Why unit rents are growing faster than houses

Karen Dellow
Karen Dellow

Weekly rents have surged over the past year for both houses and units, but growth in unit prices has significantly outpaced that of houses.

Year-on-year, national weekly house rents have increased by 10.5%, an increase of $55 per week.

However, unit rents have increased by 17%, which equates to an $80 weekly increase.

This variance is even more pronounced in the combined capital cities where the growth in weekly unit rents is double that of weekly house rental growth.

All capital cities had a larger increase in unit rents compared to houses, except for Canberra and Hobart, where prices have remained flat.

Source: PropTrack

Brisbane had the largest variance between house and unit growth rates with a median house rent of $600, up 9.09%, and $535 for a unit, up 18.89% year-on-year.

The most expensive city to rent a house or a unit is Sydney where the median rent for a house is $720 and $650 for units.

However, in the past year house rents in Sydney have increased by 10.77% compared to 18.18% for units.

Source: PropTrack

In Hobart, median weekly rents for houses and units have remained unchanged year-on-year due to its property market running on a different track to the other cities.

Canberra's market is also sluggish compared to the likes of Melbourne, Sydney and Brisbane, and is going through a correction after the phenomenal price growth seen during the pandemic.

Median rents for houses have decreased by 1.45% year-on-year and unit growth has increased by a mere 0.91%.

What’s driving the big jump in unit rents?

Units were very affordable during the pandemic as many lay empty in the cities due to the lack of overseas students, migrant workers, and interstate migrants.

Prices dropped below normal market value because demand was so low, especially in Melbourne and Sydney, but at the same time house rents continued to rise.

Unit rents have sharply outpaced houses over the past year. Picture: Getty

It wasn't until the end of 2021 and early 2022 when unit rental prices began to recover, coinciding with the opening of the borders.

Since then, a combination of increased demand and low stock has driven up rents as more potential renters are turning up to inspections and competition is at an all-time high.

And with houses costing more to rent than units, many renters are having to downsize their expectations.

In addition, many renters are offering more than the asking rent to beat the competition, which has driven weekly rents even higher.

This shift in the market has helped units regain the price growth that was lost during the pandemic and this growth is likely to continue due to record low vacancy rates.

Source: PropTrack

Across the capital cities and regional areas, vacancy rates are at critical levels, and are the lowest for houses, driving many renters to opt for units instead.

Current market conditions mean weekly rents will continue to grow throughout 2024 and financial pressures for renters means that units will be the more affordable option than houses.

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