They’re one of the most common property types in the country – but experts now agree the humble two-bedroom apartment is well and truly on the nose.
Once upon a time, apartments in general were rare outside of the inner cities, but in recent years they have fast become a legitimate lifestyle choice for Aussies across the country.
However, as the cost of living crisis takes hold hot on the heels of the Covid pandemic, the size and types of apartments we’re choosing to buy and live in is changing dramatically.
Harrison Astbury from mortgage comparison site InfoChoice told news.com.au two-bedroom apartments “exist in a sort of ‘netherworld’ at the moment”.
“They can present the ‘worst value’, with those intent on living alone opting for a cheaper studio or one-bedroom apartment, where it doesn’t matter if their workspace is in the living room,” he said.
“To make two bedrooms affordable, there often needs to be two people, and with hybrid/work from home setups, this can make them feel cramped.
“Many couples and smaller share houses will simply opt for a three-bedroom dwelling for not much more rent – one or two bedrooms for sleeping, and a spare for the study or as a spare room.”
Mr Astbury added that the industry was seeing a reversed trend now compared with during the pandemic, “where the average household size decreased from 2.6 to 2.55, adding to demand by about 140,000 dwellings across Australia”.
“Migration is also ramping back up, adding further pressure to apartment rents,” he said.
“We have seen this in SQM Research data, where unit rental asking prices have outperformed houses over the past 12 months in Sydney, Melbourne, Brisbane, Perth, Canberra, and Hobart.”
Anthony Ferraro, managing director of Salvest, which finances developer projects, told news.com.au that two-bedrrom, one-bathroom apartments are typically the “most difficult to sell”, as they do not yield as much profit and “do not allow an owner-occupier to be able to rent out the second room or use the space for additional overflow storage”.
And real estate agent, tax adviser and founder of MCA Assessors Marc De Diego Ferrer agreed that two-bedroom apartments are “definitely losing their appeal”.
“With rising housing costs, we’ve experienced many renters seeking more cost-effective options, such as shared living arrangements, co-living spaces, or smaller units with lower rents,” he said.
“In a time of rising rental costs, we can definitely see more and more people turning to smaller units, such as one-bedroom apartments or studios, due to their manageable rental payments. Two-bedroom houses, especially in urban areas with high rental prices, may not always be the most affordable choice for renters.”
But he added that affordability isn’t the only factor at play, with the changing demographics of renters – now more likely to be young professionals, single individuals, or small families – no longer needing as much extra space as in the past.
“They’re more comfortable with compact living spaces that are easier to maintain and fit their lifestyle needs,” he said.
Meanwhile, First National Real Estate’s chief executive Ray Ellis told news.com.au that “major lifestyle changes” were afoot, which were shaking up the real estate market.
“What we saw during Covid was that a whole range of people left their apartments to go home to the country or the family home in the suburbs because of safety concerns, job losses or loss of income,” he said.
“Then, at the same time, there was a move from one-bedroom apartments to two bedrooms, because people had to work from home, so you couldn’t have you and your wife or housemate working at the kitchen table together.
“That was a horrible lifestyle, so people wanted to rent places with a spare bedroom they could turn into an office – that was a trend during Covid.
“But what we’re seeing now is that while a lot of people are still working from home, a lot more are returning to the office, so they don’t need that extra bedroom in their apartment and they are moving back to one-bedroom, or staying in the suburbs … people don’t need the same amount of space.”
At the same time, investors were also being affected by Australia’s rising cost of living.
“Most apartments are purchased by investors. A one-bedroom apartment in inner Sydney with one car park is worth around $650,000, and a two-bedroom around $800,000, but the rent for the first one is around $500-$550, while the rent for the second is $750-$800, so for the outlay they’re not getting a much greater return on rent,” he said.
“So again, investors are probably looking for one-bedroom apartments, not for the lifestyle but for the return, which is far better for one bedroom than for two. That’s not to say two bedrooms aren’t being purchased, but investors are more likely to go for one bedroom.
“Whether they are investors or tenants, when it comes to cost of living pressures, everyone is in the same boat. And for investors, strata title costs have gone up by around 30 per cent, the cost of running an apartment is up by 20 to 30 per cent, so again, if you’re an investor who wants to cut costs … one-bedroom apartments is where you’ll go.”
Meanwhile, a recent Finder survey revealed Australian couples were moving in together quicker than planned to reduce bill pain, with one in 10 moving in with a partner earlier than planned to make rent more affordable.
The data shows 29 per cent of Gen Z and 17 per cent of Millennial couples had rushed romance due to financial pressures.
Sarah Megginson, money expert at Finder, said the rising cost of living has forced many Australians – particularly young people – to make some tough decisions.
“Rising costs are becoming a big concern for Australians, with many struggling to find affordable housing,” she said.
“It’s not surprising to see this rental crunch is prompting some people to turn to alternative living situations to cut down on expenses.”