One bed units outperforming
I recently read an article by property writer Jonathan Chancellor, about the rental increase rates on one bed units here in Sydney. According to PRDNationwide statistics, the growth in rents is exceeding that of two bed units, with five year increases in rents very strong in the top five local government areas of Canterbury, Rockdale, Ashfield, Parramatta and Ryde. Five year growth rate increases are showing an average between 9.5% to 11.8% in median rents for one bed units in these LGA’s, a surprisingly healthy result for units often ignored by investors.
However, what we need to keep in mind is that our demographic is changing. Whilst families remain our most dominant group, lone households are our fastest growing group here in Australia, with the ABS predicting that they are projected to grow by an average of 2.2% per year, from 1.9 million in 2006 to 3.2 million in 2031. Other factors, such as affordability and convenience of location mean that increasing numbers of single person households are opting for the cheaper and smaller dwelling ie: studio and one bed units.
Of course, the other advantage of smaller units for investors is that they present an entry level opportunity to get a foot in the door of the real estate market. With prices starting from the $200,000 range here in Sydney they should be considered for those investors who are after a more affordable investment, but one not necessarily lacking in return, if the latest increases are any indication. There is also no hard evidence that two bedroom units outstrip one bedders when it comes to capital growth, despite popular belief to the contrary.