Originally published by WHICH Investment Property?
Investors who are considering adding an apartment to their portfolio need to know a few things first.
Generally, I’m not a fan of apartments as an investment vehicle as they lack the scarcity factor that makes them likely to deliver sustainable, long-term capital growth.
Apartment size has been manipulated over time to be more focused on providing a suitable “financial commodity” than a home.
About 85 per cent of apartments in the city of Melbourne are sold to investors and many are pre-sold in Asia. Despite increases in construction costs, the appealing price point of $450,000 to sub-$500,000 has been maintained – simply by reducing the size of the apartments.
I was pleased to see in the media last week that the NSW Land and Environment Court overturned the long-standing accepted practice of Sydney’s developers and planners and increased the required minimum size of proposed apartments.
NSW introduced minimum apartment sizes in 2002 as part of SEPP 65 (State Environmental Planning Policy No. 65) design rules and these have long been the envy of planners and designers in Victoria, which does not have similar rules.
While the industry and planning authorities have long used one set of size guidelines, last week’s judgement, over a development application in Botany Bay by the Meriton group, identified a separate table – which specifies apartments nearly half as big again in some cases – as the new required reference point.
The new minimum, according to a separate table identified by Justice Terence Sheahan in the same planning document, increases the required size from 50 to 58 square metres for dual-aspect apartments and up to 73.4 square metres for the more common single-aspect apartments.
The judgement makes it easier for councils to reject development applications, said Clare Brown, a director of planning at consultancy Urbis.
“Even if it’s a good design and a good urban design, if it has internal areas that are below that in the table they can refuse the application on that ground alone,” Ms Brown said.
In Singapore 82 per cent of Singaporeans live in Housing Development Board (HDB) flats. The HDB has the following minimum space requirements:
- 1-bed apartment: 45 square metres
- 2-bed apartment: 60 to 65 square metres
- 3-bed apartment: 90 square metres
New York has a minimum apartment size of 37 square metres. However there is also a large amount of family sized accommodation available in the city.
It is easy to see how Asian investors may view a 50 square metre one-bed apartment as a good size, however, Australian cities do not have the same overcrowding issues as many Asian cities and it is questionable if living in “shoe boxes” is sustainable in this country.
I recommend if you are looking to buy an apartment as an investment option you only consider a one-bed that is 58 square metres, plus balcony and a car space or larger; and a two-bed that is over 80 square metres, plus balcony and car space with storage.
It is also preferable to be in a smaller, low-rise development with minimal body corporate fees.
Having ample lifts to service the complex and suitable storage are desirable features.
To maximise your investment outcome, you want your apartment to appeal to owner-occupiers when you go to sell, so be discerning about the features that provide for a comfortable long-term home.