Studio apartments - a good investment?

Studio apartments have always been a staple of any development, but until recently they have always served as only a small percentage of the overall build. Recently, however, developers (and investors) have been reaping the benefits of these compact units, and the high profits they can offer to the discerning individual.

Recent trends have shown that studio apartments are usually the first to be sold by a developer, as they are more often than not the cheapest options for investors. With this, developers are also keen to include these in the first phases of their builds to generate income for building the rest of their development, or instant capital. Studio apartments are a great choice for newer investors who want to start small, or for those who want to buy units outright and enjoy higher rental yields.

These compact apartments usually range in size anywhere from 25 - 50 sq. m. - however, developers should be aware that any apartments built under 30 sq. m. will not allow for investors to buy with a mortgage.

With a new class of 'generation rent' looking for modern, affordable and low maintenance accommodation, developers have been quick to change their plans and include more and more studio apartments (and even micro-apartments with one or more separate bedrooms) into their projects. With this shift in renters demands, tenants are also now, more than ever, looking for affordable apartments in which they are spending little time in city centre locations.

Studio apartments are great options for students and young professionals who don't spend much time at home and are spending the majority of their time at work or socialising. Studios are also a popular option for those living in city centres, looking for low maintenance rental accommodation close to their work places. This low rent in prime locations mean that studio apartments are a great asset for investors to have in their portfolio, as with current trends rental demand will always be high.

An independent property investors told a leading investment company earlier this year: "The main advantage [of investing in studio apartments] is that my monthly outgo for the studio apartment will remain the same since the EMI [Equated Monthly Instalment] will be equal to the rent that I am currently paying anyway. Besides, I own an asset whose price will rise in the future. Property is an investment and I don't see my studio depreciating any time soon."

Studio's have a strong appeal for short-term investors looking for high yields over just a few years. This type of apartment (after the assured returns have completed) can generally reach yields of 1.5% more than one- or two-bedroom apartments. With these high yields and growing demand, studio apartments can also be a good option for short-term investors looking for quick turn-arounds, and it's a lot easier to attract buyers to them; as well as the cheaper stamp duty that comes along with buying them.

Studio apartments aren't just perfect for short-term investments - they are also a great option for investors looking for long term projects to add to their portfolios. While the capital growth of a studio apartment is profitable, it's certainly not as lucrative as larger apartments currently, with growing demand and recent changes to what the rental generation want, studio apartments could see a faster growth in the next decade than any other type of apartments. Predictions show that the right type of studio apartment in the right location could soon be the same price as a small one-bedroom apartment in some cities.

Similar to any other investment, investing in studio apartments can also have its cons. However, with thorough planning and a clear view of what your investment goals are, studio apartments can be some of the most lucrative on the market. Choosing a studio apartment that has a high-quality finish, resident amenities, and one that's close to transport, shopping and learning/work hubs are often the most successful. The right studio apartment can attract prospective tenants to paying more for less space because they are getting the quality and convenience.

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