Many investors steer away from family-sized homes and instead focus on units or small houses.
The reasoning is straightforward enough – most renters are young singles and couples who will buy their own house once they start a family, so buying a three-bedroom house runs the risk of poor demand from renters.
That may have been true 20 years ago, but data collected from realestate.com.au suggests that picture is well and truly out of date.
Renters nowadays aren’t necessarily 20-somethings looking for a cheap home, but families looking for a long-term family house.
Family-sized homes in some parts of the rental market are in hot demand, but in others they run the risk of going vacant.
Are there enough families looking to rent?
Yes, plenty. Over the past 15 years the proportion of Australians who own or are paying off their own home has fallen around 10% in every age group.
That translates to more than a million family households renting in 2014.
Are there enough homes on the market?
The best way to answer this is to look at rental vacancies. Fifteen years ago, vacancy rates were around 3-3.5%, a level which indicates demand and supply of homes for rent was roughly in balance.
But in 2014, vacancy rates are well below this mark showing us that rentals are in short supply across the major cities.
What about family-sized houses?
To find out, I delved deep into the mountain of data the realestate.com.au website throws up and found some interesting themes.
Using the Invest function I looked at the number of online visits to three-bedroom houses advertised for rent across Australia’s four largest cities – a reliable indicator of where demand for three-bedroom homes is highest.
Which areas are in hot demand?
What I found is that family homes for rent are as rare as hens’ teeth in in the leafy suburbs within 30 minutes travel time of the CBD, but not nearly as sought after in outer suburban areas.
Family homes for rent are as rare as hens’ teeth in in the leafy suburbs within 30 minutes travel time of the CBD.
To illustrate these findings, I have picked six areas in each city which typify where family homes are in hot demand, and a suburb that typifies areas where demand is low.
In Sydney, it is the northern beaches, eastern suburbs and the middle North Shore that are most in demand, while in the outer south west demand was low.
In Melbourne, it is the trendy inner north and bayside, along with the suburbs in the city’s east, that were the most popular, while new suburbs on the fringe had low rental demand.
It was a similar story in Brisbane; popular suburbs in the centre and the middle rings north and south of the city were popular, with affluent suburbs like Hawthorne highly rated.
Ditto for Perth, where it’s leafy suburbs with good access to the centre – particularly those near beaches – that were the most popular.
What do the numbers tell investors?
For investors, the message from this analysis is clear: there simply aren’t enough houses for rent in in the leafy affluent and middle-class suburbs like those identified.
Demand for family-sized homes in the more affordable areas further out is low and, in most of the wealthiest suburbs I looked at, demand for three-bedroom houses was about the same as it was across large swathes of suburbia.
But in the well-connected inner and middle ring markets where many families want to live, demand for rentals is acute and this data suggests there is a much lower risk of these properties going unlet than in the rest of the market.
originally posted on realestate.com.au