What’s the better buy? A one-bedroom apartment now or a two-bedroom apartment later?

As property prices keep growing, many first-home buyers have been priced out of houses and have now turned to apartments to enter the property market.

However, much like buying a house, the number of bedrooms can significantly impact the property’s price, which begs the question: is it better to get on the market straight away with a cheaper studio or one-bedroom apartment, or save up to get a more spacious two-bedroom unit?

Take Melbourne, for example: a 20 per cent deposit on a median-priced one-bedroom apartment is $74,000, but for a median-priced two-bedroom unit the deposit jumps to $120,000, according to Domain’s House Price Report.

Domain chief of research and economics Dr Nicola Powell says the price gap between one and two-bedroom apartments has grown since the pandemic because people want more space to fit with the hybrid work style, making two-bedroom apartments a more attractive option. 

“The buyer pool that perhaps would have gone for a one-bedroom has shrunk because wanting that additional space to convert a bedroom into a study is still there,” she says.

It’s essential to think long-term when buying a property, says Powell, because transaction costs like stamp duty make it costly to move frequently.

SOLD - Price Withheld

201/25 Swinburne Street, Lutwyche QLD 4030

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“If you’re moving into a one-bed but you’re planning to have a child or grow your family, whatever that scenario is, that one-bedroom apartment will only be suitable for a very short period of time.”

The average monthly repayment for a two-bedroom apartment in Melbourne with a 20 per cent deposit is $3332, while a repayment on one bedroom is $2054, according to data from financial comparison site Mozo.

With a 10 per cent deposit, that monthly repayment for a two-bedroom and one-bedroom Melbourne apartment would go up to  $3841 and $2368, respectively.

While the difference in the monthly repayments between making a 20 per cent and a 10 per cent deposit is a few hundred dollars, Mozo spokesperson Rachel Wastell says a lower deposit means paying more on interest in the longer term.

“For example, if you’re buying a home worth $1,000,000 and you borrow $800,000, your loan-to-value ratio (LVR) is 80 per cent.

“At the current average variable rate in the Mozo database of 6.8 per cent per annum a $800,000 loan would be charged $865,773 in interest payments over 25 years while a $900,000 loan would pay $973,995 in interest – an additional $108,222,” she says.

When purchasing property, additional costs (besides the deposit) may occur, such as stamp duty, legal and conveyancers fees, strata reports, council fees, and time and transportation costs for home or building inspections, says Wastell. 

Sydney-based agent Michael Ma of Belle Property Strathfield has seen a shift towards buyers wanting two-bedroom apartments, compared to five years ago.

“A lot more people that used to probably look for one bedroom, they prefer two bedrooms now because they can work from home,” he says. “We’ve seen people demanding a lot more space.”

SOLD - $1,465,000

1308/5 Albert Road, Strathfield NSW 2135

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Melbourne-based agent Torsten Kasper of Chisholm & Gamon Elwood agrees and has seen the same trend in Melbourne. 

“COVID has actually let people find what’s important; for some it space and to have the ability to live on their own,” he says.

Chief economist of PRD Dr Diaswati Mardiasmo advises first-home buyers to wait and go for the two-bedroom option, citing the pipeline of apartments that will materialise over the next few years.

“If we look at the project pipeline, in terms of new projects coming on that’s been approved, currently being constructed and about to be constructed … about 90 per cent of them are units and apartments,” she says. 

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4/19 Milton Street, Elwood VIC 3184

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“Whether you’re talking Brisbane, Sydney or Melbourne, it’s literally the same, [developers] are all moving to constructing more units and apartments.

“The chances are in the next 12 months 24 months, we’ll start to see the pricing for two-bedroom apartments stabilise. That means that if you do have the time to save up a little bit more – or save up and wait for the cash rate to go down a little bit and then still be in the market – there will be a lot of supply,” she says.