Property News, Insights & Education

    The Rise of One-Bedroom Units: A Smart Investment Choice

    • Once despised by the investment community, one-bedroom units are fast becoming one of the smartest investments people can make
    • In the next 9 years, one-bedroom units will be the most commonly built dwelling type
    • With low entry costs and high rental returns, one-bedroom units are perfect for first-time investors

    For many years, one-bedroom units have been shunned by the investing community. 

     

    The horror stories of ‘bait-and-switch’ Gold Coast apartments are still burnt into people’s memories. 

     

    However, it’s time for this old-school thinking to adjust. Times are changing, and one-bedroom units are fast becoming a smart investment. 

     

    There are two major reasons for this. 

     

    Reason #1. The rise of the single-person household

     

    There’s no such thing as a typical household in Australia any more. 

     

    Houses for Mum, Dad and the 3 kids were once the dominant force in the real estate market. 

     

    However, these days the average household is shrinking, and from the previous census to the latest one, we experienced a drop from 2.6 people per household to 2.5. 

     

    And it has been coming down for a long time. 

     

    In fact, the National Housing Finance and Investment Corporation has forecast that within 5 years, the growth of single-person households will overtake all other types. 

     

    According to their forecasts, between now and 2032, more single-individual households will be built (adding 563,000 dwellings), beating dwellings for couples and families (adding 533,000 houses). 

     

    And the ABS predicts that by 2041, single-person households will make up approximately 26% of all households in Australia. 

     

    That’s 1 in 4 houses. 

     

    This chart demonstrates how strong this demand is.

     

    Rising-trend-in-single-person-households

     

    There are, of course, many reasons people are living alone, or at least choosing one-bedroom units. 

     

    A major one is divorce and relationship breakdowns. 

     

    Another is that people are having families later, if at all. 

     

    In the last 10 years, the age women have their first child has increased by 15 months. 

     

    And this means there are more singles and childless couples who find one-bedroom units ideal for them. 

     

    In fact, the number of childless couples has doubled since 2006. 

     

    One-bedroom units are ideal for many cashed up couples who prefer to spend their money on their lifestyle (restaurants and entertainment), on living in trendy suburbs or the CBD, and be closer to work rather than on larger, more expensive housing. 

     

    We also have an ageing population, and units such as these are an excellent downsizing option. 

     

    They are also a good option for single or widowed elderly people.

     

    Finally, and it’s surprising to say this in this day and age, but more young women are still joining the workforce, boosting demand for smaller accommodation. 

     

    ME Bank, a division of the Bank Of Queensland, reports a continuing climb in the number of female loan applicants, along with an increase in the average loan size. 

     

    It’s no wonder that the changing demographics have made one-bedroom units the fastest-growing dwelling type in Australia. 

     

    Reason #2. Excellent investments

     

    One-bedroom units ‘tick a few boxes’ for investors, making them an attractive option. 

    They are highly affordable.

     

    Affordable-entry-to-property-market-with-one-bedroom-units

     

    The median house price in Australian capital cities has soared above $900,000 today. 

     

    And this puts real estate investing out of reach for many first-time investors.

     

    However, one-bedroom units can get investors into the market earlier so they don’t miss out on any capital growth. 

     

    According to data from realestate.com.au, in major capital cities ... one-bedroom units are between 58% and 75% cheaper than two-bedroom units.

     

    The median price in Melbourne is just $371,000 and $375,000 in Brisbane. 

     

    This lowers the barrier to entry for first-time investors without access to huge deposits. 

     

    And it lets people access the market who would normally be locked out. 

     

    Higher rental yields

     

    One-bedroom units typically enjoy larger rental returns than large properties. 

     

    The returns are even higher than those from two and three-bedroom apartments. 

     

    Since they are also in huge demand, vacancy rates for units in the right locations are also extremely low. 

     

    Take a look at rental yields for 1, 2 and 3-bedroom units from Brisbane. 

    This trend is the same across all major capital cities. 

     

    Yields_jan_5_24

     

    Lower maintenance and strata fees

     

    Another benefit of one-bedroom units is the upkeep expenses which are lower than for larger dwellings. 

     

    With fewer rooms, there is less to manage. 

     

    And strata fees tend to be less than for larger apartments because of their smaller footprint. 

     

    See why one-bedroom units are a smart investment?

     

    With a huge demographic shift underway towards smaller dwellings, one-bedroom units are going to become more and more popular. 

     

    Given their low cost of entry plus high rental returns, they can be an ideal starting point for first-time investors who want to get into the market.