Buying An Apartment: What To Look For

There are many positives about buying apartments. Here are just a few below.

• More affordable.
• Less property maintenance.
• Rental yield can be better than houses.
• Access to amenities such as a gym or pool.

• You don’t own the land, which many Australians don’t feel comfortable with.
• Generally don’t appreciate in value as much as houses.
• Strata and maintenance costs.
• Potentially less privacy.

Lawless says if you’re buying an apartment as an investor, you need to make sure there is longevity in your rental demand.

“It’s not like a train station is a short term consideration. It’s always going to be there. So being located close to efficient transport options and major working nodes is generally a really good rule of thumb for buying an apartment,” he says.

“It doesn’t necessarily mean that you’re buying close to the CBD or major office precincts. Some of the biggest employment nodes tend to be hospitals, and universities. You know that close to those areas there’s always going to be rental demand from students and from service workers.”

And just because an apartment might be cheap, doesn’t mean it’s good value. Even if you’re not looking to buy as an investment, at some point, when you do sell you would probably rather make a capital gain than a capital loss. Therefore it’s best to avoid apartments that are isolated and not close to public transport, shops and schools.

If you are buying for investment purposes or capital gains, the major capital cities are probably where you get the best value, although some areas are more desirable than others.

If he was looking to purchase an apartment today, Lawless says he would probably look to buy in Brisbane where the median apartment price is $494,785 and the gross rental yield is 5%.

“I’d probably be looking at Brisbane as my preferred option at the moment. Partly because Brisbane’s apartment market has had a really long run of fairly soft conditions. So it’s very affordable, yields tend to be higher as well. So your typical rental yield in Brisbane for apartments is about 5%. In Sydney, it’s only 3.7% and in Melbourne it’s only 4.1%,” Lawless says.

In terms of affordability, Adelaide might be cheaper—with a median apartment price of $436,462—but there is also a much smaller supply of higher density housing because houses are still quite affordable. The gross rental yield on apartments in Adelaide is 5%.

The capital city that looks the most affordable with a median apartment value of $376,428 and a gross rental yield of 7.2% is Darwin, but Lawless cautions that it is also the most volatile and comes with the most risk.

Darwin unit values went through a significant decline between 2008 and 2020 and are currently still well below those previous record highs.

“The typical apartment value in Darwin is still 26% below its 2010 peak, which is quite amazing considering what’s happened over the past couple of years,” Lawless says.

And the apartment market in Canberra has been oversupplied for some time, but is now coming into equilibrium with a decent gross rental yield of 5%.

As the data from CoreLogic highlights, houses generally have a higher value than units. Afterall, you are paying for the land the dwelling is on and increased privacy and control over what you can do in the space.

The value of units also does not appreciate as fast as the value of houses. There is a 60% difference between the median house and unit value in Sydney, and in Melbourne there is a 55% difference.

But on the positive side, an apartment can be a better investment as it is more affordable and can provide investors with a better yield. All the gross rental yields in the CoreLogic table for apartments are higher than those for houses.