Residential Market Investing
Apartments versus houses as an investment…
The trend might not yet be too obvious in official statistics of new dwelling types, but some of Australia’s hottest residential markets are seeing a subtle shift in preference for apartments over houses. This raises an age-old question: which is better: a house or an apartment?
Conventional wisdom has always been that land is what creates enduring value and that buildings after all simply depreciate in value over time. However contemporary pressures: affordability, the desire for inner city living, land prices in urban areas and land planning orienting towards densification of land has eclipsed old rules.
Brisbane’s apartment market for example has demonstrated a shift towards apartments. Apartments and townhouses claimed almost 30% of the Queensland Housing Market in 2006-2007 and the trend is more marked in Brisbane.
The tight rental vacancy rates (1.3% in Brisbane and less than 1.0% in Sydney) and a soaring median house price are the main factors driving the renewed interest in apartments.
The drive by house buyers diverting to units for both affordability reasons and to a lesser degree, investor competition returning has seen units priced between $500,000 and $800,000 getting 10% and in some instances 20% premium to market. This may well pick up tempo in the months ahead.
The chief executive officer of Raine and Horne, Angus Raine, says that when faced with higher house prices, many buyers will opt for an apartment, and that’s what is happening in many parts of Sydney. He noted that the $360,000 median apartment price is definitely more affordable than houses.
An entire new generation of renters living in inner city suburbs will ensure a continuation of these trends.
Filed Under: Investment Strategies • Property Investment
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