Renting a house in Australia costs just $39 more a week than renting a unit, compared to a difference of $64 a year ago, new research shows.
Kaytlin Ezzy, an economist at property data firm CoreLogic, said Australians have been increasingly turning to units amid sky-rocketing rents. This has caused the rental price gap between houses and units to shrink as demand for units outstrips supply.
“Units are the affordable option for many; new migrants, students, service workers and many other tenant types,” Ezzy said.
“But the increase in demand and low availability is forcing rents increasingly higher and causing the affordability gap between houses and units close rapidly.”
In April, rents for units across capital cities rose on average by 1.6%, significantly outpacing the 0.9% rise for houses, CoreLogic figures show.
This rise was most stark in Sydney, where unit rents rose by 1.9% last month. This is off the back of a record annual increase of 19.1%, equating to an extra $106 a week.
The supply of advertised rentals is 40% below the five-year average, CoreLogic says. And vacancy rates in capital cities, with the exception of Hobart and Canberra, remain near record lows.
The price of buying a unit is also outpacing rises in house prices, with unit values increasing for the second straight month by 0.7%.
Ezzy said there were about 10,000 fewer units for sale than would typically be expected at this time of year, putting upward pressure on prices.
Meanwhile approvals for new buildings have sharply dropped over recent months, according to the Australian Bureau of Statistics. Approvals fell by 8.1% in April and 24.1% over the past year with about 11,500 new dwellings approved.
Developers are also holding off building tens of thousands of homes across Australia, despite already gaining planning approval, largely because of surging construction costs.
Treasury secretary Steven Kennedy has told parliament the downturn in building approvals is expected to continue until 2025, with investment in new dwellings likely to contract by 2.5% this year and a further 3.5% in 2023‑24 and 1.5% in 2024‑25.
Max Chandler-Mather, the Greens spokesperson for housing and homelessness, said the sharp drop in building approvals should push the government to invest directly in building housing rather than pushing forward with its planned housing fund.
The fund will invest the $10bn and spend the earnings, up to $500m a year, on affordable and social housing projects.
“Rather than gambling $10bn on the stock [market] and only spending some of the returns in a few years’ time, Labor should do what governments used to and invest billions of dollars now directly building public and affordable housing,” he said.
“Australia has the construction capacity to build 110,000 public and affordable homes over the next five years. It can afford the $5bn a year it would cost – all we need is the political will from the federal labor government.”
Michael Sukkar, the spokesperson for housing for the opposition – who alongside the Greens are also refusing to back Labor’s housing fund – also levelled criticism at the government for not doing more to increase the number of homes being built.
“Australians have every right to be concerned about the future of our nations’s housing under this government,” he said.
