Is Buying an Apartment a Good Investment?

Is buying an apartment a good investment?

In October 2024, the Federal Government passed the $10 billion Housing Australia Future Fund. The Fund is intended to create a secure, ongoing funding pipeline for social and affordable rental housing. With the introduction of the Fund, some investors may be concerned that it could impact property values, especially in the apartment market. However, with immigration expected to continue in large numbers (in the financial year to 30 June 2023, net immigration equated to over 500,000 people), people need places to live. Many of those people will choose apartments. 

New supply provides more choice

Over the coming years, newly built apartments are expected to be constructed in the middle rings of capital cities, predominantly near transport hubs and in some outer suburbs. Further, as the pace of new development struggles to keep up with population growth, it could positively impact rental yields and capital growth. The average time from planning to settlement in a 200-unit building is seven years. If population growth continues at its current pace, apartments will continue to be a good investment, especially if the price gap between detached houses and apartments closes. 

Whether it’s a small apartment suited to students or young professionals in urban areas or larger family-oriented builds in the suburbs further from the CBD, new apartment supply in the coming years will provide many options for investors. 

Social and affordable housing isn’t traditional investor stock

It’s important to remember that many new apartments built as part of the Housing Australia Future Fund won’t be traditional investor stock. This housing stock will likely be institutionally owned. These areas where new developments are expected to be constructed could create opportunities for investors looking for apartments in locations that will see an influx of population growth. 

Apartments can be a good entry into the property investment market

If you don’t have any investment properties or want to add to your portfolio, an apartment can be a good way to buy property instead of waiting for a house. Generally, apartments have a lower price point than detached homes so that they can be a good option, especially for rental yields in the current market. 

An apartment is a good investment, especially in a tight housing market. Not only can it provide consistent income, but you have an asset to grow your broader financial wealth or something to use as a nest egg if you sell it before retirement. And in buildings where the owner’s corporation does a good job of maintaining the building, you can expect to attract quality tenants who enjoy the convenience of apartment living.

Remember, this article is general in nature and is not financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.