Should I buy a house, apartment or townhouse?
6 min read
Apartments are often pitched as a low-cost way to get into the property market. However in some suburbs across Melbourne (such as Fitzroy or Carlton) it’s now possible to buy a house or an apartment for about the same price. the decision whether to purchase an apartment or house is no longer simply a financial one. Here are some factors to think about:
Pros to buying an Apartment
There are many beautiful, high-end apartments on the market and currently being built. And apartments are great for many reasons:
- Minimal maintenance – body corporate takes care of all communal areas and there’s no outdoor/yard to worry about
- Location to CBD – many apartments are in great inner city areas, public transport and of course bars, eateries and shopping
- Good security – there are more layers of security for someone to get past
- Amenities – the apartment complex might have a gym, pool, etc.
- Land – when you buy an apartment you don’t own the land it is built on
Pros to buying a Townhouse
Buying a townhouse is not the same as buying a house. A townhouse is often larger than an apartment and is on land, however the land is usually owned on a strata title. This means you own the house but you share ownership of the land with the other people who own the adjacent townhouses.
As with an apartment, there is still a body corporate, but you end up with the space and privacy afforded by a house.
Townhouses also tend to be quite similar looking (like apartments) and any major renovations are probably not going to be approved by the body corporate. Internal refurbishments or renovations might be ok, but they’ll also have to be approved.
Pros to buying a House
One of the biggest pros to buying a detached house is that you own the land too, and for most property the largest portion of value is held in the land rather than the building.
Although you tend to have bigger bills and more maintenance as houses are usually bigger than apartments or townhouses, there are no body corporate or other fees like that which you would need to pay.
You also have the freedom of being able to do what you want to the interior and exterior (STCA) without needing to get approval from a body corporate.
What is best: house, apartment or townhouse?
As you can see there are benefits to buying each of the different property types. But how do you know what’s going to be best for you?
If you plan on renting it out, then apartments tend to do very well in terms of rental yield. Insurance and maintenance are covered by the owner’s corporation which is paid by the owner/landlord and therefore it can eat into profitability. You can however look at claiming depreciation and other expenses, especially if it’s a newly built apartment that you are renting out.
Capital gains tend to be stronger with houses. Take for instance the 2021 year, houses have grown in value almost 20%, compared with units (apartments) at 9.2%. If you are investing for capital growth over the longer term, then a house might be a better option.
If you are looking to buy somewhere you want to live (owner occupied) then you need to consider what lifestyle factors you want and purchase accordingly. If you want a big family home with land for the kids and pets, then an apartment is obviously not going to be suitable.
When it comes down to it, it really depends what you are using the property for as to what it going to be most suitable.