Adelaide Advertiser

SA Apartments Emerge As Rent Increase Winners

Apartments have long offered a more affordable alternative to houses, but new data shows they are could be the next big thing among SA’s investors.

According to the Rise and Rise of Apartments report from Nuestar and Hotspotting, apartments are one of the top-performing investment sectors in the nation, with more than half of the apartment markets around the country recording a higher rental growth over the past 12 months than their house counterparts.

In South Australia, 10 apartment markets have received double-digit growth over the past year, with rent growth surpassing that for houses in 27 suburbs. Victor Harbor apartments experienced the biggest increase for that period, with rents increasing 17 per cent or $72 to $493.

Harris Real Estate South Coast’s Mark Forde is currently selling a four-bedroom corner penthouse at 29/2-5 Flinders Pde in Victor Harbor for $2m and said Victor Harbor property values were increasing, fuelled partly by the proposed Anchorage Hotel redevelopment and the tourist town’s changing demographic.

“Victor (Harbor) is such a wonderful location,’’ he said. “It’s just over an hour’s drive south of Adelaide and there’s so many exciting things happening there.’’ Victor Harbor’s apartment growth was followed by Modbury and Brooklyn Park where apartment values increased 12 per cent, taking weekly rents to $610 and $480 respectively.

Parkside and Klemzig rounded out the top five with rental growth increases of 11 per cent. Apartment rent growth across metropolitan Adelaide outpaced houses for the year, with average apartment rent growth up 3.7 per cent compared with 3.5 per cent for houses.

The data showed apartments were 37 per cent cheaper than houses, with metro Adelaide’s house median sitting at $1.016m compared with apartments’ $697,000 – a difference of $319,000.

Nuestar founder Michael Wilkins said apartments just worked – for investors and renters alike. “More renters are opting for attached dwellings in key markets across the nation, which has driven up rents and returns for investors,” Mr Wilkins said.

“Apartments are not just an affordability play – in the right locations, they are a way to secure exposure to high-quality, high-demand markets earlier and at a lower entry point than houses.”

Hotspotting founder Terry Ryder said rising rents and more affordable buy-in prices than the house market meant stronger returns for investors in the apartment market. And he said that with Federal Budget changes to allow future negative gearing only for new builds, apartment assets would be more in demand.

“As a result of the Budget changes, yields will become a higher priority for many investors and as this report shows, the higher yields are to be found in the apartment market,” Mr Ryder said.

“There are a lot more apartment projects underway and their price point is lower than stand-alone properties, so they appeal to investors, who are generally looking to buy at a lower price point.

“As well as the potential benefits of being able to access negative gearing, new properties offer investors better depreciation benefits.”