30 Sep 2021

Mind the gap: Cheaper apartment rents are letting buyers into the market sooner

A record gap between the cost of renting a unit and a house is “opening a window” for first-home buyers looking to get into the property market, experts say.

Nationally, the gap between house and apartment rents is now $50 per week, new analysis from Domain shows, with the median weekly rent for a house sitting at $477, while unit rent costs $427.

Ten years ago, that gap was only $5.

Domain chief of research and economics Nicola Powell said this record gap meant people renting units were able to save more now than ever, thanks to the cheaper costs, which allowed them to buy into the market sooner.

She also said the consistent decline of unit rents across some capitals had seen investors turn away from buying them, instead focusing their purchasing efforts on houses that have more broadly maintained higher rent prices and income earnings.

That gave first-home buyers further opportunity to get into the apartment market without the competition from investors that often pushed prices higher.

“If a tenant is able to move and choose cheaper rent, they can save quicker and enter the housing market,” she said.

“And investors are attracted to houses because of the house price rises, drawn to the prospect of big capital growth, so they’re not there to compete with the first-home buyers.”

City

House rents

Unit rents

Gap

Sydney

$550

$470

$80

Melbourne

$430

$365

$65

Brisbane

$450

$400

$50

Hobart

$495

$400

$95

Perth

$450

$380

$70

Adelaide

$430

$350

$80

Canberra

$630

$500

$130

Darwin

$593

$450

$143

National

$477

$427

$50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weekly Rent Gaps- National

Source: Domain Research House, June 2021.

The gap between house and unit rents across Australia’s capital cities is sitting at record levels, jumping well ahead of where they were a decade ago.

The two most significant rises were in Darwin and Canberra, where the difference between house and unit rents was well over $120 per week. That had jumped significantly since 2011 where the two cities saw a difference in rents of just $30 and $40 respectively.

In Sydney, the gap between rents for units and houses also widened, with $80 between the two in June.  That was almost double the $45 gap recorded back in 2011.

Melbourne’s divide between house and unit rents rose to $65, from a difference of just $10 a decade ago.

Brisbane has also seen the gap between unit and house rents widen, with the median weekly rents for houses leaving a divide of $50, well up from the $10 difference in 2011, data shows.

Barry Plant Victoria executive director Mike McCarthy said there was a great opportunity for those who were looking for a cheaper buy to get into the market, but this would only be for a short time.

“I think it provides a window before things correct themselves over time,” Mr McCarthy said. “That window will close as we learn how to live with COVID-19 and we reopen the national borders.”

An influx of international migrants looking to Australia as a much healthier place to live would boost sales of apartments in the inner city, he said.

Propertyology head of research Simon Pressley took a more pessimistic view saying it could take up to five years for the unit market and rents to recover from the impact of the pandemic.

Prices could stay at low levels or even fall, even as the market recovers, he warned.

“I think there’s a lot of people contemplating [buying an apartment] now … but they should be asking themselves, ‘how would I feel in two years time if I bought an apartment for $550,000 and it’s now worth $480,000’?” Mr Pressley said.

“The prices that are going up are for houses and not units, so that should be sounding alarm bells.”

SOURCE: https://www.domain.com.au/news/mind-the-gap-cheaper-apartment-rents-are-letting-buyers-into-the-market-sooner-1073844/

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