{"id":38143,"date":"2025-04-10T15:30:00","date_gmt":"2025-04-10T05:30:00","guid":{"rendered":"http:\/\/propertyupdate.com.au\/?p=38143"},"modified":"2025-04-16T23:07:13","modified_gmt":"2025-04-16T13:07:13","slug":"one-bedroom-two-comes-apartments-size-matter","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/one-bedroom-two-comes-apartments-size-matter\/","title":{"rendered":"One bedroom or two? When it comes to apartments, size does matter"},"content":{"rendered":"

Be careful\u2026 a new wave of sub-standard 1-bedroom apartments is set to catch some investors out.<\/strong>
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Whether or not property investors should consider adding a one-bedroom apartment to their portfolio is not just a question of demographics and demand these days \u2013 in other words, whether a market exists for smaller properties \u2013 but also whether you\u2019ll be able to finance the asset.<\/p>\n

Lenders are increasingly cautious as a veritable deluge of new one-bedroom apartment stock is on the brink of saturating the Sydney, Brisbane and Melbourne CBD property markets<\/span>.<\/span><\/p>\n

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Note: <\/span>Australia's local and international developers have been encouraged to build relatively \u2018cheap\u2019 generic high-rise apartment buildings, and then spruik them to punters as off-the-plan property investments<\/a>.<\/p><\/div><\/div>\n

\u2018Micro apartments\u2019 are popping up at a rabbit-like rate in vertical monoliths across our major city skylines, with some projects marketed specifically as student or furnished corporate accommodation, where the promise of \u2018guaranteed rent returns\u2019 is used to entice novice investors.<\/p>\n

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Banks are wary<\/span><\/h2>\n

Lenders are getting nervous about the sheer volume of smaller, high-rise apartment stock (particularly anything purpose-built) being targeted at investors and, in particular, those wanting to acquire assets within self-managed super funds.<\/p>\n

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Note: <\/span>Anything under 40 square metres is generally a no-go zone for wary lenders, who know the unfavourable resale prospects for such restrictive accommodation in terms of liveability (for tenants or owner occupiers), make this a risky prospect to take on as security over a mortgage.<\/p><\/div><\/div>\n

<\/div>Then there\u2019s the likelihood that your valuation on settlement will come in lower than the original purchase price, giving lenders yet another reason to decline finance on such a deal.<\/p>\n

Adding to the problem are a number of accountants and financial planners, especially those who \u2018specialise\u2019 in self-managed super funds, who get paid generous commissions (sometimes as much as $30,000 per client) to on-sell developers\u2019 apartment stock.<\/p>\n

These less-than-scrupulous \u2018professionals\u2019 target unsuspecting investors who believe they\u2019re being given \u2018advice\u2019, when really they\u2019re just getting a cleverly dressed-up sales pitch.<\/p>\n

Quality over quantity<\/span><\/h2>\n

By now, you\u2019re probably thinking that investing in anything with less than two bedrooms is not even an option.<\/p>\n

This could be confusing for some, as I\u2019ve written about why apartments make great investments and about the increasing number of downsizing baby boomers and young professional singles and couples, who want low-maintenance, compact inner city homes these days.<\/p>\n

The fact is, a one-bedroom apartment can be a smart investment<\/span><\/span> so long as, like with any other property, it meets certain parameters to ensure long-term potential for exceptional capital growth.<\/p>\n

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Note: <\/span>Of course, you need to be able to finance your purchase as well, so never look at anything less than 50 square metres in size.<\/p><\/div><\/div>\n

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<\/div>I know I said 40 was the banks\u2019 no-go zone, but between 40 and 50 is a grey area you\u2019re better off staying well away from.<\/p>\n

Adding to this problematic \u2018grey area\u2019 is the ongoing dispute between developers and their sales agents and surveyors, who have vastly different ideas about where you measure to determine an apartment\u2019s size.<\/p>\n

The former like to use external perimeter walls to make their product seem bigger in those glossy marketing brochures, whereas the latter (and the lenders they work for) staunchly measure from inside the premises.<\/p>\n

You can see how this distinction could cause the finance process to get very messy indeed.<\/p>\n

So what makes for a good \u2018smaller\u2019 apartment investment?<\/span><\/h2>\n