Purchasing a property is a highly considered process. In previous years, houses represented the most obvious purchasing decision, and only those with a lower budget opted for apartments. This is now a thing of the past as the Australian property market continues to thrive; attracting overseas investors, infrastructure evolution and changing living situations. Deciding whether an apartment or house is the right purchase for you is determined by several factors including the market, your strategic goals as well as your budget.

Consider the bigger picture

As with any major financial purchase, it’s important to look beyond your personal preference to the overall environment, in this case, the property market. A buyer should approach a property purchase as a rational financial transaction and not let emotion play a part. Focusing on economic indicators such as auction clearance rates, interest rates and median purchase prices will help outline a solid strategic plan. Seeking professional assistance from real estate agents, mortgage brokers and financial planners is critical to properly evaluate this information and apply it to your direct goals.

Find a mentor

We normally associate mentors with our business success or personal development; but not when making important financial decisions. Finding a mentor with a portfolio of properties is often the best way to expedite your investment property plans. Learning and absorbing previous experience which has turned to success will illustrate the path to success for you and your goals.

Look at the facts

It’s important to consider the following three indicators before pursuing the purchase of an apartment or a house.

• Economic factors: understanding key economic drivers such as cash and interest rates, clearance and vacancy rates, demographics and employment figures will help illustrate how the market is currently performing as well as determine what might happen in the future.
• Supply and demand: how many units versus houses are there on the market currently? Are houses or apartments being leased quicker? Understanding these factors, as well as any developments in the area is an indication of oversupply or undersupply in a particular location.
• Affordability: understanding the affordability of the property will ensure you’re not over or under-capitalising in the desired area. Rental yield is also an important factor to consider the affordability for prospective tenants if you plan on using the property as an investment.

Apartment VS Hos

Advantages of apartments vs. houses

There are several factors which set apartments and houses apart.

• ApartmentsGenerally a cheaper purchase price
• Often located in highly sought after inner city or beachside locations which are attractive to tenants
• Strata maintenance to assist with upkeep and maintenance of the property
• Apartments provide investors with better yield due to a higher level of rent relative to the purchase price. This often means you can hold more property over the long term.
• HousesMore privacy for occupants
• More scope for renovations when looking to add value quickly, without the need for signoff from strata or body corporate
• Ownership of appreciating land
• Can be more resilient to market changes

Disadvantages of apartments vs. houses

Similarly to advantages of apartments vs. houses, there are several disadvantages to take into consideration prior to your purchase decision.

Apartments

• Often restrictions on pet ownership
• Restrictions on developing the apartment regarding upgrades and renovations
• Less privacy for tenants
• Fewer facilities including pools, backyards and outdoor areas

Houses

• Generally speaking, a house will often hold a higher purchase price than an apartment
• Maintenance of grounds including gardens and pools
• No strata or body corporate to assist with building maintenance or compliance

Ultimately, there is no clear winner when deciding between houses or apartments. The key is to assess the opportunity on a case by case basis, against the indicators discussed, to determine which is right for you.

To find out more about whether an apartment or house is right for your investment strategy, you can contact me on 02 9095 6888.