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Capital city apartment rents have increased by around 5 per cent compared with a 7 per cent rise in city house rents since the start of this year, according to CoreLogic.

&ldquo;Rental demand is being deflected back towards inner-city precincts as other areas become less affordable for renters,&rdquo; suggests Tim Lawless, director of research for CoreLogic.

Average capital city apartment rents across Australia have seen a fall of around 1 per cent, according to CoreLogic between March 2020 and September this year.

Melbourne&rsquo;s apartment sector has been the weakest (with rents down 7 per cent), followed by Sydney (down 1 per cent).

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Lawless advised that growing investor demand for apartments was driving recovery.&nbsp;

&ldquo;Investor demand has historically been skewed towards the medium- to high-density sector, probably because of the lower maintenance and often higher yields associated with higher density-style dwellings,&rdquo; he told The Australian Financial Review.

It has been noted investor mortgage demand had increased from a record low of around 23 per cent to more than 30 per cent.

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Apartment price rises have slipped well behind houses while yields have risen, which makes it more attractive to many investors, according to CoreLogic.

&ldquo;Both the lower entry point and higher yield profile may be an attractive option for investors as they become more active in the housing market,&rdquo; Lawless says.

&ldquo;Once international borders reopen, it&rsquo;s likely rental markets will see an immediate and positive impact as migrants, such as students, seek out rental accommodation.&quot;

Apartment price rises have slipped well behind houses while yields have risen, which makes it more attractive to many investors, according to CoreLogic

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Rental prices beginning to rise in inner city markets: CoreLogic

Rental markets had tightened noticeably in most parts of the country compared with a year earlier, the latest minutes of the Reserve Bank advised.

"Rents for units in Melbourne had been the main exception, though even there the pace of decline in rents had eased over prior months," it advised.

Members discussed the continuing strength in established housing markets at the July meeting.

Nationally, housing prices had increased by more than 10 per cent in the first half of the year; a similar pace of growth had been recorded in other advanced economies, it advised.

"Conditions were strong in both capital cities and regional areas, and across different price segments. 

"Over the first half of the year, there had been increases in prices of units alongside further rises in prices of houses. 

"Demand over the preceding year had been led by owner-occupiers, although investors had become more active in recent months. 

"As had been the case for some time, the flow of new listings for sale remained similar to pre-pandemic levels but total listings were much lower, implying that dwellings were being sold at a rapid pace. 

"Rental markets had also tightened noticeably in most parts of the country compared with a year earlier; rents for units in Melbourne had been the main exception, though even there the pace of decline in rents had eased over prior months."

The minutes noted demand for housing finance had strengthened further with stronger growth in credit to both owner-occupiers and investors. 

The pace of decline in rents had eased over prior months in Melbourne, the July RBA minutes advised

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