Is an apartment a better buy in 2017 and what are the pros and cons of owning and living in one?
When you look at the numbers being built, apartments in Australia are definitely on the up and up. In the quarter to June 2016, we saw a record high of 25,893 apartment completions. And the apartment building boom isn’t slowing down. June 2016 figures also show 150,686 units under construction, compared with just 61,350 houses.
A good option for investors?
Apartments, particularly those located in our cities, are popular with Aussie property investors. With locations delivering good access to transport, jobs, entertainment and amenities, city apartments are usually in high demand with tenants, as well as being a better bet for capital gain, making them strong investment performers.
The 2016 annual Core Logic Investor Report shows investors own 48.1% of Australia’s apartments, compared with just 17.3% of houses. Darwin tops the bill for the proportion of residential apartments owned by investors at 42.9%, followed by the Gold Coast (32.8%), Melbourne (32.2%), Sydney (28.9%) and Brisbane (28.6%).
Offshore interest in the apartment market is also strong and Melbourne, in particular, seems to be very desirable with Asian property developers. According to a recent Market Snapshot from the Urban Development Institute of Australia, Chinese apartment developments are almost split equally between Sydney and Melbourne, but are much higher in Melbourne for developers from Malaysia and Singapore.
Buying to live
So if you’re looking to buy an apartment as your home, you can find yourself up against some strong competition from the investor market, both overseas and domestic. But don’t let that put you off apartment buying altogether. Although they might be in demand, they’re generally more affordable than houses. According to August 2016 figures, the median price for Australian apartments has increased just 5.5% in the last 12 months, compared with 7.2% for houses.
Units are also in demand for being easier to maintain than houses. And whether you’re a millennial chasing career goals or a baby boomer looking to move close to where the action is, there are generally far more apartments being built in urban locations than there are houses. So if you’re looking for a generous slice of city living, a smaller space in a multi-residential building could be just what you need.
The apartment outlook
With the growing supply of apartments, there could be a lot of properties out there to choose from. So make sure you’re equipped with a list of features to look for and a good idea of what’s involved in owning an apartment so you can choose the right one for you. And speaking with an Aussie broker can help you set a budget, so you know you’re looking at affordable options too.
Apartment investors, on the other hand, might be looking towards a decline in overall yields. According to Core Logic, the rental market in our cities is the weakest it’s been in more than 20 years. And with so many more units on the way, it seems that we could be heading towards a buyers’ market, for both tenants and owner occupiers. Good news for affordability, but not so great for investment returns.
Are you planning to buy an apartment in the near future? Tell us your thoughts in the comments below.