Slower unit value growth could prompt investors into market

Unit values are increasing at a slower pace than that of houses, which could be encouraging news for those looking to make their first move in residential property investment.

According to statistics released by RP Data, capital city unit values increased at an average annual rate of 3.7 per cent over the 10 years to August 2013, compared to 4.4 per cent for houses.

The lower rate of value growth means that units are likely to be placed at a more attractive (and accessible) price point for those looking to enter the property market.

While the last five years have seen unit value growth rising faster than house values (3.4 per cent for units compared to 2.9 per cent for houses), units are still priced at a more affordable level than detached houses – especially for the first time investor or property buyer.

Further cementing the good news for investors is the fact that typical gross rental yield on a capital city unit is currently sitting at 4.8 per cent. In contrast, the gross rental yield for capital city houses is currently recorded as 4.1 per cent.

Rental yield is the total return that investors earn from rent in a single year, calculated as a percentage of the property's value. It can be a very useful tool for investors when comparing different properties, as the greater the yield, the more return they are likely to get from their investment.

According to RP Data Senior Research Analyst Cameron Kusher, the amount of new dwelling approvals for units is rising steadily – indicating that demand for these types of properties is also increasing.

Investing in a unit such as an inner-city apartment is an attractive option for many Australians, but it's important to ensure that the necessary finance is arranged prior to purchasing any property. A mortgage broker can help you secure the right home loan for your investment goals.