Houses versus apartments
With housing affordability at the lowest level in years, it is a great time for investors and renters to secure their place in the market. But when it comes to houses or apartments/units, it is worthwhile spending some time to consider which property type represents the best buying and investment opportunity in the current market.
Houses and units across the country have shown mixed results during the last 12 months. Subject to many influences including low interest rates, generous first home owner incentives, tightening rental affordability and dwindling stock levels, both types have faired relatively well.
According to researcher RP Data, during the last quarter the Melbourne median house price rose 4.2 per cent to $472,815, while the median unit price rose 2.1 per cent to $337,192. This trend of capital appreciation in favour of houses is not uncommon, as the growth experienced is relative to the larger land component. However, although it would appear that the housing market has outperformed the unit market in the last quarter, the growth experienced in housing follows a more significant fall in values during the last 12 months, compared with units which have showed greater resilience to market forces. This is largely due to a shortage of affordable unit and apartment accommodation across the country.
There are many pros and cons to consider when weighing up between houses and apartments. While apartments traditionally offer greater yields when compared with houses (currently estimated to be 5.3 per cent and 4.4 per cent respectively) they can be met with significant Owners Corporation fees, which can eat away at returns.
However, as rental affordability in capital cities tightens many tenants are choosing more affordable and convenient apartment living, over houses. Although recent RP Data statistics show that rental rates for houses fell 3.5 per cent and only 0.6 per cent for apartments over the June quarter, apartments remain the more affordable rental property, and are also often better situated in relation to infrastructure as well as offering lower maintenance living.
Tightening lending constraints is a further consideration to be mindful of when choosing between these two property types. Many banks and lenders are now reluctant to lend on property smaller than 50sqm, which may limit the marketability and value of smaller apartments when it comes time to sell.
When deciding between purchasing a house or an apartment there are many factors to consider. The decision should be based on the purchaser’s personal circumstances and whether they are driven by capital growth or rental returns.
Whatever the decision, the Spring selling season is sure to bring some great purchasing opportunities for both property types.
Courtesy of propertybooks.com.au