Demand rising for tiny studio apartments, but mortgage hurdles higher: Aussie John Symond

Demand rising for tiny studio apartments, but mortgage hurdles higher: Aussie John Symond
Demand rising for tiny studio apartments, but mortgage hurdles higher: Aussie John Symond

Demand is growing for more affordable small properties and tiny CBD studio apartments, but obtaining financing can be harder, according to Aussie Home Loans founder John Symond.

“For all the affordability that a small apartment provides, however, there is a catch,” says Symond in his latest Aussie blog.

“There are often strict lending rules around studios that prevent those without sizeable deposits from buying in.

“Buyers will typically require a deposit upwards of 20% to buy an apartment with less than 50 square metres in floor area, and lenders mortgage insurance (LMI) is often more expensive as well,” he says.

In August last year Property Observer provided readers with a top 10 list of studio apartments in the Melbourne CBD starting from a 17-square-metre apartment on Flinders Street, which sold to an investor for $145,000 last year.

Property Observer noted Sydney studio apartments were proving tempting to investors and home buyers  given both buying classes were being affected by rising rents across the city. We listed 10 of the cheapest, starting with a studio on Dixon Street in Chinatown at $255,000, with eight of them now sold.

Also last year, we wrote about pocket-sized inner Sydney listings, including what is believed to be Sydney’s smallest home, a terraced house measuring just 27 square metres built in a former alleyway on Evans Street in Rozelle.

Symond mentions the tiny Bondi Beach flat dubbed the “bolt-house” measuring just 16 square metres, which Property Observer wrote about October. The property failed to attract a single bid at auction, coming with $270,000 hopes, eventually selling privately for $245,000.

Symond says small properties and tiny studio apartments have become increasingly popular in the last few years “as home buyers seek affordability in cities with escalating property prices”.

“Typically a studio apartment – defined as ‘any unit that does not have a wall separating the bedroom from the living areas / kitchen’ – will require a floor area no less than 40 square metres and have a maximum loan to value ratio of 60%."

Of the 10 cheapest Melbourne CBD apartments, which we wrote about in August last year, two remain up for sale:

210/600 Little Bourke Street

$148,000

Unit 210 at 600 Little Bourke Street is a serviced apartment currently run by Hotel Ibis, which has the contract until 2018. The 25-square-metre apartment has a modest guaranteed income of $650 a month, and agent Lilian Yoon from OzAsia Real Estate is unsure of the outgoings for the property, although she says they would be minimal. The unit, which has no cooking facilities, has been on the market for years.

417B/268 Flinders Street

$165,000

This studio apartment is in the Home @ Flinders building opposite Flinders Street Station and rents for $310 a week. It’s 15 square metres and has outgoings of more than $4000 a year. It includes a kitchenette and a bathroom, and there’s room to walk.

We’ve also tracked down a few more tiny apartments currently up for sale:

1306/268 Flinders Street

$225,000

This studio apartment - in the same building as the previous apartment (417B)- is being sold by Robert Eggers of Dingle Partners - Melbourne. 

57/546 Flinders Street

$150,000 – $170,000

This apartment is situated across the river from Crown casino, and close to Southern Cross train station. It is currently leased at $240 per week. It is being sold by Dien Tran of Ray White CBD.

Of the 10 Sydney studio apartments we wrote about in August last year, just two remain available for purchase. These are:

$265,000

318/8 Dixon Street

It’s a 28 square metre studio on level three of the building. The property currently earns $14,502 per year in rent from Quest Apartments, which is set to increase to $15,082 next year. That works out to about $280 a week. Agent David Tsang from Friendly Properties says outgoings would total around $250 a quarter.

$275,000

94/8 Dixon Street

In the same building again here, but back down to 25 square metres. It’s a similar deal to the cheapest on the list but it earns slightly less rent at $400 a week. Total quarterly outgoings are $1,296. It’s being sold by Alan Cheung from LJ Hooker Chinatown who says the vendor for apartment 124 is just slightly more motivated.

For information on out-of-the-box property investments, download our free eBook.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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