Owning a capital city unit could be your next property move.

Is a unit right for your next investment?

Take a look at the skyline of your city nowadays, and there's a good chance you'll see a large number of cranes busily working away. Australia's constantly high immigration numbers – well over 200,000 in 2013-14, according to the Australian Bureau of Statistics – mean there will always be demand for affordable housing in the major cities.

Despite the belief of some real estate prognosticators that the property boom of the last several years is showing early signs of slowing, there are still plenty of reasons why you should consider investing in units in Sydney, Melbourne and Brisbane. As your buyer's agent will tell you, whether you are interested in purchasing a unit to live in or to rent as an investment, there are few drawbacks to snapping up new apartments.

There are still plenty of reasons why you should consider investing in units.

Value growth is still strong

While it might be true that home value growth is not powering along across the entire country, prices are still rising in the three biggest Australian cities. In the unit market, CoreLogic RP Data's Pain and Gain Report of September 2015 found that over 83 per cent of sales netted sellers a profit in Brisbane, 89 per cent in Melbourne and an astonishing 98 per cent in Sydney.

One might think that it simply isn't possible to sustain figures like these. Indeed, in wealth management firm UBS's Global Real Estate Bubble Index of 2015, Sydney was placed third in a list of cities most at risk of a housing bubble, behind only London and Hong Kong. A statistic like that could be enough to send shivers down the spine of many investors, however, even if the market does begin to decline, new opportunities could begin to present themselves.

There are plenty of units in cities like Sydney, presenting a lot of investment opportunities.There are plenty of units in cities like Sydney, presenting a lot of investment opportunities.

Excess supply, lower prices

Let's face it – as a seller, lower prices are not good news. Australia is not quite at the point yet where significant housing price falls are occurring, but given the nature of property cycles, it is something the economy should prepare for. All of those cranes dotting the skyline are certainly building something, much of which will be new apartment complexes ready to take residents in the near future.

It's a basic tenet of economics that an increase in supply leads to lower prices. With less competition in the investment property market due to new units coming online, buyers will see less urgency in making purchases, and sellers and developers have to lower their prices. This is the moment when savvy investors can begin to look for bargains in the market.

Even if the market does begin to decline, new opportunities could begin to present themselves.

The cycle will come around again

For most people, property investment is a long-term strategy, often part of a retirement plan or as a source of income across decades. For this reason, it's never really a bad idea to consider buying property, even at a time where some speculators are claiming there is a glut of units in capital cities. 

Certainly there is fluctuation in growth levels, however nothing ever stops house prices from going up. In a study of the Australian property cycle stretching back to the 1970s, BIS Shrapnel found that amidst several upward and downward shifts in the market, the constant remained that the median house price just kept growing, from around $150,000 in 1978 to almost $800,000 in 2014. 

While you may need to discuss the state of the Australian property market with a buyer's agent to get a better understanding of where the cycle is sitting, there are really no compelling reasons to discourage buying units in Sydney, Melbourne and Brisbane. 

up icon