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Houses versus units – the great debate

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Houses versus units – the great debate

by Steven Cross 30 November 1999 1 minute read

 

I was chatting to a friend of mine the other day who said “oh no, I wouldn’t invest in an apartment”. I asked her why and she said because a good investment had to include land. Right?

by Steven Cross
November 30, 1999

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Well according to one of the oldest property maxims, yes. ‘Land appreciates, property depreciates,’ so the saying goes.

Indeed, investors have long advocated that the best investment involves a decent ratio of land.

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But times are a changing and while this adage may still hold some merit, apartments are increasingly being recognised as a strong investment option.

The reason for this shift largely comes down to affordability. The median capital city unit price in July 2010 was $420,000, according to RP Data and Rismark. The median capital city house price was $497,000, some $76,000 more. In some capital city markets, the price difference between units and houses is even larger.

Changing lifestyle trends are also driving demand for apartment style properties.

“Traditionally, people wanted the big yard. They wanted to spend time at home in their backyard,” Sean Green, NSW and Queensland operations manager at Raine & Horne, recently told me.

“But now they’re doing other things – they’re not so interested in the maintenance of a yard.”

A quick look at the price growth of units and houses confirms that units are in fact an increasingly attractive investment choice.

In the 12 months to July 2010, Australian capital city median house values grew by 9.2 per cent, according to RP Data & Rismark.

Over the same period, Australian capital city median unit values grew by 11 per cent.

But like all investment decisions, exactly what you purchase requires careful consideration and due diligence. Perhaps the biggest vulnerability units face is oversupply, so look for a unit in a location where dwellings are in short supply.

You’ll also need to carefully consider any strata expenses and regulations associated with buying into a complex.

So if you’re looking to purchase a good investment property, don’t discount the humble unit. So long as you make a well-considered purchase, a unit might just offer you better growth than a house – or at the very least a cheaper route into the property market.

Houses versus units – the great debate
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