Why a small Australian apartment may not be a cool investment

FindAHomeLoan Australia

If you’re an overseas investor (or an expat) looking to buy property in Australia, you need to be very careful.


Potential issues with Australian apartments

Apartments are also called ‘units’ in Australia, so if you’re doing some online research, that’s a term you’ll often come across. Potential issues with Australian apartments/units include:

  • Not being in a desirable location. As with any investment property, location is crucial. You’ll have a much better chance of attracting high quality tenants and achieving capital growth if you buy an apartment/unit in a desirable location. Look for one that is close to the CBD in one of Australia’s major capital cities, has good access to public transport, and is close to shopping and recreational facilities.
  • Their size. A small apartment/unit will generally be harder to rent out to tenants, and their capital growth prospects are usually more limited as well. Some banks and lenders will either lend less for units/apartments with an internal size less than 50square metres, or they will refuse to lend for them. To avoid these issues, look for apartment/units that have at least 50 square metres of floor space (excluding any balconies). Make sure there is enough living, kitchen and bedroom space.
  • Studio apartments. Studio apartments are self-contained units where every feature is contained in a single room except the bathroom. Apartments/units with separate bedroom, kitchen and living areas generally attract higher rental yields and have better capital growth prospects than studio apartments
  • Serviced apartments. There are much higher property management fees that you need to consider with a serviced apartment. These will be ongoing, so you need to factor this into the financial planning for your investment property if you’re considering a serviced apartment.
  • Being old. Even though there are many new developments, there are also many apartment/unit complexes in Australia that are quite old. It may also be harder for you to attract tenants and achieve capital growth if you buy in an older complex.
  • Not having enough natural light. Look for a unit/apartment that is well located in the complex in terms of attracting natural light.
  • Not having dedicated car parking spaces. This helps to make your property more attractive to potential tenants and can improve your capital growth prospects.
  • Current oversupply. There is currently an oversupply of apartments/units in Australia, leading many analysts to conclude that this will affect both their capital growth and rental yield prospects in the short-term. An oversupply of apartments/units is problematic for two reasons:1) It is harder to rent an apartment/unit to tenants in those market conditions. Tenants have more choice available, and the competition between landlords for tenants causes rental yields to drop.2) It is harder for apartment/unit owners to sell their properties in those market conditions.  Many are forced to drop their prices to make a sale, which affects the market value of all apartments/units in an area.

How we can help

Quality apartments/units in highly desirable locations will often overcome the issues we have identified. It’s important to do your research to make a wise buying decision. Or you could choose to buy a house and land package or an existing house instead.

At FindAHomeLoan, sourcing mortgage solutions from Singapore and Australia for investors looking to buy property in countries like Australia is one of our specialities. We can help you navigate Australia’s tough mortgage lending restrictions for foreign investors.

We would be happy to speak or meet with you to discuss your needs and goals. We believe you should have a mortgage partner.  Just like you engage a mechanic to make your car run smoothly, we can do the same with your investment property financing.

We’ll take the time to understand your circumstances and provide the best advice.

Contact us now to find out how we can help you!

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