If you are an off-the-plan investor, you may have noticed a decline in the number of one-bedroom apartments available. Here’s why one-bedroom units are losing their popularity.
Yes, two is better than one in most cases, but especially so in the off-the-plan apartment market of 2016.
Given the strength of the residential market and its relative affordability, buyers are shifting their focus away from one-bedders to slightly larger apartment models that offer greater flexibility, better lifestyle choices, higher rental yields and superior resale value.
Of the 50 developments Melbourne-based Marshall White Projects has rolled out in the three years since inception, the percentage of one-bedroom units in each building has typically ranged from 15 to 50 per cent.
In some inner-city or inner-fringe developments, the percentage of one-bedroom apartments proposed has been as high as 80 per cent.
This isn’t surprising when you consider the fact that any remaining stock in a development is likely to be a one-bedroom apartment. These flats are usually accompanied by incentives, rebates, discounts or other ‘hooks’ that resonate with the price sensitive, one-bedroom buyer, but are unappealing to downsizers.
From a developer’s perspective, an abundance of one-bedroom apartments also inhibits a project’s ability to substantially grow prices during the various selling stages and maximise their yield.
There are several reasons why the one-bedroom buyer, most commonly a single professional, has been resisting buying – namely the adjustments to the first home buyer grant and the challenges associated with a single income purchaser gaining finance approval.
With these roadblocks removed, these buyers are facing greater choice than ever with the amount of stock hitting the market. With competitive pricing and financing options now available, these buyers are stretching their budgets and distance from the city slightly further and investing instead in two-bedroom, two-bathroom models.
Marshall White Projects offers two-bedroom, two-bathroom apartments for about $550,000 to $650,000. These units are not only profitable from the developer’s point of view, they are also a safe bet for a purchaser.
Sixty-three per cent of all local and overseas buyer inquiries is about a two-bedroom, two-bathroom unit.
Marshall White Projects often requests architects limit the number of one-bedroom apartments and ensure they make up no more than 3 to 5 per cent of the overall product.
For example, of the past 11 developments launched by Marshall White Projects since July, nine have ruled out one-bedroom apartments altogether. All of these projects still sold out and at a higher than forecast yield.
Marshall White Projects is not alone in advocating for the two-bedder, with many financial and property advisers also steering investors and owner occupiers towards these apartments as they are proven to garner higher capital yields and significantly lower vacancy rate than their one-bedroom counterparts.
Marshall White Projects has reached the point where the one-bedders that dominated the Melbourne market for years are now seen to be too small and it has also coming to realise that while lavish three-bedroom apartments at the other end of the spectrum are, in some cases, as grand as any house, they only account for 27 per cent of total buyer demand.
As such, Marshall White Projects finds itself looking to the two-bedroom, two-bathroom model as a solution that feels just right.