Guide to buying an apartment in Australia – Forbes Advisor Australia


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Entering the real estate market becomes more difficult than ever thanks to higher interest rates and always high real estate prices. While prices across the board have fallen over the past 12 months, property, and homes in particular, are still out of reach for many.

A more affordable alternative for the future owner is to buy an apartment rather than a detached house. For example, the median home value in Sydney is $1,257,625, while the median apartment value is a much more affordable $783,406, according to data from CoreLogic.

Another factor in favor of those looking to buy apartments is the wide gap between median home price values ​​and median apartment price values ​​that is narrowing, said Tim Lawless, CoreLogic’s research manager for the ‘Asia Pacific.

“We know that apartments are probably becoming more attractive to investors as well as homeowners simply because they have much lower prices,” he says.

“Part of that apartment affordability comes from the fact that they haven’t seen values ​​rise as much as homes have during this last growth cycle.”

During the pandemic, people wanted more space, not less, and high-density living wasn’t as appealing. But with people returning to the city for work and overseas migration starting to pick up again, demand for apartment living is set to rise.

An apartment can be a lifestyle choice and can also be a good investment if you choose one that is close to public transportation and other amenities a potential tenant might want.

Related: Guide to investing in real estate

Benefits of apartments

Buying apartments has many advantages. Here are a few below.

  • More affordable.
  • Less property maintenance.
  • The rental yield can be better than that of houses.
  • Access to amenities such as a gym or swimming pool.

Disadvantages of apartments

  • You don’t own the land, which many Australians don’t feel comfortable with.
  • Generally, they do not appreciate the value as much as the houses.
  • Strata and maintenance costs.
  • Potentially less privacy.

What to look for when buying an apartment

Lawless says that if you’re buying an apartment as an investor, you need to ensure the longevity of your rental application.

“It’s not like a station is a short-term consideration. He will always be there. So being located near efficient transport options and major work hubs is usually a very good rule of thumb when buying an apartment,” he says.

“That doesn’t necessarily mean you’re buying near the CBD or major office districts. Some of the biggest job centers are usually hospitals and universities. You know that near these areas there will always be demand for rentals from students and service workers. »

And just because an apartment is cheap doesn’t mean it’s good value for money. Even if you’re not looking to buy as an investment, at some point when you’re selling, you’d probably rather realize a capital gain than a capital loss. It is therefore preferable to avoid isolated apartments far from public transport, shops and schools.

Where to buy an apartment?

If you are buying for investment or capital gains purposes, the major capitals are probably where you get the best value, although some areas are more desirable than others.

If he was looking to buy an apartment today, Lawless says he would probably be looking to buy in Brisbane where the median apartment price is $494,785 and the gross rental yield is 5%.

“I would probably rate Brisbane as my preferred option at the moment. Partly because the Brisbane apartment market has had a very long period of fairly mild conditions. So it’s very affordable, yields also tend to be higher So your typical rental yield in Brisbane for apartments is around 5%, in Sydney it’s just 3.7% and in Melbourne it’s just 4.1%,” says Lawless.

In terms of affordability, Adelaide could be cheaper — with a median apartment price of $436,462 — but there’s also a much smaller supply of high-density housing because homes are still quite affordable. The gross rental yield for apartments in Adelaide is 5%.

The capital that seems the most affordable with a median apartment value of $376,428 and a gross rental yield of 7.2% is Darwinbut Lawless warns that it’s also the most volatile and risky.

Darwin’s unit values ​​have seen a significant decline between 2008 and 2020 and are currently still well below previous highs.

“The typical value of an apartment in Darwin is still 26% below its 2010 peak, which is quite amazing considering what’s happened over the past two years,” Lawless says.

And the apartment market in Canberra was surplus for a while, but is now balancing out with a decent gross rental yield of 5%.

Apartments vs. Houses

As data from CoreLogic points out, houses are generally more valuable than units. After all, you are paying for the land the dwelling is on and increasing privacy and control over what you can do in the space.

The value of units does not appreciate as quickly as the value of houses. There is a 60% difference between the median home and unit value in Sydney, and in Melbourne there is a 55% difference.

But on the positive side, an apartment can be a better investment because it is more affordable and can offer investors a better return. All gross rental yields in the CoreLogic table for apartments are higher than those for houses.

How much does it cost to buy an apartment in Sydney?

The median cost of an apartment in Sydney is $783,406, but there are also reasonably sized studio apartments (30m2) for sale around $500,000 near the city.

Are apartments a good buy?

An apartment can be a very good investment if you are buying in an area where there is rental income longevity. It’s also a good buy for the homeowner who prefers apartment living with less maintenance.