Two-bedroom dwellings outpace houses in price and rental growth

Smaller dwellings are leading Australia’s property market, with two-bedroom properties outperforming houses in both price and rental growth during the March quarter 2025.

Real Estate Institute of Australia President Leanne Pilkington said the trend reflects changing household compositions, affordability constraints and increasing demand for more manageable, lower-maintenance housing options.

The REIA’s Real Estate Market Facts report shows two-bedroom properties and other dwelling types are outpacing houses, though overall growth continues across all accommodation types.

The national median price for other dwellings, typically apartments and smaller townhouses, increased by 1.1 per cent over the quarter to $702,315.

This matched the quarterly growth rate of houses, though the increase was supported by stronger performance across a wider range of regions.

“Every capital city recorded an increase for this category except Canberra, where prices dipped 3.4 per cent,” Ms Pilkington said.

“Hobart recorded the strongest quarterly growth at a 7.5 per cent increase, while Brisbane and Perth also posted strong increases of 4.5 per cent and 2.8 per cent, respectively.”

The national median price for houses rose 1.1 per cent over the previous quarter to $1,079,017, driven primarily by price increases in Sydney (1.7 per cent), Melbourne (2.7 per cent) and Darwin (2.9 per cent).

All other capitals saw price declines, with Hobart down 1.3 per cent, and both Perth and Canberra dropping 1.0 per cent.

Rental markets showed a similar pattern.

Weekly rents for two-bedroom dwellings rose 3.5 per cent nationally to $648, compared to a 0.6 per cent increase for three-bedroom houses, now at $628 per week.

“Melbourne posted the strongest rise for two-bedroom rents at 8.7 per cent, while Sydney remained stable,” Ms Pilkington said.

“All other capitals posted increases ranging from 1.4 per cent in Darwin to 4.8 per cent in Perth.”

Vacancy rates remained tight in most capitals, particularly in Adelaide (0.6 per cent), Brisbane (0.9 per cent), and Canberra (1.6 per cent), reflecting ongoing pressure in rental markets.

Melbourne and Perth saw vacancies rise to 2.5 per cent, while Darwin recorded 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,” Ms Pilkington said.

The data suggests two-bedroom dwellings are becoming the preferred choice for both renters and homeowners as affordability concerns persist and demand for flexible, efficient living grows.

This reflects a change in demographic trends and accommodation type preferences across Australia’s property market.