Apartments are on the rise

With the never-ending search for affordable housing driving the next generation of homebuyers, it appears that high-rise apartment buildings and other high-density living solutions will become the more popular choice of homes for sale. As land values and the cost of established, standalone houses continue their upward march, it is becoming increasingly preferable for buyers to consider a unit or apartment over more traditional dwellings.

Is real estate in Australia ready for this?

While the market may demand apartments, if there isn't enough supply units will soon ratchet up in price as quickly as detached houses have. However, it seems the market mechanism is in working order, as the approval rate for apartments and other types of units has outstripped dwelling approvals for standalone housing.

While this might not sound like a major event, Cameron Kusher of CoreLogic RP Data points out that this has only happened twice before in Australia's history. In fact, units accounted for 45.4 per cent of all dwelling approvals over the year to March 2015, hinting that we may soon see more apartments approved than houses on an annual basis.

Are apartments a good buy?

While traditional housing has always been the preferred way to bring up the family, with the dog running around and a game of backyard cricket every now and then, this is increasingly out of reach for a vast majority of the population. This is not because there aren't any affordable freestanding homes - it's because people want to live close to where they work.

According to the Australian Institute of Family Studies (AIFS), 69 per cent of our population is concentrated in major cities. This can give you a very good idea of just how in-demand inner city land is. In fact, the AIFS reveals that our country is one of the most urbanised in the world, with an incredibly low population density outside of major urban areas.

So, not only do apartments allow developers and investors to offer more homes for sale on less land, they also allow homeowners to have access to certain lifestyle elements that they want. As a owner-occupier, units can present a great opportunity to make that first step onto the property ladder, while remaining close to work, amenities and the cultural and entertainment attractions. For investors, it's an affordable way to build up a substantial portfolio, with properties that are always in demand.

In fact, in Centennial Park where houses have a median price that is 752 per cent higher than units in the same area, according to CoreLogic RP Data, an investor could pick up eight median-priced units for the same cost as one median-priced house. They'd even have some change in their pocket. And this isn't limited to real estate in Sydney either. In the Brisbane suburb of Ascot, one house at the median value is equal to three units. The pattern is very similar for the rest of the country too.

So, if you can imagine the rental income on three, four or five units, compared to what you could command for one freestanding house, it all starts to add up - literally.

Where should I buy a unit?

If you're after value for money (and who isn't?), there are some cities where units are incredibly affordable investment options. A median-priced unit in Canberra or Brisbane could be had for under $375,000 according to SQM Research's figures for the week to 26 May. Adelaide apartments are going for less than a $300,000 median price-tag, while a unit in Hobart has a median price under the quarter-million mark.

If you're after capital gain, Sydney and Melbourne are the clear winners at the moment, according the SQM figures, but rental increases are evident across the country - indicating good yields aren't limited to these two cities.