Which is better: one or two-bedroom apartment?

We invest in property to create wealth. History suggests that property investment has been the most consistent wealth creation tool out of all the asset types. Buying the right property can accelerate the path in which you take to create wealth. A common misconception held by someone unfamiliar with property is that the larger the asset, the stronger it will perform. As an example, a house is superior to an apartment and/or a two-bedroom apartment is superior to a one-bedroom apartment.

The Blue Wealth research methodology has always placed a strong emphasis on finding the right property, relative to the suburbs demographic and housing composition. Matching a property with the market demands leaves you well-positioned from both rental and resale perspectives.

As I mentioned earlier, the assumption of many is that two-bedroom apartments outperform one-bedroom apartments. We recently conducted a study on the Sydney market to see how the growth in one and two-bedroom apartments has differed pending the distance the suburbs were from the city. Grouping suburbs as either inner ring or middle ring allowed us to review suburbs individually. The inner ring has been selected from suburbs within 1 and 8 kilometres from the CBD. Suburbs such as:

 

Sydney – Inner Ring

Suburb 1 BED 2012 – 2018 2 BED 2012 – 2018
Darlinghurst (1km) 55.5% 65.7%
Surry Hills (1km) 59.1% 62.7%
Redfern (3km) 68.5% 80.8%
Alexandria (4km) 55.5% 63.2%
Glebe (3km) 53.6% 59.7%
Stanmore (6km) 51.6% 61.1%
Leichhardt (5km) N/A 61.3%
Balmain (6km) 32.4% 62.0%
Newtown (4km) 61.7% 60.8%
Erskinville (6km) 45.1% 60.3%
Roseberry (6km) N/A 53.1%
Kensington (6km) 74.5% 68.6%
Ashfield (8km) 72.4% 55.2%
Average 57.3% 62.6%

The middle ring suburbs have been selected from within 9 and 20 kilometres from Sydney’s CBD.

 

Sydney – Middle Ring

Suburb 1 BED 2012 – 2018 2 BED 2012 – 2018
Kogarah (11km) 68.7% 55.7%
Strathfield (11km) 68.1% 61.3%
Maroubra (9km) 57.3% 54.7%
Burwood (10km) 88.9% 58.2%
Cronulla (20km) 76.7% 75.0%
Hurstville (14km) 52.5% 48.3%
Parramatta (20km) 55.0% 67.4%
Ryde (12km) 96.8% 66.3%
Brookvale (13km) 55.2% 66.7%
Dee Why (15km) 69.2% 66.3%
Gladesville (9km) 72.2% 71.4%
Freshwater (13km) 60.7% 61.9%
Breakfast Point (9km) 44.8% 77.1%
Average 66.6% 63.9%

 

Unexpectedly, one-bedroom apartment grew at a faster rate than two-bedroom apartments in outer ring and two-bedroom apartments grew at a faster rate than one-bedroom apartments in the inner ring. In the study we refrained from using suburbs where data was based on less than 15 sales.

The return on your property investment is two-pronged and to assess the returns of a property you need to consider the rental yield as well as capital growth. Broadly speaking, in all these suburbs, one-bedroom rental yields have remained higher than two bedrooms over the same period.

In Sydney, the significant sprawling price growth has stretched the demand for one-bedroom apartments further out from the city.

What this article tells us is that you should be led by research and data rather than perceptions. According to the ABS, over the same period, Sydney’s median house price grew by 61.1%. The data above indicates that apartment growth matched median house price growth and again, when considerations are made for the far superior yields, the return on your investment of an apartment has been superior.

With the guidance of Blue Wealth and the implementation of our research model we help our clients to find the right property within a market.


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