Why are apartments more desirable than houses?

This is a subject of constant debate: Which investment is the best? Do you want to buy new or old homes?

 

There is often disagreement between landlords when it comes to investing in apartments or houses.

 

It’s often a firmly divided camp, with those who believe that a property’s value is in the land on one side. On the other side, you’ll find those who believe that a property’s individual characteristics – such as location and number of bedrooms – are far more important than simply the dwelling type.

 

“Many first-time investors assume that houses are always better as investments as they have more accommodation and land,” says Monique Sasson Wakelin, director of Wakelin Property Advisory.

 

“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.”

 

She believes that investors who are stuck on this question are often focusing on the wrong thing, as the question you need to be asking is not, “Should I invest in a unit or a house?” but rather, “What type of property will deliver a bigger return on investment in the long term?”

 

According to the Real Estate Institute of Australia (REIA), there’s not much of a difference in price growth between each dwelling type. The median price of a house has increased by 81 percent over the past decade, while that of an apartment has increased by 72 percent.

 

“Historically, house prices have been higher than units over a longer time period. [but]REIA spokesperson says, “This isn’t always true over a shorter timeframe or medium.”

 

“Houses are more difficult to maintain than units, and therefore they are not suitable for all investors. The majority of the maintenance and care for surrounding buildings and their surroundings is done by units.

 

Ultimately, there are pro’s and con’s attached to any dwelling type, and the right investment for you will depend on your risk profile, investment strategy and financial position.

 

It’s also vital that you pay attention to lifestyle trends, adds Sasson Wakelin, so you can tailor your investment to suit the area you’re looking to buy in.

 

“As more people choose to live in inner precincts, closer to work and the attractions of urban life, the land that inner urban properties sit on has become increasingly valuable,” she says.

 

“Apartments are most likely to be built in the inner urban areas, as they take up a higher share of the land there than anywhere else, and owners of apartments are sharing in the rising value of the land that their buildings stand on… Apartment investors therefore benefit from the appreciating land values, even though they don’t have a direct landholding.”