One-bedroom units are far from a diminutive investments, writes Monique Wakelin
Many property investors are reluctant to include one-bedroom units in their investment portfolios, adhering instead to the mistaken belief that 'bigger is always better’ as far as real estate is concerned.
But changing demographics are making small apartments increasingly attractive to both young and older Australians– and the financial returns to investors can be significant.
Australia’s urban societies are changing rapidly in accordance with modern work practices, sophisticated lifestyle requirements and evolving family structures. A new demand is emerging for accommodation that services career oriented, single people and independent retirees. Escalating levels of divorce and separation are also fuelling demand for trouble-free affordable accommodation. One-bedroom units are ideal for these markets; however there is a surprising scarcity of suitably compact dwellings.
According to figures released by the Australian Bureau of Statistics (ABS) in November 2000, single-bedroom units make up just 3% (211,000) of the country’s seven million dwellings1. Whilst the concentration of one-bedroom units is higher in the heart of large cities, their relative scarcity is undeniable when compared to other property types. This meagre presence in the market can be attributed to numerous factors, including a greater demand in the 1950s – 1980s for large family properties, combined with much smaller numbers of older people living on their own.
In simple terms, there was little need in post-War Australia for single-resident dwellings.
By contrast, more and more people in Australia today are living alone. ABS statistics reveal that, in 1996, there were 356,364 single-person households in Victoria, representing an increase of 22.8% over 1991 figures2. This huge rise was most prevalent in urban areas.
Given this steep climb in the number of single-person households, there is a growing demand for well-located, low-maintenance units that cater for a highly diverse mix of residents.
The Young Ones
All indications are that we are about to enter a familial 'ice age’, whereby traditional households consisting of two parents and several children will become rarer. Current projections 3 indicate that couples without children in Australia will outnumber couples with children by 2016.
Not only are our younger generations increasingly opting out of child rearing, but they are also entering into long-term relationships and marriage much later in life. This means young, single people in the workforce are accumulating assets without the traditional burdens on their incomes associated with having a family.
Units or flats fill a void in property ownership for young people who are childless, financially independent and keen to enjoy sophisticated lifestyles without the heavy purchase and maintenance costs of a traditional house.
Another benefit of owning a unit is that, providing it is in a structurally sound building, there are usually fewer risks of encountering unforeseen major expenditures – an extremely important consideration for owners just embarking on busy, mobile careers.
The Not So Young
In a rapidly ageing population, quality low-maintenance and conveniently located accommodation is in the forefront of peoples’ minds as they near retirement. In 1996 there were 908,000 residents aged 65 years and over in Australia, more than 300,000 of whom lived alone. By 2021, forecasts indicate that up to 669,000 out of a total 1.7 million people aged 65 and over will be living on their own4. This clearly indicates that demand for single-person accommodation in this age group will double in the next 20 years or so.
The ability to anticipate one’s costs of living is critical for retirees who are investing in property. Single-bedroom units offer many benefits to older occupants. The Body Corporate relieves residents of day-to-day repairs and maintenance issues affecting the exterior of the building and common property, while running and utility costs are comparatively low for both tenants and landlords. Often people are prepared to pay a premium for a unit if they have a clear idea of what their future expenses will be. The peace of mind of knowing a property will require minimal maintenance, for instance, is like an insurance policy against stress in later life.
Bedrooms without Beds
In 1997-98, more than a third of Australian households with three bedrooms had only two people living in them. Similarly, 42% of all two-bedroom dwellings had only one resident5. This suggests that the term 'bedroom’ is rapidly becoming a misnomer. There is ample anecdotal evidence that bedrooms are being used as de facto studies, offices, home business centres, storage rooms or computer rooms.
Another lifestyle trend is for single residents and families to spend more time away from home, therefore minimising the need for expansive entertainment areas in their permanent residences. One glance at the bustling crowds inside suburban cafes is proof that the tradition of families spending time together at home is waning.
Whilst many Australians do not need extra bedrooms, they are keen to make use of as much additional space as possible. A one-bedroom unit with plenty of living space is likely to serve the same purpose as a nominal two-bedroom apartment for a growing proportion of residents.
All of these factors suggest that spacious one-bedroom units, particularly those in inner-suburban localities close to shops and entertainment venues, have the potential to be fine investments indeed, both in terms of capital growth and overall yield.
Monique Wakelin is a director of Wakelin Property Advisory and author of
Streets Ahead- How to Make Money From Residential Property.Contact Wakelin Property Advisory
Ph. 03 9859 9595
Web www.ownproperty.com.au
1. Australian Bureau of Statistics, Australia Now – A Statistical Profile Housing, Number of Bedrooms , 2000.
2. Australian Bureau of Statistics, Australia Now – A Statistical Profile Population, Households and Families, 2000.
3. Australian Bureau of Statistics, Household and Family Projections, Australia, 1996 to 2021, October 29, 1999.
4. Ibid. (3)
5. Ibid. (1)
These article and many more,
were in the
(15th edition) of Your
Retirement, Your Life.
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