Investors shape the new apartment market
Investors are buying the vast majority of new units and, for this reason, developments will be shaped to suit an investor market, according to a real estate company.
Speaking about the future of the apartment market, Colliers International Brisbane residential director, Andrew Roubicek, said that investors currently make up 85 per cent of the new apartment market.
With this in mind, new apartment stock may be set to undergo some changes, gearing away from larger properties to smaller dwellings.
“Investors are very price sensitive in terms of what they are willing to commit to, and with no desire to live in the property they are buying, they are purely looking at the return, and the best returns can currently be found in one-bedroom apartments,” Mr Roubicek said.
“The yields for one-bedroom apartments are more attractive because they are at a lower price point, and that’s driving buyer interest for one-bedroom apartments over two-bedroom apartments.”
Typically, he said, buyers are looking for properties between 45sqm and 52sqm, priced from $345,000 to $425,000 and that rental returns on a property in this price range would be at around six per cent. After depreciation, he said, this would be “almost paying for itself”.
“For apartments above $425,000 however, the investor would be more out of pocket,” he explained, saying this is causing developers to look into the future to weigh up their options about what type of product to build.
“If you look at current demand, it would make sense to build stock that will be attractive to investors – that is, smaller apartments with just one or two bedrooms,” he said. “The ideal mix might be 70 per cent one-bedroom apartments and 30 per cent two-bedroom apartments.”
This may make the larger apartments more difficult to come by, thus making them more valuable, especially as stock now seems to be being soaked up.
“This is what is happening now in Brisbane, and the Gold Coast will follow once the current stock is exhausted and new developments take shape,” he said.