Are the days of the 1-bedder numbered?

By Rich Harvey, CEO, propertybuyer.com.au

You'd have to be living under a rock to not know how prices have surged in Sydney over the past year. While this is great news for current owners of Australian property - it boosts capital growth and leads to more people looking to rent instead of buy - it also acts as a barrier to those still on the fence about buying investment property in Sydney.

The question on many lips at the moment is: Are prices getting out of hand when compared to rental yields?

On a capital city basis, rents were either flat or in decline during the March quarter, according to Australian Property Monitors (APM).

The organisation's Rental Price Series Quarterly Report showed that median weekly asking rents for houses rose 0.2 per cent on a national basis.

"There has been some relief for tenants generally over the March quarter with flat or falling rents reported in most capitals," said APM Senior Economist Dr Andrew Wilson.

At the same time, the New South Wales capital continued to give potential investors plenty to smile about during this time period.

"Sydney, however, continues to record unit rent increases as affordability barriers impact on house rent growth," Dr Wilson continued.

"In Sydney, affordability constraints, together with growing preferences for inner-city apartment living, have seen rents move to a point where the median asking rent for a unit is just $10 less per week than a house."

Meanwhile, the latest RP Data - Rismark Home Value Index Release showed that the pace of price gains in capital cities slowed during April. RP Data's Tim Lawless said that this cooldown in price growth could signal a cycle peak.

Based on these figures, it would appear that prices are starting to become more manageable and unit rents have much to offer investors in Sydney.