One of the biggest mistakes that Western Australian property investors make is to purchase a home that is too big for the actual requirements of the rental market. An ABS survey of household utilisation in Australia shows that Western Australia has the largest number of surplus bedrooms of any State in Australia.

The ABS survey – Australian Social Trends 2005 – shows that the average number of persons per household was 2. 5 while the average number of bedrooms per household was 3.3. This rate of surplus bedrooms compared to the actual number of people living in home is much lower in other states. For example, in Queensland, there are 2.5 persons per household yet the average number of bedrooms per household is 3.0.

The survey highlights that people are buying larger new homes than they actually need in Western Australia. Many investors are effectively wasting between $50,000 to $100,000 on buying homes with rooms that will never used.

In inner city areas, for example, the rental returns for a three bedroom and two bedroom apartment can be minimal yet the purchase price can be very significant.

A key factor that investors have to also consider is that many people renting a home are generally young and single. There is also a high proportion of single parents renting accommodation.

Even in outer suburbs, Peter Fletcher Realty is finding that smaller homes are becoming more popular amongst tenants because family sizes are falling and these homes are easier to maintain.

Typically, many new homes in the outer suburbs of Perth have now four or five bedrooms even though the average size of the family unit in this State is declining.

This trend towards smaller family units will accelerate with the result that larger style homes in Western Australia will be less in demand in the coming years.

For investors in the Western Australian housing market, there is an opportunity to capitalise on this trend by purchasing older style 3x1 homes.

Many of these three bedroom homes can still be purchased in near city areas for less than $350,000. During the coming decade it can be expected that these homes will again become more popular because of their location near the city and the fact that they offer correct amount of living space required by ‘skrinking’ family households.

Many of these homes lend themselves to renovation because in the coming years there will be a growing demand by homeowners for homes built to a higher specification rather than offering large amounts of space.

Peter Fletcher Realty is finding that rental returns for these older style 3 bedroom homes can be boosted by 20% following even superficial renovations such as new carpets and window treatments.