Are One Bedroom Apartments a Good Investment in Victoria? What Buyers Need to Know

This question comes up constantly, especially from first-time investors and buyers priced out of houses. One bedroom apartments look affordable, easy to rent, and simple to manage. On the surface, they feel like a sensible entry point into the property market.

The reality is more complicated. In Victoria, and particularly across Melbourne, one bedroom apartments can be a difficult long-term investment unless the circumstances are very specific. Some perform adequately. Many do not.

Below is the straight explanation buyers rarely get before they sign a contract.

Why one bedroom apartments attract investors

The lower purchase price is the obvious drawcard. Compared to houses or larger apartments, a one bedroom apartment can feel achievable without stretching borrowing capacity too far. For many buyers, this makes property ownership feel possible sooner rather than later.

Rental demand is often steady in inner city locations. Students, single professionals, short-term workers, and downsizers regularly look for one bedroom accommodation close to transport, universities, hospitals, and employment hubs. Vacancy rates can appear reassuring.

On paper, the rental yield can look appealing. When the purchase price is lower, the percentage return often looks better than houses in the same area. This is frequently used in marketing material to push investor demand.

These points are all true, but they only tell half the story.

The capital growth problem

Capital growth is where one bedroom apartments usually struggle. Property growth relies heavily on scarcity. Houses have land. Larger apartments are limited in number. One bedroom apartments, especially in newer buildings, are often produced in large volumes.

In many Melbourne suburbs, buyers are not choosing between one or two similar apartments. They are choosing between dozens or hundreds that are effectively interchangeable. This puts a ceiling on growth and makes price rises slow or inconsistent.

When a building next door goes up with newer finishes or incentives, older stock is immediately under pressure.

Lending restrictions and resale risk

Many buyers do not realise that banks treat small apartments differently. Apartments under certain size thresholds can attract lower loan to value ratios, higher interest rates, or outright refusals from some lenders.

This becomes a serious issue when you go to sell. Your pool of buyers is limited to those lenders prepared to fund the purchase. Fewer buyers generally means less competition, which places downward pressure on price.

This is not a short-term issue. Lending policy affects your exit strategy years down the track.

Owners corporation costs change the numbers

Owners corporation fees are often underestimated. Lifts, fire systems, cladding compliance, pools, gyms, security, and concierge services all come at a cost. Even buildings without luxury amenities can face significant expenses as they age.

These costs do not increase your rent, but they reduce your net return. A property that looks cash-flow positive on paper can quickly become neutral or negative once realistic owners corporation fees are factored in.

Special levies are also common, particularly in newer buildings where defects or compliance upgrades emerge years after completion.

Oversupply is a real and ongoing risk

Many one bedroom apartments sit in zones where councils have approved dense development. This means new supply can keep arriving long after you buy. Oversupply suppresses both prices and rents.

This is particularly noticeable in investor-focused precincts where large projects are marketed offshore or sold almost entirely to investors rather than owner occupiers.

Exit strategy matters more than entry price

Buying is easy. Selling is where investors feel the consequences of a poor choice. When you sell a one bedroom apartment, you are often competing with identical properties in the same building, sometimes at the same time.

If multiple owners decide to sell during a soft market, prices can stagnate or fall quickly. Incentives, price reductions, and long selling periods are common in these scenarios.

When a one bedroom apartment can make sense

Not all one bedroom apartments are bad investments. Some perform reasonably well when key factors line up.

Older style walk-up blocks with a small number of units often do better than high-rise towers. They tend to have lower owners corporation fees and genuine scarcity.

Premium locations still matter. Proximity to transport, universities, hospitals, and major employment centres supports rental demand and resale interest.

Good design counts. Natural light, functional layouts, storage, and a car space make a noticeable difference in Melbourne, even for one bedroom stock.

A small, well-run owners corporation with no history of disputes or looming major works reduces risk significantly.

When one bedroom apartments usually don’t stack up

New high-rise developments marketed heavily to investors.

Very small or poorly designed layouts.

Buildings with extensive shared facilities and high ongoing costs.

Areas already saturated with investor-owned apartments.

The practical takeaway for buyers

One bedroom apartments are not automatically a bad investment, but they are rarely a strong default choice in Victoria. They require careful selection, conservative assumptions, and a clear exit plan.

If long-term growth, flexibility, and easier resale are priorities, houses and well-located two bedroom apartments generally perform better.

Before committing, the decision should be based on the specific building, the true holding costs, lending implications, and how easy it will be to sell later, not just the headline price or advertised rental return.