Expert Advice provided by Jason Paetow

22/10/2014

 

Try this: Ask someone you know about whether to invest in an apartment or a house. It doesn’t have to be a seasoned investor; it can be a mate who just has the slightest bit of interest in the investment game. No matter who you ask they’re probably going to have an opinion on whether it’s better to invest in a house or an apartment, and they’ll have the argument to back it up. Well guess what? I’m no different – but I have a pretty impartial opinion on both, and I’m going to share the pros and cons of each with you.

 

When the age-old argument of house versus apartment comes up, the people you talk to will often have a strong opinion about whichever camp they believe in. Some will firmly believe in the idea that a property’s value is in the land, and on the other side of the fence you’ll have people who champion a property’s size and layout as far more important for investment value. Often you’ll find that first time investors are the ones thinking that houses are the best investment, partly as there’s just more to a house – and if you’re going to save up for a deposit you want as much to show for your hard work as possible, right?

 

Plus, investing in a house was the norm in the past, as it was possible for people to buy a house with land and still be relatively close to the centre of the city. As the population has grown and land has become scarcer, people still want to live in the centres but there’s just not enough land, so they’re looking for apartments to get that central convenience. So with the growing number of people choosing to live closer to urban centres we’re seeing the patterns of growth and value change. With investing you can stick to one hard and fast rule. It’s no longer the question of ‘house or apartment’ it’s ‘what kind of property is going to deliver the biggest return on investment (ROI) in the long run?’

According to the REIA there’s not a huge difference in price growth, with houses increasing 81% in the past ten years and apartments seeing a 72% increase. This is because over the last twenty or thirty years as houses have become more scarce there’s been greater pressure placed on the smaller dwellings, namely apartments and townhouses. This has driven up the demand and price, and ensured a pretty comparable rate of growth with with houses. Historically, houses have experienced a greater price rise than units over a long period of time, but this hasn’t always been the case in the short to medium term.

 

Let’s look into this further and compare the two with pros and cons:

 

Houses Apartments
Pros Pros
  • Good appreciation in value over a long period of time
  • Land value increases
  • Can upgrade and maintain property as you see fit – full choice on design
  • Good for family rental prospects
 

 
  • No yard maintenance
  • Minimal upkeep of property
  • Body corporate takes care of a lot of the maintenance and upgrades
  • Often newer fixtures and fittings
  • Greater short term appreciation
  • Tenants will enjoy the lifestyle location of an apartment – good rental prospects
  • Higher rental yield
Cons Cons
  • More maintenance on the property
  • Responsible for all upgrades and problems with the property
  • Rental yield is going to be lower than for an apartment
  • Body corporate fees
  • Less flexibility with choices for decoration and design
  • No land/minimal land holding
 

The bottom line is, Australia is moving towards the trend of high-rise living as seen overseas, as more and more people want to be part of the metropolitan lifestyle and come up against competition for property. While the demand for houses will always exist because of the lifestyle and space for families, the demand for inner city apartments and the location they provide means that apartments will continue to grow as a solid investment choice in the future.

 

It just comes down to your personal buying power at the time and when investments become available. Ultimately it’s a choice based on return, and so if houses and apartments both continue to be desirable, I’d suggest that either would be a valid choice for a savvy investor. If you’d like to learn more about the different types of investment properties and how to best balance out your portfolio then I’d recommend you watch out online training videos

Which cover topics like:

  • How to invest with no impact to your lifestyle
  • How to balance your property portfolio with different types of purchases and properties in different locations
  • What you need to avoid as an investor
  • What banks won’t tell you about equity
If you are keen to get going and join the ranks of thousands of successful investors, book your obligation-free and complimentary private consultation with an AllianceCorp Property Investment Coach today.

Jason Paetow is the Managing Director of AllianceCorp, a buyer's advocacy and property investment company. Jason has over 15 years of experience in the property industry and is an expert at property investment strategy, and in coaching and working with clients to optimise their success through education and support. He is a qualified Financial Planner, Mortgage Broker, REIV Licensed Real Estate Agent and a Licensed Builder. To find out more, please visit www.alliancecorp.com.au.

Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.