04/04/2022
Townhouse vs house vs apartment: which is a better investment?
Sources from Alex White realestate.com.au
Home ownership is changing in Australia, with many buyers moving away from the traditional house and instead becoming open to purchasing dwellings of different shapes and sizes.
Depending on what you are looking for in a home, one of these types of properties may be more suitable than the traditional house with a front and back yard.
Costs of transacting property in Australia is high, mainly due to stamp duty and other selling costs, so from an investment perspective buyers should avoid doing so more than necessary. For this reason they should spend ample time considering their needs before buying a home.
📚Different property types
These days when searching for property there are a number of options to select:
👉house
👉apartment
👉unit or subdivision
👉townhouse
How to choose between different housing types 🧐
When it comes to buying a home, it’s important that you consider potential downfalls and bonuses of all types of property and choose the one that is right for you.
This includes whether your family will grow and if you will need more space in the future. Meanwhile, if it is an investment property, location might be more important than the size of the property.
Answering the below questions before you buy should help you decide which property type is best for you, reducing the likelihood of making a costly mistake.
📚House🏡
This is the traditional stand-alone dwelling where the buyer is purchasing the land on an individual title.
This is the most popular property type for owner-occupiers in Australia and allows the most flexibility and privacy. However, it has its drawbacks, including: higher costs, more space to clean and maintain, higher utility bills, and sole responsibility for maintenance and repairs.
Duplexes also fall into this category, because, although they may share an adjoining wall, they usually stand on separate titles.
Pros
More space: houses have minimum block sizes set by the government and the dwellings tend to be larger than other dwellings.
Outdoor space: most houses come with a front or back garden, or both.
Privacy: houses offer greater privacy, as you are not sharing common areas with multiple people.
Flexibility: a shared title often brings rules, especially when it comes to renovations. On a single title, you are free to do what you like, permitting council regulations.
Better finance: lenders prefer freeholds and will likely lend you more money when purchasing a house.
Resale value: in general, houses appreciate better than townhouse and apartments.
Cons
Cost: houses tend to be more expensive than other types of property in the same area.
Location: in popular locations, houses are either more expensive or snapped up by developers.
Maintenance: keeping a house in good nick is a lot of work. There is cleaning, gardening, plumbing and a whole range of other tasks – not to mention repairs.
Bigger bills: houses are generally harder to heat and cool, which means larger utility bills. You must also take out insurance by yourself, which means bigger premiums.
📚Apartment🏢
An apartment is a self-contained flat that is part of a bigger complex.
When you own a unit, you are on a strata title, which means the flat belongs to you but ownership of the common property is shared with the different owners.
It also means that you will belong to a body corporate and must comply with certain bylaws. As a member of a body corporate, you'll need to pay body corporate fees, to cover the repair and maintenance of the common areas. The exact amount you pay will depend on the size of the lot you own, as well as the sizing of the building complex, its age and its amenities.
A cheaper purchase price and more convenient location tend to be the biggest benefits of owning an apartment, which means they're generally best suited to property investors and single, first home owners.
Pros
Affordability: apartments are generally more affordable than stand-alone houses.
Location: Apartment complexes are often built next to popular amenities such as transport and shopping strips.
Less maintenance: the body corporate repairs and maintain the common areas.
Security: new apartments tend to have swipe cards and CCTV, and having more people around is generally a plus.
Amenities: units can come with added extras such as gyms, pools, lifts and tennis courts.
Lower bills: living in a unit will cost you less when it comes to water, heating and gas.
Cons
Less space: flats are usually smaller and many have limited or no outdoor space.
Body corporate fees: these can be cheap in older apartments but can become quite expensive if your complex has lots of amenities.
Reduced flexibility: bylaws stipulate whether you can have pets, allowable noise levels, where you can hang your washing, and whether you can renovate.
Fewer parking spaces: there is increased competition for car spaces around high-rises and an individual space on your title can be costly.
📚Townhouse🏘
A townhouse is a multi-level building designed to mimic a traditional house that is owned on a strata title. This means you own the dwelling but share the land with other people.
Typically, townhouses offer the space and privacy of a house, giving your family space to move around, and often come with an outside courtyard.
However, you still have a body corporate and, therefore, face similar restrictions to an apartment.
Pros
Space: townhouses are often two or three-storeys and have more room than an apartment.
Modern amenities: due to the recent boom in townhouse construction many of these dwellings have modern conveniences like ensuites and open-plan floorplans.
Privacy: designed in a similar way to a house, townhouses don't have any shared areas.
Limited freedom: you are still bound by bylaws, but these tend to be more relaxed than apartment complexes.
Price: townhouses are cheaper than houses.
Location: buying a townhouse closer to the city or beach, or in a competitive real estate market is more affordable than buying a house.
Cons
Space: less area than a house.
Price: more expensive than an apartment.
Shared title: you are on a strata scheme.
No individuality: townhouses are often the same layout and design as the neighbouring buildings and tend to lack individuality.
Privacy: you have less private space than in a house and typically share walls with your neighbours.
Land: smaller lot size.
Stairs: townhouses typically span two to three storeys, which may not be suitable for elderly or disabled owners.
Resale value: townhouses usually experience less capital growth than a house, roughly the same as an apartment.
📚Subdivided blocks
A subdivided block which may include either a standalone house or an attached dwelling is considered a unit due to the division of the land. Addresses will typically have a number or letter attached to street number, eg. 1/29 or 42B.
Technically all urban and suburban blocks are divisions of larger parcels of land that have been split up and arranged into the streets and suburbs we know today. Over the years these blocks have been further subdivided into smaller parcels to accomodate growing populations. For example, it used to be common for blocks of land in Australian suburbs to be around a quarter of an acre or 1101sqm.
Blocks in many urban areas are trending smaller, especially those close to CBDs, but usually the suburb will have a standard size that is common for most dwellings.
Subdivided blocks will be smaller than the average block in the area, hence the more affordable price, which allows more buyers to access land.
Often these properties can share driveways, parking areas or other outdoor space and may or may not be subject to an owners corporation.
This style of dwelling can be popular for those that are looking for all the benefits of a house but don't have the budget or desire for a full block in the same neighbourhood. This can include younger families, downsizers or investors.
Pros
Price: Subdivisions will be cheaper than full blocks in the same area.
Dwelling type: Many subdivisions have traditional free-standing family homes with all the individuality and space that comes with them.
Ability to make changes: Owners can make changes to their dwellings as they would a standalone house provided it's not part of the shared or common space, unlike owners of a strata title.
Outdoor space: Subdivisions will often either have a front yard or a back yard or smaller versions of both, depending on where the house is situated on the block.
Cons
Privacy: Some dwellings on subdivided blocks may be built close together and therefore privacy can be impacted.
Price: These styles of units can be more expensive than townhouses in the same areas.
Land: The land size will be smaller than a full block.
Resale value: The resale value will be less than that of a full block.
📚Questions to ask yourself before deciding on property🤔
When choosing between a house, subdivision, townhouse or apartment, there are a few factors to think about when it comes to making an investment:
What can you afford?
How big is your family?
Will you need to upsize or downsize in the future, therefore spending more on transaction costs?
Do you have pets that require outdoor space?
Do you want to entertain outside?
Is a garage essential?
Would you like to renovate?
Do you like living close to your neighbours?
Do you mind sharing facilities?
Do you know what a strata scheme is and is it something you'd be willing to deal with?
Do you mind paying body corporate fees?
Do you want to own physical land?
Will you be a owner-occupier forever, or might you rent out the property?
For investors: Will renters find this type of property appealing?
Good luck for your investment journey🥰
If you would like for more information or share you knowledge, feel free to call me Kim Le on 0499769888
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