Apartments or houses: which is the better
investment?
By Nila Sweeney - 7th June 2013
Ask anyone who invests in
property – and even those who don’t – and they’ll likely have an opinion on the
old “houses versus apartments” debate. If this is a question in your mind then read on...
When the topic of conversation
drifts towards investing in apartments or houses, it usually generates some
debate amongst landlords!
It’s often a firmly divided camp,
with those who believe that a property’s value is in the land on one side. On
the other side, you’ll find those who believe that a property’s individual
characteristics – such as location and number of bedrooms – are far more
important than simply the dwelling type.
“Many first-time investors assume
that houses are always better as investments as they have more accommodation
and land,” says Monique
Sasson Wakelin, director of Wakelin Property Advisory.
“This may have been true once,
but as a growing number of Australians have come to prefer living closer to the
centre of town, the patterns of growth in property values has changed.”
She believes that investors who
are stuck on this question are often focusing on the wrong thing, as the
question you need to be asking is not, “Should I invest in a unit or a house?”
but rather, “What type of property will deliver a bigger return on investment
in the long term?”
According to the Real Estate
Institute of Australia (REIA), there’s not much of a difference in price growth
between each dwelling type. Over the past ten years, median house prices have
increased by 81 percent, while median apartment prices increased by 72 percent.
"Historically, over a longer
time frame, price rises for houses are greater than that for units, [but] this
is not always the case over a shorter to medium time frame," a REIA
spokesperson says.
"Houses generally, however,
require more attention in terms of ongoing maintenance than units do and thus
do not always suit all investors. Units have much of the maintenance and care
of the building and surrounds undertaken through the body corporate."
Ultimately, there are pro’s and
con’s attached to any dwelling type, and the right investment for you will
depend on your risk profile, investment strategy and financial position.
It’s also vital that you pay
attention to lifestyle trends, adds Wakelin,
so you can tailor your investment to suit the area you’re looking to buy in.
“As more people choose to live in
inner precincts, closer to work and the attractions of urban life, the land
that inner urban properties sit on has become increasingly valuable,” she says.
“Apartments are most likely to be
built in the inner urban areas, as they take up a higher share of the land
there than anywhere else, and owners of apartments are sharing in the rising
value of the land that their buildings stand on… Apartment investors therefore
benefit from the appreciating land values, even though they don’t have a direct
landholding.”
