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Investment opportunities increase as capital city units become more affordable

On Sep 27 2013
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Purchasing an apartment as a property investment has always been a favourite for many investors ...

Purchasing an apartment as a property investment has always been a favourite for many investors looking to turn a profit from rental yields in dense urban environments like capital cities.

A recent RP Data article has indicated that could be an increasingly popular real estate decision to make.

In a September 26 article, Senior Analyst Cameron Kusher has highlighted the affordability of capital city units over the last 12 months. The value of these apartments has grown by 3.2 per cent nationwide, in comparison to a 5.3 per cent increase for detached houses.

"Units offer a more affordable price point at which to enter the housing market. Not only are they more affordable, they are often most abundant within inner city areas where many people aspire to live and from an investment perspective they tend to offer better rental returns," wrote Mr Kusher in the article.

For example, the gross rental yield expected from a house in a capital city sits at 4.1 per cent, while an apartment will yield a larger return of 4.8 per cent.

Coupled with the affordability of the unit, this could indicate an opportunity for investors to secure a piece of prime real estate in one of Australia's capital cities in the near future.

Furthermore, with an expected population growth of 1.5 million people by 2030 in Sydney, there are a number of initiatives being undertaken to help increase the number of dwellings in the New South Wales capital.

Mr Kusher said that this is also fuelling the investor fire, with many looking towards these developments as potentially viable property investments to add to their portfolio, catering towards new home buyers and migrants to the city.

"Over the 12 months to July 2013, there were 66,185 units approved for construction across the country. Unit approvals accounted for a near record high 41.5 per cent of all dwelling approvals over the year," wrote Mr Kusher.

"Clearly over the coming years, we are likely to see more and more medium and high density residential product delivered to the market, most of which will be in central areas of our capital cities."

The growing gap between the value of homes and units also makes them attractive to first home buyers, who want to enjoy the benefits of living in a high density metropolitan area, but can't afford to purchase a house in the community.

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