Episode Details

It is becoming increasingly difficult to buy an investment-grade house for under $1 million in Brisbane, Melbourne and Sydney. This begs the question; if your investment property budget is less than $1 million, where and how do you invest it?

Brisbane is becoming more difficult

In early August 2021, I presented an investment case for buying an investment-grade home in Brisbane. My wife and I subsequently followed this advice (I put my money where my mouth is) and we purchased an investment-grade house in the Brisbane suburb of Indooroopilly, which settled last month.

Whilst I am still very bullish about the Brisbane market, it is becoming more challenging to buy an investment-grade house for less than $1 million. Whilst it is still possible, it may not remain that way for long.

House budgets must be substantially more than $1 million in Melbourne and Sydney

It will not come as a surprise that you need a budget of substantially more than $1 million to buy an investment-grade house in Melbourne and Sydney.

In Melbourne, you need more than $1.3 million and approaching $2 million and above in Sydney.

Of course, it is possible to find houses in these capital cities for less than $1 million, but these tend to be in non-investment-grade locations and/or have unacceptable compromises. That is, they are not deemed investment-grade assets.

Remember, there’s never a good reason to invest in a sub-standard quality asset. Your long-term investment returns will be directly related to the quality of your investment assets. You cannot expect good investment returns from an average (or below) quality asset.

A villa unit could be good option

Villa units are typically small houses that share the same block of land e.g. there might be 3 to 4 on the same block. They are often single-level homes that were constructed in the 1960’s or later. Typically, owners share some amenities, such as driveways, but mostly the owner has a direct interest in, and control of, their parcel of land.

Villa units are often prevalent in impaired locations such as busy main roads or secondary suburbs. However, it is possible to find some investment-grade villa units in blue-chip suburbs, but you must select judiciously. Villa units are scarce assets, particularly in blue-chip suburbs – property developers don’t build any more as they are not economical (higher density apartments are more economical).

It may be possible to buy an investment-grade villa unit in Melbourne for close to $1 million, but it is becoming more challenging. Villa units are not that common in Brisbane in established suburbs.

Investment-grade apartments in Melbourne

Arguably, the sub-$1-million property investment option that represents that best value is investment-grade apartments in Melbourne.

In October 2020, I wrote this report investigating the performance of investment grade apartments, particularly in Melbourne. I have taken the opportunity to update this report. This update can be found in Section 1 as an addendum. You can download a copy by clicking below.

There are three predominate reasons I believe investment-grade apartments in Melbourne represent excellent future growth prospects which I summarise below: