, increasing 1.6% and 0.9%, respectively.

“As the gap continues to narrow, we could see more rental demand shift towards the house sector, or as we’re potentially already seeing, flow into additional purchasing demand with some prospective buyers fast-tracking their decision to become home owners,” CoreLogic economist, Kaytlin Ezzy, said.

She added that the preference for more affordable accommodation had an unfortunate negative knock-on effect with the gap between house and unit rents closing to less than $40 a week.

On the demand side, domestic factors driving a 4.9% increase in unit rents in cities for three months to April included the return of local students to campuses and a higher rental demand from workers in inner city areas.

On top of that, the market saw the strong return of overseas migrants and international students.

Sydney managed to retain its status of the most expensive Australian rental market, with unit rents rising 1.9% in April. It was followed by Melbourne (1.7%), Perth (1.6%) and Brisbane (1.1%).

Adelaide and Hobart saw 1.0% and 0.4% increase in unit rents, respectively, while unit rents in Canberra remained steady in April and Darwin was the only city which saw a drop (-0.2%) in its unit rents.