The Move to Apartment Living

Date: 30 September 2011

Apartments have become the choice for first home buyers in inner suburban Sydney as well as sought after suburbs in Melbourne. And it’s not just a case of a steady shift towards solo living. For sure, we’re seeing a rise of ''double income no kids'' couples, or DINKS, to be buying and renting properties. A greater numbers of parents also will be moving from baby boomer to empty-nester status. The ABS forecasts that couple-only families will overtake the number of couple families with children in 2013 or 2014. By 2031, DINKS are expected to account for up to 60 per cent of people living in couple relationships

But it’s also affordability, demographics and price performance of apartments when compared to houses. The big trend in housing in the next 20 years will be an increase in demand for smaller dwellings. And as apartment buying becomes more popular and older apartment building get snapped up, newer developments are becoming hugely popular given their location; their modern fit outs and the ability to buy off the plan.

For some home buyers and investors, it is the size of their deposit and their property investing strategy will dictate that they buy an apartment.

This and changing preferences and improved design are behind an increase in demand for apartments compared with previous property cycles. Apartment and townhouses are growing in popularity as the houses in desirable locations become less affordable and poor infrastructure quashes the reality of house and land ownership. Add to this the sometimes poor shopping and amenities in the outer suburbs where new detached housing is largely built; and then longer working hours too factor in to the equation.

Property buyers used to suggest that houses increasing value more rapidly than units because of the underlying value of the land. While houses historically delivered a greater capital return than apartments, investors and owner-occupiers have in recent times become more focused on buying more affordable apartments, so the gap between returns in most capital cities is closing.

Apartments offer location factors as the other key driver. Developments are often located closer to the city and major rental/working nodes such as universities and hospitals. These areas generally have efficient transport connections, plenty of retail facilities and social amenity; all key elements high on the list of young buyers. This style of housing also generally involves less maintenance; no mowing the lawn or trimming in particular. For investors, as one sector of the buying market, this ensures high demand and a long term rising trend in rental yield.

The demand is coming from younger buyers who aren't willing to sacrifice their lifestyle to live in a detached home located a greater distance from the city and similarly, couples who are willing to raise a family in an attached or semi-attached dwelling .

Despite the fact that most people would if they could afford to, like to live in two-bedroom apartments of 70 square metres to 75 square metres, many are accepting the advantages of one-bedroom apartments. Whereas typically a two-bedder can cost $600,000 to $650,000, which is more than younger people or investors want to pay, one bedders are more affordable. Indeed, the rising costs of construction and recent increases in apartment prices have forced a practical solution: smaller apartments built according to affordability.

Developers are including more one-bedroom units in their projects. Contemporary developments are being built with better, more efficient design, so that you maximise the use of the internal space. In some suburbs of Melbourne, such as Docklands, a one-bedroom unit without a car space recently sold for $380,000. With a parking space, a one-bedroom unit will sell for up to $430,000. In Sydney a one-bedder in for example Surry Hills or Paddington can command $450,000 and $550,000 or more with parking.