House or apartments - which is the better investment?

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Some property pundits believe that a property’s value is in the land, and that a house investment is the only way to go, while others swear that apartments deliver the strongest profits. So which investment is the better choice: houses or apartments? 

Monique Sasson Wakelin, director of Wakelin Property Advisory, has been advising clients on their property purchases for over two decades – and she says the “units versus apartments” question comes up again and again.

“The one question that comes up more than any other is, wouldn’t a house with a backyard make a better investment than a one bedroom apartment?” she says.

“The answer is never a simple ‘yes’ or ‘no’, but rather ‘it depends’ – it depends on the property, it depends on your budget and it depends on the location.”

Many investors assume that houses are always a better choice as they have more accommodation and more land. “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,” Sasson Wakelin advises.

Most investors also wish to find a property that delivers decent rental returns and strong capital growth, so the key to success is to buy a good quality property that matches up with your budget, Sasson Wakelin adds.

“With a budget of $800,000 or more for a city property, a house is usually the better option,” she says.

“At $700,000-$800,000, depending on the location, either option will work. If you’re spending less than $700,000, an apartment is usually a better investment.”

Ultimately, there’s no definitive right or wrong answer, and Sasson Wakelin suggests that you weigh up each potential investment on its own merits. And to those who still believe that all apartment investments are doomed? You’ll soon be proven wrong, she asserts.

“Well-positioned established apartments in low-rise, inner urban complexes can be as strong an investment proposition as any other in the Australian property market,” she says.

Apartments - pros and cons

Pros:

  • Smaller upfront financial investment
  • Tap into large, constantly growing rental pool
  • Lower or nil land tax bill
Cons:
  • Required to contribute to body corporate fees - these can range from several hundred to several thousand dollars per year
  • Less opportunity to add value
  • Lower “unique” factor, particularly when the apartment is situated in a large block
 
Houses - pros and cons
 
Pros:
  • Opportunity to subdivide, develop, add extensions or substantially renovate to add value
  • Larger land content, therefore larger potential for capital growth
  • No need to pay body corporate or strata fees
Cons:
  • Usually a larger upfront investment is required
  • Higher land tax bill – the more land you own, the more land tax you owe
  • Potential for more frequent maintenance and repair bills, as there’s more property to maintain
 
 

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