House Rent Catching Up with Unit’s?

💡Rental Insights from Pathfinder💡

Is the rental disparity between houses and units narrowing?

Pathfinder team often hears concerns from our community of investors regarding the traditionally lower rental yield of houses in comparison to units, such as apartments and townhouses. This is particularly prevalent in major eastern Australian cities like Sydney and Melbourne.

However, recent data from CoreLogic indicates a promising shift. Notably, the difference in weekly rents between houses and units has widened to $36. Interestingly, rental growth for houses over the third quarter was 1.7%, surpassing the 1.3% growth observed for units.

From April to September, we've seen a dramatic decline in the rate of rental growth in Australia's unit sector. The gap between median rents of houses and units increased from $33 in May to $36 in September. This decline, from its peak of 4.3% over the three months leading up to April, represents a substantial change.

The unit sector's once notable affordability seems to be dwindling. Over the last year, unit rents have surged by 11.7%, whereas house rents have grown by 7.1%. This diminishing affordability in units, along with a possible trend towards larger rental homes, suggests a rebalancing in demand between these two property categories.

For growth investors, especially those in the early stages of their investment journey, this development is positive. It enhances their cash flow and minimizes the expenses associated with retaining growth-focused land assets.

This positive trend is certainly one that our community welcomes with enthusiasm.