The Rise of Small Living: Why Renters Prefer Compact Units

Discover the reasons behind the growing trend of renters choosing smaller living spaces over larger houses. Find out why compact units are becoming the preferred choice.

The demand for larger properties and homes located further from cities saw a surge during the pandemic, driven by the need for spaces better suited to remote work and changing lifestyles. However, recent data on rental prices, searches, and lease times indicate a shift in renter preferences back to seeking similar homes as before the pandemic.

During the height of the pandemic, as borders closed and central business districts shut down, the number of vacant rental units in inner-city areas increased significantly. People's desire for more space and larger homes led to a decline in demand for smaller properties. This shift is evident when comparing rental days on the market for houses and units in November 2020, with units taking longer to lease than houses.

Fast forward three years, and the rental landscape has evolved. Rental demand has increased post-pandemic, with units now leasing 36% faster than in November 2020, while houses are leasing 9% faster. Renters are now searching for units more than houses, reflecting a change in preferences for attributes in a home.

The price gap between houses and units has also narrowed since the pandemic. Premiums for houses compared to units have decreased, indicating a shift in renter preferences towards units. Living in close proximity to CBDs has become more important following the reopening of offices, making units located in inner-city areas more appealing due to their accessibility and affordability.

With the increase in unit demand and the cost of living crisis driving renters towards more affordable options like shared housing, the future of the rental market remains uncertain. As cities return to their pre-pandemic state and hybrid working becomes the norm, unit demand may continue to rise. However, the resurgence of demand for larger homes with more roomscannot be ruled out.

The rental market has seen a shift in preferences towards units over houses, driven by factors such as proximity to CBDs, affordability, and availability. As the rental landscape continues to evolve, renters will need to consider these factors when making housing decisions.