19 April 2022

Which Property Type Should You Buy?

Emma McLaren
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Australian living arrangements are changing.

As apartment, unit, and townhouse markets explode, could it suggest we’re sharply shifting away from white picket fence traditions?

We’re opting for compact over capacious and adequacy before abundance. But when did these minimalistic trends start to dominate?

Our guess is likely around the same time house prices reached new levels of insanity.

So, what’s the better investment?

We’ve put together the best and the worst about purchasing each, providing rather straightforward pros and cons-style townhouse vs house vs apartments guide!

Let’s begin with the importance of self-querying for a more personalised introduction to getting started.

Townhouse vs House: Key Questions to Ask Yourself As An Investor

When it comes to selecting a suitable property for purchase (especially as a first-time homeowner), it’s critical to acknowledge and resolve a few things beforehand.

Making an incorrect townhouse vs house vs apartment decision due to misunderstandings, failing to conduct research, or not challenging yourself on your true wants and needs can be financially detrimental.

Jot down plenty of questions similar to the following to gain a comprehensive ‘self-scoop’ on which search filters to tick next time you’re browsing:

  • What’s your budget? - Remember, realistically, you’ll need a solid 20% cash sum ready to go at a minimum (10% for the minimum deposit in most cases + 10% for other fees).

Top Tip: Get finance pre-approval sorted before you even schedule your first inspection. Confirming your maximum borrowing capacity prevents you from spending within your means and shows vendors you’re keen for a quick sale.

  • Who will be living in the home? - More space is always better than not having enough. Living with large families in small areas with minimal privacy gets real old, real quick!

  • How important is yard space? - Have pets? Are you an avid weekend entertainer? Consider how much outdoor area you’ll need and whether a large backyard will only be a waste of square footage (and money).

  • Where will residents park? - Oftentimes, garages aren’t even essential, depending on the property’s location. Ample, free street parking attached to a home with plenty of storage will probably see a garage become that ‘junk room’.

  • Do you plan to renovate? - Some property types will come with a range of restrictions or build-on limitations.

  • Is privacy a priority? - If you’re not one to share, then purchasing something containing a common area and amenities might not be up your alley.

  • Are you happy being part of a body corporate or strata scheme?

  • Do you require actual land? - Will you want a self-sufficient garden space or an extra shed down the track?

  • Will this particular property type attract tenants? - Combining location-specific and demographic data will provide more insight into who will likely be renting your place, how much you can charge etc.

  • Will you want to switch between investing and occupying?

Townhouse Pros and Cons

Pros:

  • Multiple Floors - Often more square footage and storage than an apartment.
  • Small yard space - Some feature mini backyards or courtyards, unlike high-rise apartment buildings.
  • Modern & Stylish - Newer developments will likely include ensuites, pools, gyms, saunas, and more.
  • Price - Better value for money as you’re not paying as much for the land.
  • Locational affordability - You’re more likely to snap up a bargain closer to a city centre or coastal area for significantly less than the average house price.

Cons:

  • Limited Privacy - Depending on its development, some complexes’ orientations feature an overabundance of common areas like grassed areas, driveways etc.

  • Staircase access to second storey floors isn’t always suitable for every homeowner.

  • Strata Plans & By-laws - Although not generally as limited as apartments, townhouse complexes come with restrictive requirements and onsite ‘rules’ or by-laws. You’ll likely need permission for minor installations such as air conditioners or shade screens.

  • You own less “lot” - Limited individuality.

  • Less capital growth than a standalone house.

House Pros and Cons

Pros:

  • Ample yard and entertaining space.

  • No common areas or sharing

  • Freedom from regulations - Only council permissions must be obtained for certain activities/works.

  • More borrowing power - Lenders will likely allow you to borrow more funds for a house.

  • Higher resale value

Cons:

  • Price - You’ll need more upfront and require a larger loan.
  • Upkeep costs - House maintenance can be expensive and time-consuming.
  • Higher utility bills - Heating, cooling and insurance costs can be quite significant.

Apartment Pros and Cons

Pros:

  • Affordability - Purchase in a prime location for significantly less than the average house price in the same area.

  • Limited self-maintenance required - Repair costs and maintenance arrangements are the body corporate’s responsibility.

  • Secure - Apartment buildings usually offer high-performance/private access features.

  • Shared modern amenities

Cons:

  • Limited space and storage
  • Often no car parking facilities
  • Astronomical body corporate fees in newer complexes
  • Toughest by-laws - Pet restrictions, storage limitations, renovation permission complications, noise restrictions.

Investment vs Occupation

Although we’re primarily discussing investments here, we can’t overlook one of the pivotal reasons people choose to purchase property in the first place.

Aside from its potential investment benefits, the sheer versatility of homeownership attracts and influences Australians to buy rather than rent if they can.

When conducting your townhouse vs house vs apartment comparison, just be mindful that you’ll probably want to live in the property at some stage.

While buying for investment purposes differs from a primary residence purchase, it’s crucial to try and generate criteria that incorporate both goals. For example, you may have zero desire to live in the suburbs right now, but you could need some extended family space within the next five years.

The contrary might also be the situation. Perhaps you’ve found an inner-city studio within budget and provides an incredible rental return, so why not try to double up and buy something you feel you could live in yourself for a year?

How To Ultimately Decide

Digging deep into stats and analytics only gets you so far.

The real goal is figuring out how to merge what makes financial sense with your actual needs, all while satisfying a budget.

We’ve delivered the facts on what you’re in for regardless of personal circumstances, and it’s now up to you to utilise these for a better-informed purchasing decision!

We all establish our own criteria when buying a home, but it’s the result of due diligence that defines where we’ll direct our offers.

Good luck on your journey, and happy hunting!

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