Many
property investors are reluctant to include one-bedroom units in
their investment portfolios, adhering instead to the mistaken belief
that "bigger is always better" as far as real estate is concerned.
But
changing demographics are making small units increasingly attractive
to both young and older Australians-and the financial returns to
investors can be significant.
Australia's
urban societies are changing rapidly in accordance with modern work
practices, sophisticated lifestyle requirements and evolving family
structures. A new demand is emerging for accommodation that services
career oriented, single people and independent retirees. Escalating
levels of divorce and separation are also fuelling demand for trouble-free
affordable accommodation. One-bedroom units are ideal for these
markets, however, there is a surprising scarcity of suitably compact
dwellings.
According
to figures released by the Australian Bureau of Statistics (ABS)
in November 2000, single bedroom units make up just 3% (211,000)
of the country's seven million dwellings1.
Whilst the concentration of one-bedroom units is higher in the heart
of large cities, their relative scarcity is undeniable when compared
to other property types.
This
meagre presence in the market can be attributed to numerous factors,
including a greater demand in the 1950s-1980s for large family properties,
combined with much smaller numbers of elderly people living on their
own. In simple terms, there was little need in post-War Australia
for single-resident dwellings.
By
contrast, more and more people in Australia today are living alone.
ABS statistics reveal that, in 1996, there were 356,364 lone-person
households in Victoria, representing an increase of 22.8% over 1991
figures2.
This huge rise was most prevalent in urban areas.
Given
this steep climb in the number of single person households, there
is a growing demand for well-located, low maintenance units that
cater for a highly diverse mix of residents.
The
Young Ones
All
indications are that we are about to enter a familial 'ice age',
whereby traditional households with two parents and several children
will become rarer. Current projections3
indicate that couples without children in Australia will
outnumber couples with children by 2016.
Not
only are our younger generations increasingly opting out of child
rearing, but they are also entering into long-term relationships
and marriage much later in life. This means young, single people
in the workforce are accumulating assets without the traditional
burdens on their incomes associated with having a family.
Units
or flats fill a void in property ownership for young people who
are childless, financially independent and keen to enjoy sophisticated
lifestyles without the heavy purchase and maintenance costs of a
traditional house.
Another
benefit of owning a unit is that, providing it is in a structurally
sound building, there are usually fewer risks of encountering unforeseen
major expenditures-an extremely important consideration for owners
just embarking on busy mobile careers.
The
Not So Young
In
a rapidly ageing population, quality, low maintenance and conveniently
located accommodation is in the forefront of people's minds as they
near retirement. In 1996 there were 908,000 residents aged 65 years
and over in Australia, more than 300,000 of whom lived alone. By
2021, forecasts indicate that up to 669,000 out of a total 1.7 million
people aged 65 and over will be living on their own4.
This clearly indicates that demand for single person accommodation
in this age group will double in the next 20 years or so.
The
ability to anticipate one's costs of living is critical for retirees
who are investing in property. Single bedroom units offer many benefits
to older occupants. The Body Corporate relieves residents of day-to-day
repairs and maintenance issues affecting the exterior of the building
and common property, while running and utility costs are comparatively
low for both tenants and landlords. Often people are prepared to
pay a premium for a unit if they have a clear idea of what their
future expenses will be. The 'peace of mind' of knowing a property
will require minimal maintenance, for instance, is like an insurance
policy against stress in later life.
Bedrooms
without Beds
In
1997-98, more than a third of Australian households with three bedrooms
were occupied by only two people. Similarly, 42% of all two-bedroom
dwellings had only one resident5.
This suggests that the term 'bedroom' is rapidly becoming a misnomer.
There is ample anecdotal evidence that bedrooms are being used as
de facto studies, offices, home business centres, storage rooms
or computer rooms.
Another
lifestyle trend is for single residents and families to spend more
time away from home, therefore minimising the need for expansive
entertainment areas in their permanent residences. One glance at
the bustling crowds inside urban cafes is proof that the tradition
of families spending time together at home is waning.
Whilst
many Australians do not need extra bedrooms, they are keen
to make use of as much additional space as possible. A one-bedroom
unit with plenty of living space is likely to serve the same
purpose as a nominal two-bedroom apartment for a growing proportion
of residents.
All
these factors suggest that spacious one-bedroom units, particularly
those in inner-suburban localities close to shops and entertainment
venues, hold considerable rental and capital growth potential, making
them a worthwhile part of a property investment portfolio.
1.
Australian Bureau of Statistics, Australia Now-A Statistical Profile
Housing,
Number of Bedrooms, 2000.
2. Australian Bureau
of Statistics, Australia Now-A Statistical Profile Population,
Households and Families, 2000.
3. Australian Bureau
of Statistics, Household and Family Projections, Australia,
1996 to 2021, October 29, 1999.
4. Ibid. (3)
5. Ibid. (1)
©
Copyright Australian Property Investor magazine. Reprinted with
permission.
