One of the questions that is often asked in the property market is whether apartments make better investments than houses
? Although both apartments and houses have their own advantages and disadvantages, there are many great reasons why you should be considering an apartment purchase.
To help you decide and provide you with some clarity, here are eight reasons why apartments make better investments than houses
8 Reasons why apartments make better investments than houses
Firstly, one of the most important reasons why apartments make better investments than houses
is down to the affordability factor. With the cost of property in Australia constantly rising, particularly in Sydney where first home buyers especially are struggling to save up a large enough deposit to enter the property market, many potential buyers are opting for apartments instead. This is because apartments tend to be more affordable than houses and offer a more affordable way onto the property ladder.
The latest data from CoreLogic shows that the median house price in Sydney at 30 April 2017 stood at $990,000, compared to the median unit price of $740,000, a $250,000 price difference.
2. Changing demographics
The average number of people in our households is also shrinking with far more lone and two person households than ever before. The Australian Bureau of Statistics (ABS) predicts that the average household size will fall from 2.6 people per household in 2011 to between 2.5 and 2.6 people per household in 2036.
Although family households show the greatest numeric increase, lone person households are projected to show the greatest percentage increase over the 25-year projection period. It is predicted that the number of lone person households will grow by approximately 61% and 65% from 2.1 million households in 2011 to between 3.3 million and 3.4 million households in 2036.
As the population ages and lives for longer, there will be more retirees and those looking to downsize into a smaller property. An apartment is an attractive property choice due to good levels of security, low maintenance living and good positioning.
Today, we are living in a world where we want everything as quickly and as easily as possible. This also relates to where we live. We want all of our necessities such as public transport, shops, schools, dining and parks all close by, or within easy walking distance to lead a far more convenient lifestyle. Apartment developments tend to be positioned within close proximity of these conveniences, making them a popular choice for many, particularly professionals.
5. Land scarcity
Another reason why apartments make better investments than houses is due to the amount of available land close to the CBD reducing. This is driving the number of high-rise apartment developments being built to cater for the demand. As mentioned previously, we want convenience close by, and people are far more likely to pay a premium to live within close proximity of the CBD.
6. Growing population
As well as our households changing, our population is also growing at a rapid rate, particularly our capital cities Melbourne and Sydney. Australia’s population is projected to grow by 45%, from 22.3 million people to 32.4 million people. By 2056, Melbourne is expected to become Australia’s largest capital city, overtaking Sydney’s population. In order to cope with this increased demand, new dwellings will need to be built in the upcoming decade to meet this demand. According to the ABS, the number of households in Australia is projected to increase from 8.4 million in 2011 to between 12.6 and 12.7 million in 2036, an increase of around 4.2 and 4.3 million households.
7. Off the plan apartments
A great reason why apartments make better investments than houses is that there is the opportunity to purchase apartments off the plan. This means you can buy a property before construction even begins, making the property far more affordable. You also do not need to pay a mortgage until settlement arrives, which might be two or more years away, giving you greater time to save up a larger deposit. A longer settlement time might also see your apartment grow in value.
8. Higher rental yield
Finally, investing in apartments rather than houses is a popular move due to apartments generally providing a higher rental yield. According to the latest statistics from CoreLogic, the rental yield results for Sydney saw a rental yield of 2.7% for houses compared to 3.8% for units. Melbourne also saw a 2.7% rental yield for houses, whilst units had a rental yield of 4.1%.
Do your homework
It is important to keep in mind that just like any property purchase, it is essential that you do your thorough research and homework first to ensure your apartment makes a solid investment. Apartments might make better investments than houses, but it all depends on where you buy, what you buy and when you buy. Five key things to think about include:
- Stick to your budget
- Speak to a Mortgage Broker
- Buy in a suburb that has high demand, but low supply
- Buy close to core amenities
- Talk to property experts such as iBuyNew
Get in touch
To find out more about the benefits of buying an apartment, it’s best to speak to one of iBuyNew’s talented Property Consultants who can assist you further. Discover whether an apartment best suits you today by calling the iBuyNew team on 1300 123 463
Published on 13th of June 2017 by Marty Stanowich