Every Australian will be plagued by this question at one point or another – many traditionally house loving Australians are moving towards apartment living gradually but each property buyer faces the dilemma of choosing between a house and an apartment.

House Vs. Apartment

For first home-owners, owning a home is a dream they have grown up on. Further, houses have shown higher capital appreciation over a long term horizon and give you flexibility to renovate, redesign and even build a granny flat for your granny or a loved one (or for renting out), if you feel like.

 

 

On the other hand, maintenance and repair costs can come down quite heavily on your shoulders if the house is not in good shape. Renting in the future may not be as profitable as according to stats, apartments return higher rental yields than houses in most suburbs.

Many first home-owners and investors are choosing apartments over houses, thanks to changing lifestyles, affordability factor and State Grants for new constructions (know more). For apartment blocks, the body corporate charges you a fee and takes care of the building and surroundings, saving you a lot of headache. Most apartment blocks are strategically located close to family-friendly amenities and office areas, making them easier to rent in the future as well.

From an investor’s point of view…

A savvy property investor knows ‘house vs. apartment’ is a wrong question to ask. What a property investor really needs to know is which type of property would give better returns on investment.

Investing in a House

Pros:

The Land – Land certainly appreciates over time and when you own a house, you own the land as well.

Higher capital growth – This is true over a long period of time. According to stats, median prices of houses grew more than that of apartments over the last ten years; however, the reverse is true over a shorter time frame of five years.

Cons:

Maintenance Costs – When you own a house, maintaining the building and the surroundings is completely at your cost.

Rental Yield – Over the past few years, units in well-connected suburbs have given much higher rental yield than established houses.

Investing in an Apartment

Pros:

Affordability – While buying a house requires a huge deposit and a potentially large loan, a unit can cost you half the price of a house, making it much easier to enter the property market.

Savvy investors are buying units at affordable prices and letting the tenants pay their mortgage, while renting out a house/apartment for themselves in a suburb they cannot afford to buy in. A perfect case of having the cake and eating it too, isn’t it?

Rental Yield – A compact unit in an established complex usually offers attractive facilities such as gym, swimming pool, parks and easy transport access. Going for a smaller complex also means no requirement of an elevator, meaning lesser corporate fee. Such units are affordable to buy and much sought after by tenants, leading to good rental yield.

Low Maintenance – Your body corporate fee absolves you from maintaining the building and the surroundings – these are taken care of by the body corporate on your behalf.

Cons:

Less Space – Buying a unit in an area preferred by families may be a bad decision, as families require space and prefer houses. Go for areas popular with working couples.

Corporate Costs – Some apartment complexes demand very high corporate fee that can be a huge additional cost for investors. Check what you are paying for maintenance before you buy.

Always choose an area with some established houses/apartments and lesser area for redevelopment. Too much supply can substantially decrease your rental yield.

So do I buy a house or a unit?

Choosing a home or an apartment ultimately depends on your future economic goals and current situation. If you intend to immediately rent out the property, an apartment can be a wise choice for regular income. Well-established units in small blocks can offer better rental yield.

In case you are looking for a capital gain, a house may offer much more capital appreciation, more scope for negative gearing and also rental potential.

Whichever of the two you pick, there is no way you can undermine the research:

• Always go for a high growth area. Read here to spot the next booming suburb to spot the next booming suburb.
• Get a building inspection and valuation done before you buy.
• Always check what’s in vogue in the market you are planning to buy in – don’t buy a house where units are preferred and vice versa.
• Using a broker may be a good idea to save time and money as well.

Before you buy, get to know the market better with your free property report at HashChing and check out our handy investment guide for great returns.

Whether you choose to buy a house or an apartment, experts at HashChing will answer your queries online, absolutely free of cost and guide you for hassle free financing.

 
By Vidhu Bajaj