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Apartments emerge as a top investment candidate

Strong demand for apartments has made units an enticing proposition for investors, with a host of locations likely to see rising prices in the next six months.

According to Hotspotting’s National Top 10 Apartment Hotspot report, Queensland, NSW, Victoria, South Australia and the ACT all feature suburbs where apartments are likely to outperform.

Hotspotting Director Terry Ryder said apartments had outperformed standalone houses this year in a number of ways, including faster growth in rents, superior price growth for much of the past 12 months and a growing share of new dwelling approvals.

“There is a plethora of reasons why apartments are increasingly becoming the property of first choice for home buyers and investors,” Mr Ryder said.

“It’s not just about affordability – although that plays a big role in our largest cities – but our population is simply embracing apartment living more because of the opportunity to reside in more desirable locations as well as having easy access to lifestyle precincts.”

Mr Ryder said investors had long been attracted to apartments due to their historically higher yields and solid demand from tenants. 

“Now, we are seeing rental growth in apartments outpace houses, as well as superior price growth over the past year, too,” he said. 

“We have significant numbers of downsizers active in the market, as well as hundreds of thousands of overseas migrants arriving on our shores, with many of them coming from cities where apartment living is the norm. 

“All of these factors point towards a solid future for apartments that are designed and built to be long-term homes of first choice for tenants and owner-occupiers alike.

“Developers have also been constructing more owner-occupier stock, such as three- and four-bedroom apartments, as well as offering superior resident facilities such as rooftop and BBQ areas, infinity pools and spas, private dining rooms, and even the complimentary use of vehicles for those who don’t have transport.”

According to the report, most of the in-demand apartment locations are in Queensland, which is currently experiencing a high level of population growth.

Hotspotting General Manager Tim Graham said Annerley, in Brisbane, is likely to benefit from the positive impacts of the 2032 Olympics, as a near neighbour of the main event venue, Woolloongabba.

“Beyond of the Olympics’ influence, Annerley is a well-located and well-connected suburb in Brisbane’s inner-south,” Mr Graham said.

He said units in the suburb sell quickly and are priced affordably compared to houses.

Also in Queensland, the Sunshine Coast has been one of Australia’s strongest markets since 2020, boosted by the region’s big infrastructure spend and its key role in the exodus to affordable lifestyle trend. 

Mr Ryder said research has shown the Sunshine Coast to be one of the nation’s top choices for Australians relocating from the big cities to the regions.

“Exceptional price growth from 2020 to 2022 means the Sunshine Coast has become a much pricier market to get into – and market attention has switched to the more affordable Caloundra precinct at the southern end of the coastal strip,” he said. 

“There are only a handful of sales each year and listings typically sell within a fortnight.”

“Vacancies are low, and rents have risen steadily in the past three years – while the long-term annual capital growth rate is around 13 per cent.”

Mr Graham said the Gold Coast’s Southport is also ripe for future growth in apartment values.

“Vacancy rates here are low and usually more stable than the Gold Coast tourist spots that attract the transient population, and prices are more affordable,” he said.

“There is also a higher-than-average number of renters seeking homes, providing openings for investors.”

He said Yorkeys Knob, a small beach suburb in Cairns, is a location where units are tightly held and listings sell quickly.

In NSW, several suburbs in Sutherland Shire have been rezoned to include more apartments, for which there is growing demand.

“Gymea is a ‘nerve centre’ suburb, with major medical and education amenities, Westfield Shoppingtown and rail links to central Sydney,” he said.

“The price gap between houses and apartments is boosting demand for attached dwellings – in the suburb of Gymea, the median price for units is roughly half that of houses.”

Mr Ryder said one of the emerging trends in the Greater Sydney property market is growing numbers of people buying apartments in well-connected locations where they typically cost less than half the price of houses. 

“The trend is driven by downsizers, young buyers and others seeking lifestyle and affordability in good locations,” he said. 

“There is particularly prevalent in the Inner West on the fringe of the Sydney CBD, where Stanmore is a leading example – the median house of $2 million compares with the median unit price of $765,000, according to CoreLogic.” 

Mr Graham said in Victoria, Clayton is also attracting a lot of interest from apartment buyers.

“The suburb of Clayton is well-located beside Monash University and Monash Medical Centre,” he said.

“The suburb’s median house price is $1.2 million but typical apartments are in the $700,000s – with yields above four per cent, supported by a low vacancy rate of 1.8 per cent in June this year.”

Mr Graham said Kensington is an inner-city suburb of Melbourne known for its village feel, cafes, and diversity of architecture, including Victorian terraces, cottages, warehouse apartments and new structures in the west of the suburb.

“The suburb is hilly in sections and contains established tree-lined streets,” he said.  

“The median house price is $1.18 million but the median for units is half that level – and the suburb’s affordability and lifestyle is attracting growing numbers of home buyers and investors.”

According to the report, in Adelaide, Mitchell Park has currently seen demand increasing from unit buyers, while Belconnen in Canberra is also attracting attention given its affordable price and location.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.