Smaller apartments are certainly cheaper than their larger counterparts, but a more affordable property doesn’t necessarily become a good investment – or does it?
A decade ago, many industry experts would have warned you against investing in a one-bedroom unit. “You’re limiting your re-sale potential,” they would have cautioned. “Two-bedrooms appeal to a much wider group of renters and buyers!”.
These days, that’s only half-true. The way we live in Australia is changing as more people are electing to live alone – and, as we make this shift away from the trend of living in a traditional nuclear family home in the suburbs, the convenience offered by smaller, centrally located apartments is becoming increasingly sought-after.
Consequently, one-bedroom units are “definitely a good investment option”, says Michael Fenech, buyers agent from www.vipportfolio.com.au. This is particularly the case if you’re looking in any of our capital cities.
“Because housing affordability is pricing people out of the market, more and more people are turning to the lower priced property, which means there is a lot more demand for one bedroom units,” Fenech explains.
“Secondly, in terms of capital growth, what’s got more chance of doubling in value – a one-bedroom unit worth around the $450,000 mark, or a two-bedroom unit worth around $730,000?
“Demand for anything will drive up the price, also known as capital growth. As the demand for lower-priced property increases due to property prices soaring across Australia, the one-bedroom unit or lower priced property has a lot more potential to double in value, due to the simple economic principles of supply and demand.”
There are pros and cons involved in buying any type of property, he adds, and in terms of one-bedroom units, the main drawback can be finance approval.
“The main thing to look out for is the internal size of the apartment. You can easily check the internal size of the apartment by looking at the strata plan, which is located within the contract of sale. When buying one-bedroom units for our clients, we always make sure the unit is above 50sqm,” Fenech says.
“The reason for this is your loan to value ratio (LVR) may be drastically reduced if you purchase something under 50sqm. This basically means that you will have to come up with more deposit funds to settle the property.”