Should You Invest in CBD Apartments?

When someone asks me, "is investing in CBD apartments smart?", the answer is generally "no" and it became apparent to me on a recent trip to Seoul, South Korea.

You see, in Seoul, there's seemingly no limit on housing density. If you need more housing, you build higher towers, closer together. Problem solved.

The Allure vs. the Reality

Why Investors Are Drawn to CBD Apartments

It's not hard to see the appeal:

• Convenience and lifestyle

  • Walk to work, cafes, public transport

• Amenity-rich living

  • Gyms, pools, view decks, concierge

• Rent demand

  • Professionals, students, renters who prioritise location

• Prestige factor

  • Owning in the "heart of the city" feels symbolic

But every glamorous pitch hides trade-offs. As with most things in property, what feels sexy often costs you in hidden ways.

Common Myths That Lead to Mistakes

Myth	Reality (or Challenge)
"High rent means high returns."	True on paper, but turnover, vacancy, and premium strata fees eat margins.
"Everyone wants to live in the CBD."	Many tenants are transient. Owner-occupier demand is weaker for inner-city towers.
"Supply is limited downtown."	Definitely not. Developers can (and do) build high when demand justifies it, or they see potential profit.
"Lifestyle trumps numbers."	Buyers fall in love. But banks and valuers only care about cash flow and capital growth.

Why I Usually Avoid CBD Apartment Investment

Here's what I see again and again and why I typically steer clear of pure CBD towers in my own portfolio.

1. Oversupply Risk Is Always On the Table

In many CBDs, skyscraper after skyscraper is approved, constructed, and delivered. That pushes competition front and center. One day you feel smart. The next, your neighbor's new tower is your competition.

When supply outpaces demand, prices stall or even fall.

2. Tenant Churn Equals More Costs, More Work

In the CBD, your tenant list usually looks like this:

• Young professionals with short-term leases

• Students who move frequently

• Corporate placements, relocations

High turnover means regular vacancy gaps, re-leasing costs, and the wear-and-tear reset. That $700/week rent looks less attractive when you discount for 4–6 weeks of vacancy annually.

3. Strata Fees and Levies Can Be Brutal

Before you dive in and make an investment, take a look at the building's financials. High-rise towers often require expensive maintenance, lifts, façade works, waterproofing, landscaping, concierge, security, etc.

These shared costs get passed through. They slash your net yield. Some buildings have strata fees as astronomical as the height of the building itself.

4. Capital Growth Often Trails Suburbs

Over time, things that can't be replicated tend to win. Land, scarcity, character… all these things usually sit in blue-chip suburbs, not mega towers.

When push comes to shove, many buyers prefer to pay more (per square metre) in suburbs with charm and restricted new supply, rather than high-rise anonymity. Novelties wear off. 

5. Resale and Buyer Appetite May Be Limited

When it's time to sell, your buyer pool is narrower. Many buyers (especially owner-occupiers) prefer suburban or mid-rise living. Also, valuation premiums for CBD towers are more volatile.

You may get stuck competing with fresh new developments or have to discount to get attention.

What I Look for Instead

When I pick apartments outside the CBD, here's what I prioritize. These principles help me avoid the pitfalls of CBD investment without sacrificing upside.

• Within 5–15 km of the CBD

  • Buy close enough for commute ease, but usually with lower density

• Blue-chip suburbs

  • Choose locations where councils restrict vertical growth and supply is naturally limited (like Sydney's Eastern Suburbs)

• Good tenant catchments

  • Find areas that appeal to professionals, families, medical precincts, education centres, etc. Areas that don't rely on a single (or limited) industry to support tenancy

• Properties with parking

  • Parking adds rent, gives you a much larger pool of potential tenants and helps resale

• Strong local amenity and good transport links

  • Look for nearby (but not too close) trains, buses, shops, café culture

• Solid building structure and strata

  • I like established second hand properties in small blocks with well-managed, no surprise strata

• Median priced

  • Look for properties that appeal to the widest audience

In short, go for median priced blue-chip properties around 5-15km from the CBD. 

Real-World Comparison: CBD vs Blue-Chip Apartment 

Let's put some numbers to it. (These are not real sales, but plausible based on recent market behaviour.)

• CBD tower apartment: $1,500,000

• Blue-chip apartment (same region): $1,500,000

CBD

• Rent premium is +$100/week

• Extra revenue is about $5,200/year

• But, higher strata fees, more vacancy, more risk

• Capital growth is modest or flat over cycle

Suburb

• Rent is $100/week lower

• You lose $5,200/year vs CBD

• But, lower costs, better capital growth (say +3% over time = $45,000 in equity)

• Net advantage is that it is far better on equity side over a 5 to 10-year horizon

Would you give up $5,200 of rent to make an extra $45,000 in capital growth? For me, the answer is emphatically "yes". That's the strategic edge.

Don't Get Sucked In

So, are CBD apartments a good investment? Not for me. And we generally don't buy them as investments for clients.

Sure, we have some clients looking for somewhere to live in the city, or stay part-time and want investment value. And for them, we're more than happy to steer them in the right direction.

However the allure of a city investment quickly loses its shine when people realise after a full property cycle, that their property has barely moved compared to a similar blue-chip location.

For my portfolio strategy, I'd rather something that is proven over the long term with limited supply and continuing demand.