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A sustained lack of stock and increasingly rising demand for rentals has seen the gap between median house and unit rents close to $15 per week, according to CoreLogic.
According to the research firm’s Australian Unit Market Update, capital city unit rental growth continues to outpace house rents, increasing 1.6 per cent and 0.9 per cent, respectively, during April. As a result, the divide between the average house rent and unit rent fell from $64 per week to $39 per week.
Among other factors driving this trend, including an increased number of international students returning to Australian shores, rising worker rental demand in inner city regions, and an uptick in migration has resulted in unit rents jumping a record 4.9 per cent over the three months to April, which has added approximately $26 to rents.
CoreLogic economist Kaytlin Ezzy said, “there is no ignoring the fact that the mismatch between supply and demand continues to be the driving forcing pushing capital city rents higher”.
Sydney, already Australia’s most expensive market, led the April unit rental rise, (1.9 per cent), followed by Melbourne (1.7 per cent), Perth (1.6 per cent), Brisbane (1.1 per cent), Adelaide (1 per cent), and Hobart (0.4 per cent), while unit rents in Canberra held firm and declined 0.2 per cent in Darwin.
Outside of the capital city markets, unit rents climbed 1.2 per cent in April in regional Western Australia, followed by 0.8 per cent increases in both regional Victoria and regional South Australia.
While Ms Ezzy described units as “the affordable option for many; new migrants, students, service workers, and many other tenant types,” she explained “the increase in demand and low availability is forcing rents increasingly higher and causing the affordability gap between houses and units to close rapidly”.
As the gap continues, Ms Ezzy expects, “we could see more rental demand shift towards the house sector, or as we’re potentially already seeing, flow into additional purchasing demand with prospective buyers fast-tracking their decision to become homeowners”.
Values for Australian units climbed 0.7 per cent in April, taking the rolling quarterly trend to 1.2 per cent, led by the NSW capital, where they jumped 1.2 per cent for the month.
Across monthly and quarterly trends, units continue to outperform houses, with unit values declining 4.9 per cent in the 12 months to the end of April as opposed to the 8.9 per cent decline for the same period.
Ms Ezzy said the stabilisation of unit values has been underpinned by a continued shortfall in listings nationally, which are 20 per cent below the levels typically recorded this time of year.
“The persistent lack of listings has seen more negotiation power shift back in favour of sellers, putting upwards pressure on unit values,” she said.
“It is likely unit values have bottomed out, but there continues to be many market forces and economic considerations to keep in mind over the short term,” she said.
Ms Ezzy added that rising values working in unison with “corresponding wealth effect would work to undo some softening in economic conditions, which could lead to further cash rate increases.
“If this transpires, we would anticipate a softening in values,” she concluded.
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