A new PropTrack analysis has found that people are now preferring to rent smaller places, such as apartments, instead of bigger houses.
This marks a reversal from the pandemic-era trend where there was a surge in demand for larger homes located further from city centres, driven by the rise in remote work and lifestyle changes.
Now, the data shows that units are being rented out more quickly than houses after demand has risen sharply.
This is highlighted by units leasing 36% faster than in November 2020, compared to houses that are leasing 9% faster.
Additionally, the search data from realestate.com.au shows a shift in interest towards units over houses, with units now accounting for a higher percentage of rental searches.
Moreover, the price gap between houses and units has narrowed since the pandemic, suggesting that renters are less willing to pay a premium for larger homes.
As the graph below shows, in 2020, there was a significant premium for renting houses close to CBDs in major cities, reflecting a strong preference for larger living spaces. However, this premium has decreased to levels seen before the pandemic – or even lower in Sydney’s case.
This shows that people are not as willing to pay high prices for houses as they were during the pandemic.
PropTrack attributed the shift towards units to several factors.
Firstly, the reopening of offices and the return to in-person work have made living closer to CBDs and access to public transport more desirable.
Units, usually found in city areas, are cheaper than houses in the same area. Plus, with more units available to rent than houses, renters have more choices and face less competition.
What does this mean for investors?
Well, as a result of these changing preferences, rent prices for units have gone up more than for houses over the past few years.
And with hybrid working becoming more common and cities getting back to normal, PropTrack predicts that the demand for units might keep going up.
