Whether you are a first time buyer or seasoned investor, you will typically choose between a house and an apartment. The key drivers which will determine the type of property you purchase includes the state of the economy, home loan interest rates, your financial capacity to borrow, desired property location and your own personal investment goals. Here are some key points to take into consideration when making a decision:
House Extensions Add Value to Land
The term ‘safe as houses’ did not come from thin air. Apartments may be cheaper overall, but there is something to be said for the security of investing in a house that sits on a parcel of land. Buyers can calculate the price per square meter and look at local council planning controls to determine how much more building footprint can be added to the land with a new extension. This may include an extra bedroom or living area and landscape garden with a pool. This is not an option in most apartments due to strata laws.
Buying an Older House
While apartments are often newer, an older house can be improved through either minor or large scale renovations. Assuming the proper building and pest inspections have been conducted, an older house is less likely to surprise you with newer, cheaper materials used in building large apartment complexes. Building defects on apartments are impossible to see if you’re buying off the plan before they are built. The patient investor that can make steady, quality improvements to a house over time, will be rewarded. Having your friends over for a BBQ or party in your backyard can be priceless.
Buying a New Apartment
There are inherent risks in investing in an apartment today – more so than ever before. Brisbane, Melbourne and Sydney’s skylines have all been dominated by cranes in recent years as literally tens of thousands of apartments are built. Unless you are investing in a post war block of units, most apartments are newish, with many built for immediate market impact rather than for longevity.
The sheer speed of construction is testament to that. Some apartment complexes can deliver less than 10 years of solid value to their owners, before they turn into money pits, as shoddy workmanship and hasty construction start to reveal themselves. In addition, the resale potential alone of apartments in many of Australia’s cities is a lottery at best, with so much competition to contend with.
Buying Land is Important
The investment potential of the property you choose is an important part of the equation and your choice here will really be influenced by what your long-term property investment goals are. In the case of an apartment, the bulk of the growth potential may be in the building itself, rather than the small piece of land it sits on. When purchasing a house, the land itself becomes the greater part of the asset in many cases, however so much more can be done with the property that improves your capital growth options as well.
Body Corporate & Ongoing Strata Fees
Buying an apartment comes with ongoing overhead costs such as body corporate fees, strata title rates and being responsible for repairs and maintenance to the general apartment block exterior, common access areas, security and administration. It is important you ask for the body corporate fee structure and include these costs into your budgeting model.
As mentioned previously, your borrowing capacity will dictate your choice of buying a house or an apartment, yet the most important consideration is looking for well priced property and the capacity to capitalize on your investment. A three-bedroom house in a regional area may end up being a much better opportunity for you to invest in, than a small inner-city apartment. Similarly, a spacious apartment a little out of the city may serve your plans better, compared with committing to a huge mortgage for a house that offers more space than you need.