A cost of living crunch is driving a new trend among renters – and it’s changing the wish lists of some property investors. What’s happening across the rental and investment markets?
Investors have been a driving force in the property market lately, with lending to investors up almost 30% over the year to May 2024.
Part of the appeal has undoubtedly been rising property values, which have jumped 10.14% nationally since the market lows of late 2022, leaving many investors pocketing tidy capital gains.
However, successful investing can also involve buying a property with plenty of tenant appeal, and new research from CoreLogic indicates that renters are opting for homes with more bedrooms.
Why is that the case?
Most people are feeling cost of living pressures right now – and renters are no exception.
Renters aren’t just dealing with higher utility bills and rising costs at the checkout and the bowser – they’ve also had to deal with rents rising 8.2% nationally over the past year.
Thus, plenty of tenants are looking for ways to lower their weekly rent – and one strategy is to lease a larger home, either for use as a share house or to accommodate multiple family members.
According to CoreLogic, the evidence for this strategy lies in data that shows higher rent increases for homes with more bedrooms.
As a guide, rents for 1-bedroom units and studios have increased by 7.1% over the past 12 months. Rents for 2-bedroom apartments have risen by 7.9%.
Whereas, rents for houses with five or more bedrooms have jumped 8.7% over the same period.
Despite the higher rent rises, it’s often more cost-effective for renters to band together and share a bigger property.
The average weekly rent per bedroom in a 5-bedroom house is about $175 nationally compared to $293 in a 2-bedroom unit, or $541 in a 1-bedroom apartment.
The takeout for investors
While rents for multi-bedroom homes may have outpaced smaller properties, a larger dwelling won’t appeal to every investor. And it’s not just about the likelihood that a big house will come with a higher price tag than a smaller place.
A large property with the potential to accommodate more tenants can experience greater wear and tear, potentially leaving an investor with higher maintenance costs.
In addition, 4-5-bedroom houses are often found in outer suburban areas, which may experience slower price growth than inner city locations.
“What matters is that investors consider what they want to achieve by purchasing a rental property and invest in a place that aligns with their goals.” Says Ivanka Bernyk, Lending & Member Services Executive.
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