Small apartments set for a big future

Australia has overtaken the US as titleholder for “home to the world’s largest houses” 

Large McMansions on expansive suburban blocks have long been held as the ideal “Great Australian Dream”, while smaller inner city apartments copped a pretty bad rap as the cheap and nasty end of the property market.

However times are changing, with many home buyers and tenants forced to reflect on whether their priority is square footage and a big backyard in the burbs or getting into a property without breaking the budget.   44298531_l

Suddenly that one bedroom apartment seems a lot more appealing. 

Whilst many developed countries have embraced the virtues of high-density accommodation clustered around major cities; think New York, Paris, London and Tokyo; here in Australia, our culture has been based on backyards, BBQ’s and wide-open family spaces.

Now though, a demographic shift is occurring, with more single person households and childless couples choosing to live in and around our big cities where employment and lifestyle factors are big draw-cards.

Figures from the Australian Bureau of Statistics (ABS) reveal that the number of one person households will surge to between 3 million and 3.6 million by 2031; a dramatic shift when you consider that in 2006 only 1.9 million people lived alone.

This massive increase is due to a number of factors including;

  • Gen-X’ers downsizing as their children leave the family home.  
  • a forecast jump in the number of DINKS (Double Income No Kids).
    According to the ABS couple-only households are set to overtake the number of families with offspring in the next two or three years, and it’s expected that DINKS will make up 60 per cent of all couple-only households by 2031.
  • a rapidly growing population and continuing housing shortage in some of our major cities.
  • ongoing affordability issues and increasing rental prices forcing many to rethink their size requirements.

Demand for one bedroom apartments, which skeptics have long considered to be less desirable, is set to soar as many Australians adjust their ideals according to what they can afford.

And one of the questions they’ll be asking is; do I really need that extra bedroom? apartment-2094699_1920

In the past singles and couples have, by and large, sought out two bedroom apartments with the perception that they offer larger living spaces and the convenience of extra storage.

However with  price tags for such real estate heading upwards of $550,000 in Melbourne and %700,00 in Sydney and rents soaring over $500 per week in many desirable locations, the affordability barrier is encouraging many tenants, investors and homebuyers to accept one bedroom units as a viable alternative.

Recognising this growing trend, developers are jumping on the bandwagon and including more one bedroom units in their large scale projects.

But be wary…

The price of many of these new apartments is going up as their size is going down.

So do one bedroom apartments make good, affordable investments?

Is there enough ongoing future demand from tenants and owner occupiers alike to ensure they perform as long term cash cows?

The simple answer is – yes!


Because affordability means more owner occupier buyers will be pushed into this type of real estate as they sacrifice size for location, thereby increasing demand and placing upward pressure on prices. 47954781_l

These apartments are often located closer to the city and major work nodes as well as universities and hospitals, in areas that generally have efficient transport connections, plenty of retail facilities and social amenity; all key elements high on the list of young buyers.

In addition, tenants seeking rental accommodation in and around desirable lifestyle locations will look for affordable one bedroom alternatives, meaning investors will have a large tenant pool to help pay the mortgage.

Sure, one bedroom accommodation caters to a narrow demographic of one and two person households, but the reality is this is a mismatch of the demand from this growing demographic and the relatively restricted supply of established one bedroom apartments that are “investment grade” properties.

I have to say that some of my best performing investments over the last few years have been one bedroom apartments.

They attract a diverse range of tenants, including Gen Y’s making the break from mum and dad; young professional couples, middle aged singles as well as downsizing baby boomers.

A few words of warning:

Not all apartments make good investments…

  • Avoid studio apartments. They are too small, the banks don’t like them and they are very hard to on sell.
    Instead go for something that offers at least 50 square metres of indoor space and if you can manage a balcony and plenty of clever storage options, all the better.
    Off street parking is a desired bonus, but not necessarily required if close to transport
  • Avoid the large generic developments sold off the plan in the center of major cities.
    While these might seem shiny and new, they quickly lose their lustre when people realise they lack character and the timeless appeal that puts property in continuous strong demand. 35519396_s
    Usually the majority of buyers in these soulless complexes are investors, while owner occupiers – the true driving force behind real estate values – tend to stay well away in preference of something more established or in a boutique block.
    With overseas investors making the bulk of the purchases in these buildings I can see huge problems looming in the future. Imagine the Owner’s Corporation meetings – with mainly overseas investors who are unlikely to want to spend money maintaining the building.
    How is the Body Corporate manager ever going to chase up their fees if they refuse to pay?
    Also…many of these have been built to a very poor standard and are likely to be the slums of the future.
    In fact a recent report revealed that many of Melbourne’s tiny apartments would be banned in New York, while another report estimated that 55 per cent of the city’s tallest apartment buildings are of “poor” quality, with common design flaws.

However there are many well designed established 1 bedroom apartments in our inner ring (not CBD) suburbs that make great investments, so next time you’re shopping for an investment remember that it’s not the size of the property that counts, it’s the size of the profit you’ll realise at the end of the day!

This means…


If you’ve been following my blogs you’d know I believe that less than 1% of properties are “investment grade” properties – ones that will outperform the averages in the long term.

At Metropole we use a 6 Stranded Strategic Approach to property selection:

  1. We buy properties that appeal to owner occupiers, as owner occupiers make up the bulk of property purchasers and push up the value of certain types of property.older apartment
  2. We buy a property below its intrinsic value – that’s why we avoid new and off the plan properties which come at a premium price.
  3. We look for proeprties with a high land to asset ratio. This just doesn’t apply when developers build high rise towers, but many established apartments (what we used to call flats) fit the bill
  4. In an area that has a long history of strong capital growth and that will continue to outperform the averages because of the demographics in the area. This will be an area where more owner occupiers will want to live because of lifestyle choices and one where the locals will be prepared to, and can afford to, pay a premium price to live.
  5. We look for a property with a twist  – something unique, or special, or different or scarce about the property, and finally
  6. A property where we can manufacture capital growth through refurbishment, renovations or redevelopment.

By following this 6 Stranded Strategic Approach, we minimise the risks and maximise the upside.

Each strand represents a way of making money from property and combining all five is a powerful way of putting the odds in our favour.

If one or two strand lets us down, I have three or four others supporting our property’s performance.

If you’d like some independent unbiased advice about getting started in property investment, or for one of Metropole’s property strategists to review your existing portfolio click here and organise a free strategic property portfolio review


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

'Small apartments set for a big future' have 9 comments


    February 3, 2016 Will Hi

    Hi Michael,

    Love your work.

    I am looking to buy into the Sydney area. It is in between 2 large universities, TAFE and a college. The space is above 50sqm and is affordable for me.
    It is a studio apartment and this will be my first investment so I’m hoping you can provide me some guidance.
    As mentioned above, you advised that a studio apartment is not a good idea.
    My thinking is that because it is near universities, and is close to the CBD, there would be potential for future students to purchase year after year. I also think there would be investors like where I am now who would be starting off and would like to purchase a similarly small investment.

    Thoughts welcome




    January 5, 2016 Robert.a

    Hi mike,in your opinion please,approx 450 k to spend,looking for good secure rental but for long term,I prefer east,south east,south. House or apartment etc not fussed,cheers


      Michael Yardney

      January 6, 2016 Michael Yardney

      Robert – what state are you in and do you have any other investments or a home?



    March 10, 2015 Kathy

    I’m sorry, but I find the supposed “trend” towards smaller one bedroom flats an excuse for developers to put up absolutely tiny little dog box kennels to which I don’t even have to bring my cat along to know I won’t be able so swing her around in it. Who decides that’s what people supposedly want? And are people only buying these because they have to, not necessarily because they want to? How many are being bought by investors who up and sell them a year later because the yields on them are so abysmal?

    They also consistently fail to put in adequate parking, on the supposed premise that if people live close enough to a few amenities they won’t need a car anyway. What utter and absolute rubbish! This is aided and abetted by Councils who live in some utopian world where nobody has a car, or if they do, they only have one. They have a very bare minimum parking requirement for residents and visitors resulting in cars clogging up streets, parking in front of other residences, making it near impossible for people exiting their own driveways to have clear visibility of the road, to put out rubbish bins, and making it next to impossible for cars, to drive the length of the street without having to stop and give way to traffic driving from the opposite direction and don’t even bother calling the emergency services if you require an ambulance or fire truck, they won’t be able to get through.

    Unfortunately the area I live (the inner ring, 12k from the Brisbane CBD) is on the way to becoming a ghetto slum with the amounts of flats being built here, and they’re mostly tiny pokey little places, with very few exceptions. As a result there’s a huge divide price wise between flats and houses here.

    There are only ever going to be so many singles or professionals with no children who want a one bedroom place, but that’s all that appears to be built at present because developers seem to think they need more stock to maximise their profit. This has certainly resulted in a glut in Brisbane.

    There’s a huge untapped market for blended families, where newly merged couples will actually require more bedrooms because every second weekend they may have three, four, five or more children at home. This need is definitely not being met at present.

    Speaking for myself as a single person, I can tell you I will NEVER EVER live in a flat. I love my house with its garden and no shared walls, floors, ceilings with other people, no hearing all their noise because it’s literally in the next room, no smoke from smokers, no exorbitant body corporate fees, no having to seek permission and rules about what colour I can paint my place, what renovations I can do, whether I can hang my clothes on my balcony or install an air conditioner, no pet restrictions, off street parking for several vehicles, and so many other benefits.

    And yes I DO have a lawn. And no I DON’T mow it. I get someone in to do that. Seriously, I found that the most ridiculous argument against having a house with a garden. Outsource it for goodness sake! If you live in a flat, you pay for garden maintenance and mowing through your body corporate fees anyway. Same difference.

    And yes, I am walking distance from shops, cafes, restaurants, public transport, cinemas, entertainment and all the other so called “conveniences” of living in the CBD. Without the crowds, noise, dust, pollution, complete absence of greenery and earth.


      Michael Yardney

      March 10, 2015 Michael Yardney

      Thanks for going to the trouble of leaving such a detailed comment



      May 5, 2015 steve

      well said Cathy, I believe this also buuuuuut, I buy R/E to get capital growth which means that I need to invest in areas that will have “over paid professionals” as this is where the heart buyer vs the head buys purchase. In a society that values convenience, attitude & lifestyle, I would keep an open mind to the possibility of other options for “investment” not personal preferences though



    May 4, 2013 Clayton

    Hi Michael,

    I am not from AUS, but I have read a few of your posts and this one really strikes home with a niche product I have been working on in the 1-bedroom rental sector. I really like the last few points you emphasize regarding how it is so important to NOT forget that it is important to ‘value’ the location and overall aura of the property (neighborhood, layout, etc.) which can help to retain the property’s value in the distant future.

    I’ve seen so many countless developments get thrown up and I scratch my head at not only their build-quality, but their longevity with future buyers/renters … (i.e. ‘Lack of Character!!)



    April 26, 2013 opinder

    Hi Michael,
    Does bank give loans on 1 bedders as they were not in favour of them few years back may be the lack of size in sqmts.
    One needs bigger deposit for 1 bedroom apartments. hope that is changed now.


      Michael Yardney

      April 26, 2013 Michael Yardney

      Yes banks are very happy to lend to 1 bedroom apartments, and no you don’t need bigger deposits
      Usually they require them to be larger than 50sq mt


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