Residz Team 4 min read
The dream of owning a first home is one that many young Australians share. Yet, Bureau of Statistics data shows that home ownership, including homes owned outright or with a mortgage, for those aged between 25–39 years has decreased in each successive generation since 1991.
With rising housing costs and property prices reaching unprecedented highs in many parts of the country, the dream to live anywhere except under your parents’ roof is becoming more elusive for many.
This has led to a surge in interest around studio apartments, especially among young buyers like our own daughter (who keeps sending us listings of studios for sale).
But is this a wise choice? Here we put some facts on the table.
What is a Studio Apartment?
A studio apartment, often simply referred to as a 'studio', is a small, self-contained flat where the living room and bedroom are one and the same. According to HomeLoanExperts.com.au, a studio apartment is very small, often less than 40 m² and can even be as small as 25 m².
This compact design often comes with a kitchenette and a separate bathroom. Some studio apartments may include a car parking space and/or a balcony, as well as amenities shared with tenants of other properties in the building.
Benefits of Buying a Studio Apartment
Compared to other types of properties, studios tend to be on the more affordable end of the spectrum. This could be an attractive option for those who want to enter the housing market without a hefty price tag.
This is the key reason people will opt for a studio apartment, but there are other benefits:
Low Maintenance: With less space comes less maintenance. Not only does this mean less cleaning, but also fewer repairs and overall upkeep.
Location: Due to their size, studios are often located in central areas, giving residents easy access to city amenities, public transport, and entertainment options.
Resale or Rental Potential: With the recent big rises in the cost of rent, owning a studio could be a solid investment. There's a growing market for renters looking for affordable, centrally-located properties.
Issues to Consider
One of the biggest issues with buying a studio apartment, especially as a first home, is finding a lender willing to hand over enough money for you to do so. As HomeLoanExperts.com.au says, typically, most lenders won’t accept units that don’t have an internal living area (excluding balconies & car spaces) of 50 m².
It says there are no lenders who will accept properties less than 18 m², and only some will lend up to 80% of the property value if the size of the studio apartment is between 18 m² to 40 m².
“A one bedroom unit is seen as a lower risk than a studio apartment. This is because lenders believe having a wall between the bedroom and the living area makes a unit more marketable,” it says.
There are other challenges with buying a studio apartment:
Space Limitations: The obvious drawback of a studio is space. Take a good look at those photos in the real estate listings - is that a Queen-size bed in the picture, or a double or King single?
And, there’s not much room or opportunity for privacy in a studio. If you want to start a family, a studio is going to seem smaller again.
Limited Growth Potential: Over time, as your life changes, a studio might not offer the flexibility that other property types do. For instance, if you plan on starting a family or having roommates, it will be a squeeze.
Resale Challenges: While studios might be in demand now, the market could change. Depending on trends and market fluctuations, it might be harder to sell a studio down the track. HomeLoanExperts.com.au says this is why lenders are cautious. They believe that a studio apartment (which is usually a small property) is an unusual offering, and may take longer to sell than an ordinary unit.
Questions to Ask Yourself
Before you rush into buying a studio apartment because it’s the only thing you can afford or your rent has just gone up, take a breath and ask yourself some questions.
Has the studio apartment’s time come?
As the costs of renting and buying larger homes continue to surge, studio apartments are positioning themselves as a feasible solution for many first home buyers in Australia. Buying a studio could be the perfect stepping stone into the world of property ownership for many young Australians.
There is the challenge of lenders being concerned about fewer interested buyers for studio apartments, affecting the ease of reselling if needed. However, as HomeLoanExperts.com.au says, “In our opinion, this is an outdated policy as a studio apartment for a home is becoming increasingly popular.”
About Residz
Residz has lots of research and data for renters, homeowners, and buyers and sellers about Australian real estate:
Image: BresicWhitney Inner East listing of 807/389 Bourke Street Surry Hills