Investors turn to compact dwellings amid price and rental gains

The data showed that over the quarter, Hobart recorded the highest growth for its other dwelling asset class, up 7.5 per cent to $576,500, while Brisbane followed suit with a 4.5 per cent to $680,000.

Perth and Darwin rounded the podium, recording a 2.8 per cent increase, with other dwellings now reaching a median price of $555,000 and $380,500 respectively.

REIA president, Leanne Pilkington, said the trend is driven by shifting household dynamics, affordability pressures, and growing demand for smaller, easier-to-maintain homes.

“At $823,467, the median price for other dwellings in Sydney continues to be the highest from among the capital cities, 17.3 per cent higher than the national median,” Pilkington said.

“The lowest median price for other dwellings is found in Darwin, which at $380,500 is 45.8 per cent lower than the national median.”

Over the quarter, Canberra was the only capital city that saw a drop of 3.4 per cent in its other dwelling class asset, reaching a median price of $604,000.

Pilkington said that while the national median price for other dwellings matched house price growth for the quarter, two-bedroom dwellings performed better, recording higher growth across more diverse regions.

“Although two-bedroom properties and other dwelling types are outpacing houses, the broader trend still reflects overall growth in both house prices and rental rates for all accommodation types,” she said.

Across the quarter, houses across the country recorded a 1.1 per cent price increase to $1,079,017, up by 4.7 per cent annually.

Darwin led the charge with a 2.9 per cent increase in house prices over the quarter to $562,000, followed by Melbourne up 2.7 per cent to $922,500 and Sydney with a 1.7 per cent increase.

“Sydney, where the median price for houses is $1,691,731 (56.8 per cent higher than the national median), continues to be the most expensive city in which to buy,” she said.

While smaller dwellings recorded a price growth in all states but one, house prices declined across several capitals this quarter.

Brisbane was down by -0.4 per cent to $910,000, Adelaide recorded a -0.3 per cent drop to $847,000, Perth and Canberra both down -1 per cent to $790,000 and $970,000 respectively, and Hobart recorded the largest drop at -1.3 per cent to $735,000.

Pilkington said the rental trends over the quarter mirrored the sales market, with national weekly rents for two-bedroom dwellings rising 3.5 per cent to $648, outpacing the 0.6 per cent rise for three-bedroom houses, now averaging $628.

Melbourne led with an 8.7 per cent jump in two-bedroom rents, while Sydney held steady and other capitals saw increases between 1.4 per cent in Darwin and 4.8 per cent in Perth.

The report also showed that vacancy rates remained low across most capitals, with Adelaide at 0.6 per cent, Brisbane at 0.9 per cent, and Canberra at 1.6 per cent, highlighting continued rental market pressure.

On the opposite, vacancies edged up in Melbourne and Perth to 2.5 per cent, while Darwin posted the highest rate at 2.9 per cent.

“With price growth, rental demand and low vacancy rates converging, smaller dwellings are becoming a strategic choice for both investors and downsizers,” Pilkington said.

“As affordability concerns persist and the demand for flexible, efficient living grows, two-bedroom dwellings seem to be the preferred choice for both renters and home owners, reflecting a change in demographic trends and accommodation type preferences,” she concluded.

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