Rents for houses surge, unit rents drop: tenant push for space creates two-speed market

Tenants prioritising space over accessibility during the Covid pandemic has driven up rents for houses, while unit rents have dropped, but this is set to change, a new report shows.

Rental unit demand dropped over the last year.

Tenants prioritising space over accessibility during the Covid pandemic has driven up rents for houses, while unit rents have dropped, a new report shows.

The latest PropTrack Rental Report revealed house rents in Sydney surged over the past year as new rental listings across the country fell to a decade low.

The Harbour City experienced year-on-year rental price growth of 7.3 per cent for detached dwellings and a 1 per cent year-on-year fall in apartment rental values in December 2021.

MORE: Ray Hadley bolthole smashes Coast record

‘Ugly’ $410m mansion is bigger than White House

Weekly median rent for all dwellings was $520, while new Sydney rental listings fell more than 13 per cent over the year.

Rental values, when factoring in both unit and house rents, remained flat in 2021 before picking up steam and recording 4 per cent growth in the final quarter.

Houses up for rent have been in short supply in many areas.

PropTrack director economic research and report author Cameron Kusher said the underperformance of units dragged Sydney rents over the past year.

“The pandemic has driven a desire for more space at home, so renters have shown a strong preference for houses as opposed to units,” Mr Kusher said. “The lack of migrants, particularly students, coming to Sydney has had a big impact on demand for unit rentals.

“With more supply of unit rentals on the market, prices have fallen.”

Mr Kusher said there was an uplift in unit rental growth in the past quarter, which could continue following the return of international students and migrants.

Rental yields have remained below 4 per cent in Sydney, with the lowest recorded in Baulkham Hills and Hawkesbury at 2.8 per cent while North Sydney, Hornsby, the eastern suburbs and the northern beaches all tracked at 3 per cent.

Cameron Kusher said unit rents may recover.

“Very high property prices in Sydney lead to comparatively low yields,” Mr Kusher said. “Yields have softened over the past year because property prices have risen faster than rental prices.”

Demand for rental properties remained high in 2021, with the number of engaged renters per listings surging 31.1 per cent year-on-year in December.

The Parramatta region had the highest growth in renters per listing in Sydney and the third highest growth nationally at 47.9 per cent.

Mr Kusher said demand for rental properties had grown faster than supply in the 12 months to December, but that this could soon change.

“With property investors continuing to increase their purchasing behaviour, there is hope for a better balance between demand and supply of rental properties in 2022,” he said.

Buyers queue up for an open house in the inner west.

The report found, while having one of the largest numbers of listed rental properties in the country, Sydney experienced rental days on site that were much higher than its historical lows. Sydney and Melbourne were the only two regions in the country where properties stayed on site longer than 25 days, compared with all other regions, aside from Darwin, staying on site for 20 days or less.

While new listings in Sydney fell by more than 13 per cent year on year, the results varied across regions, with the south west experiencing a 5.2 per cent drop and the northern beaches recording a 13 per cent increase.

Mr Kusher said he expected Sydney’s rental market would continue to perform well in 2022 thanks to open borders and the uplift in demand for apartments.

There have been fewer people in high rise suburbs due to the pandemic and a drop in international students. Picture: Nikki Short

“We expect further increases in rental prices this year,” he said. “With increased competition for the limited rental stock currently available, the market will be competitive for renters.

“The inner city still provides the best opportunities for renters in Sydney, along with units as opposed to houses. However, there’s likely to be more competition for that stock this year with borders open.

“Investors may have scope to increase rents as demand rises. However, we should be seeing more investment to alleviate the price escalations for renters as more rental properties become available.”

Originally published as Rents for houses surge, unit rents drop: tenant push for space creates two-speed market