The better investment: houses or apartments?
Over the past 12 months median house prices in Australia’s capital cities rose 10.3%, according to RPData’s latest index, with apartments up 9.1% over the same period. In Brisbane it was 7.2% and 5.4%. So it’s an obvious question and one we hear a lot: which is the better investment?
It’s no surprise that many of those pushing the case for houses or apartments have a vested interest, and usually they’re selling one and not the other. As inner-Brisbane residential agents we handle the sale and property management of both and apartments are now by far the most common investment in these suburbs. This real estate salesperson owns investments of each dwelling type, but I’m firmly in the “apartments are the better investment” camp.
Capital gain has always been the big reward sought by property investors and the well-documented theory is houses appreciate faster because they have more land as a percentage of their value. The case for houses: land appreciates – dwellings do not. But what about the total value of that land? I’d sooner own a share of a high stakes piece of land (with an apartment building on it – I do own a portion) in a sought-after and improving location, over a 100% share of a lower value suburban lot where the neighbourhood is “set” and unlikely to have major improvements or land use changes for decades to come.
The answer really lies in your preference for location and, like most things in life, your budget. What will drive new demand for the ‘burbs’? How much more land might be released nearby? Meantime our inner suburbs are like a magnet for those wanting to be close to entertainment, shops, cafes, galleries…. Close to the places we spend our leisure time, as well as the office where many of us work. Apartments tick a lot of boxes for these locations and the type of tenants wanting them. An inner-city house will have that valuable land but it’s going to be expensive to buy and its yield will be low.
That same June report says the average rental yield for a Brisbane house is 4.5% with apartments comfortably higher at 5.4%. Typically more modern and with lower maintenance, an apartment is also likely to offer investors greater depreciation so higher tax deductions. There’ll be strata fees to consider but, provided they’re well-built, an apartment is typically a much simpler renovation prospect when time comes to refresh your investment.
No doubt the debate will continue for generations to come, so please share your thoughts by commenting below. Apartments? Houses? Or should we cash in the lot and bury the cash in tin cans like Nana did?!
Note: please remember to consult a financial planner or other suitably qualified adviser when investing. A real estate agent can’t legally answer that question: “Will this property be a good investment?”