How to Select the Right Property

A number of clients have recently asked me if they should invest in a one or a two bedroom apartment. My answer remains that it depends on where you invest. Generally speaking, as you depart from a city centre household sizes and the demand for larger accommodation increases. As an example, the inner ring of our capital cities are dominated by single person and couple without children households. As such, one would expect a high proportion of demand for smaller single room dwellings.

To test this theory, we conducted a study on the performance of one and two bedroom apartments in Sydney City, our sample consisting of one and two bedroom apartment sales in the harbour city between January 2005 and November 2015.

The figure below tracks the growth in the median price of both a one and a two bedroom apartment in Sydney City over the past decade. Over this period, one bed apartment prices increased 83.9 per cent while two bed apartment prices increased 88.1 per cent, a statistically insignificant difference. Given that more than a third of households are single person occupied and two thirds have two people, the results we see below aren’t surprising.

Had we been looking at the same figure in one of our outer suburbs, the result would have been significantly different, a fact I’ll share in the coming weeks.

As investors we should avoid contemplating the merits of the right property without putting an equal focus on the extent to which that property is suited to the market in which it’s located. By isolating the right property in the right market we give ourselves the greatest opportunity for capital growth.

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