Houses or Units?
Houses have typically shown more consistent growth over the long term in established areas. Most property experts also agree that purchasing properties with more land is one way to increase your chances of securing better future growth, if it is in an established area. You also usually own the land, so you also have greater control. This means there are more options open to you to modify the property and add value. On the flip side, sometimes houses do lower rental returns as a percentage of their value. There can also be higher maintenance costs.
One of the main advantages with units is that they tend to provide a higher rental return as a percentage of their price. Moreover, apartments frequently achieve just as good return as houses, in areas that are fully built up with height limit restrictions on further development. It’s quite often the case that prestige city locations will be largely populated with units. Investors may have little choice but to opt for units if they want to access the consistent capital growth in these locations – both in terms of property availability and entry costs.
Units are also increasingly popular with the younger generation and emptynesters.They meet the needs of those demographics as they are less labour intensive in terms of maintenance. They also have potential benefits over houses, because of the shared benefits of many apartment complexes from community/ group services such as pool, tennis court, gym, activities, and so on.
The main disadvantage is that apartments typically show less consistent growth in areas that are not fully built up. Owners of apartments also typically have less control over their asset, as any changes they want to make to their property usually require approval from the body corporate. Owners also have to contribute to the running of the body corporate, so compulsory fees can be quite high. Finally, it can be difficult to get good finance for some types of apartments, such as company title properties and very small units.
Where to buy your property is equally important. Historically, investors have tended towards city properties, particularly in the eastern capitals of Sydney, Melbourne and Brisbane. However, the resources boom has energised some regional markets, particularly in Western Australia and Queensland. So you need to carefully consider which one is right for you.