What type of apartment provides the best property investment yields? Michael Matusik

What apartment type would get you the best gross rental yield as a property investment?

A while ago we asked this question on our blog and 545 people replied, and frankly whilst “perception is reality” usually applies, it doesn’t in this case.

The majority of apartment investors – reflecting maybe their status and mode of transportation – are way off when it comes to which product and accompanying number of cars shows the best rental returns and even capital growth.

 Let’s cover the survey results first

  •  Seven out of ten respondents think that a two-bedroom apartment provides a better gross rental return
  • One in four think that a one-bedroom apartment does
  • Just five percent think a three-bedroom apartment is best

When including car parking provisions:

  • 40% think a two-bed/two-bath with two car spaces is best
  • 21% think one-bed with one car does
  • 20% think a two-bed/two-bath with one car is the better option
  • Just 4% chose the one-bed without a dedicated car space

Now let’s check some facts regarding who lives in apartments and how many cars they actually haveapartments_PropertyUpdate

According to the latest national count – and excluding the 18% who were “visiting” an apartment at the time of the last Census – about half of the country’s apartments are permanently occupied by single people (46%); with a further 24% being couples with no children (at all, or living at home).

Just one in every eight apartments is occupied by a traditional family (i.e. two adults with children at home).

True, there has been a shift towards more sharing when it comes to apartment living.

Ten years ago, 52% of the nation’s apartments were occupied by loners; with just one in five (20%) holding couples with no kids and 9% housing traditional families.

Yet the real proof is the number of actual people who reside in an apartment.

Eight out of ten (81%) of Australia’s apartments hold one or two permanent residents.  By the way, 14% of Australia’s residents are housed in apartments, up from 12% in 2001.

How important is a car space?apartment_1

There are apparently about 7.8 million motor vehicles in Australia.

One in ten households does not own a car; two out of five (37%) dwellings hold just one vehicle, whilst a further 54% of our households own two or more cars.

When it comes to those living in apartments, these proportions shift considerably: 14% of apartment dwellers don’t own a car; 52% only have one car and just a third own two or more cars, with 29% having just two cars.

So who lives in apartments & how many cars they own actually drives financial returns.

Demographics (and geography) drive almost everything.  I am quite certain I read that somewhere.

You see, we undertake between 40 and 50 Project Definitions every year – this is a service which helps make a new residential project work better – and we have found that in almost every case, one-bedroom apartments show a better gross rental return than larger ones.

This is particularly the case when you include a quality furniture pack.  Now before I get a bunch of emails outlining this and that, keep in mind I am talking about rental return here and not capital gain; although the statistics regarding one-bed resale performance versus larger apartments are pretty good too.

So in short:apartment inside

The smaller the apartment type, in concert with the inclusion of a single car park, the better the gross rental return.  This rule of thumb is even more evident when you add furniture.

I think it is better, however, for investors to think more about the actual product design and useability of the apartment space they are buying/looking to rent out, rather than just the product type.

Important things when it comes to investment apartment design/inclusions include:

  • useable kitchen, galley style preferred
  • separate bedrooms
  • equal ensuites
  • separate laundry
  • decent ceiling heights
  • air-conditioning throughout
  • robe space & linen storage
  • study nook/multi-purpose space

 



Want more of this type of information?


Michael Matusik

About

Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive


'What type of apartment provides the best property investment yields? Michael Matusik' have 1 comment

  1. November 29, 2012 @ 7:27 am Brad Kark

    Hi Michael

    When you say “apartment” does this include all types of dwellings that are not a detached residence. Ie villa, townhouse and flat?

    Cheers

    Brad

    Reply


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