Features great – yet small

Making room: The bedroom “borrows” light from the unit’s single window

Melbourne’s inner city types are snapping up tiny apartments with a floor space of less than 50 square metres off-the-plan as housing affordability worsens.

The sales are helped along by the fact that some banks will lend on smaller apartments, but some analysts warn developers could struggle to sell the miniature apartments closer to completion when buyers see just how small they really are.

“These developments have found strong market acceptance at the off-the-plan stage, we are yet to see a lot of these projects [sell] as they come to completion and settlement,” property consultant Charter Keck Cramer’s director Robert Papaleo says. “That’s where the real test will be.”

Melbourne is home to a trend for developers to shrink apartment sizes because state planning laws allow developers to build sub-50 sq m dwellings or even less than that.

Property developers, including Caydon, MAP, Hamton, Buxton Group, Beck and Daracon are the latest to explore this small apartment trend, and Melbourne firm Plus Architecture is looking to capitalise on the growing market for small, single-person residences.

Demographically speaking, speculative developers may be onto something. In 2006, there were 1.9 million people living alone in Australia, Australian Bureau of Statistics figures showed. The number of sole-person households is forecast to increase to more than 3 million by 2031, with the trend strongest among women.

The aspirations of the first-home buyer changed just before the 2007 apartment boom, when the preference for owning a house switched to owning an apartment, research from Charter Keck Cramer reveals.

“There has been a fundamental switch in the psyche of young Australians,” Plus Architecture director Craig Yelland says.

With this growing trend in mind, Plus Architecture designed Society in South Yarra, one of the first large-
scale developments with apartments at about 40 sq m.

Single-dwelling, one-bedroom apartments featured in Society take no more than 45 sq m of floor space, with an open-plan kitchen-living-dining area, an internally located bedroom similar to a resort suite, and a separate bathroom with high-end finishes and a European-style laundry.

Society was the first building with apartments as small as 38 sq m within a single 240 apartment development, Yelland says.

Pools have been discarded in favour of common facilities such as lounges, dining areas and outdoor theatres, with communal areas effectively becoming an “extension of the apartment”.

Yelland says a critical design feature is the bedroom, which is located towards the centre of the building and does not have a discrete window – it “borrows light” from the mixed kitchen-living-dining area located next to the single window. “The difference between 50 and 40 sq m is usually that the 50 sq m apartment would have natural light to the bedroom, and the bedroom is on the outside face of the building,” he says. 

But this adds about $80,000 to $100,000 to the cost of an apartment, Yelland says.

“When you’re asking the buyer ... they might pay $10,000 more for natural light to the bedroom, but not $100,000 for the sake of one window,” he says. 

The average budget for those looking to buy a new apartment tends to be less than $400,000 for a one-bedder and less than $600,000 for a two-bedder, Yelland says. “In order to deliver a one-bedder at sub-$400,000 you can’t build a 50 sq m,” he says.

Plus Architecture’s latest design, Trilogy, features sub-45 sq m apartments, and construction is about to get under way. It has had strong off-the-plan interest from buyers.

Yelland says ANZ Banking Group and Commonwealth of Australia are currently approving a standard loan-to-value ratio of 20 per cent equity, 80 per cent loan for a 40 sq m property, but some banks are reluctant to lend at this end of the market.

Westpac Banking Corporation and National Australia Bank will do this deal down to 50 sq m, but below this they will ask for equity of about one-third.

Papaleo says issues with banks arise when projects are loaded up with very small apartments, but the banks do recognise that buyers will have to sacrifice internal living space to meet price points.

“Clearly the market has accepted sub-50 sq m apartments over the past three years, with banks also having accepted this as part of the mainstream apartment sector now,” Papaleo says. 

The real test will be when these projects come to resale, when clients have “decided whether they are going to be comfortable living in that kind of space”, he says.

BRW

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