If you are looking to buy a residential investment property, there will come a point where you contemplate whether to purchase an apartment or a house. It’s a difficult decision, especially if you are buying with a home loan. Different investors have different needs. You, as an individual, need to decide what works for you and what does not.

On this page, we provide some facts related to houses and apartments to help you make your choice.


Advantages Of Buying An Apartment

Here are some benefits of buying an apartment as an investment property.

  • Apartments often come with common areas such as a gym, swimming pool, library, meditation centre, etc. that can be major attractions for tenants.
  • The net rental income from a unit is usually more.
  • An apartment is easier to sell than a house.
  • Apartments are less expensive than houses in the same location.
  • Little to no cleaning and renovation are required when you first get an apartment.

Disadvantages Of Buying An Apartment

Here are some of the drawbacks of buying a unit as an investment property.

  • You need to pay fees for the common areas you share with others in the apartment building.
  • Lenders do not provide home loans for studio apartments less than 18m².
  • People who rent a unit sign a short-term contract. You may face difficulty finding new tenants all the time.
  • You require the approval of an owners corporation to renovate your apartment. Also, you must give your neighbours a 14-day notice for renovations you intend on making.

Advantages Of Buying A House

Here are some of the advantages of buying a house as an investment property.

  • Houses come with an outdoor space, which can be a major attraction for tenants.
  • Since you own the entire house, you do not have to pay any common ground fees.
  • Most minor renovations do not require a permit.
  • Lenders provide more mortgage discounts and concessions for a house.
  • People who rent a house are more likely to sign a long-term contract, thus assuring you a stable rental income for an extended period.
  • The value of the land your house is built on can appreciate, hence raising the property price. This will make you a profit when selling the house.

Disadvantages Of Buying A House

Here are some of the disadvantages of buying a house as an investment property.

  • Selling a house is more difficult than selling an apartment.
  • Houses are more expensive than apartments in the same location.
  • The net rental income for a house is usually less.
  • The value of the land your house is built on can depreciate, hence lowering the property value as a whole, meaning you could incur a loss when you sell.

Apartment Vs House: Choosing Based On Price Levels

Most apartments are smaller than most houses and, therefore, cheaper. Over the years, the price gap between a house and an apartment has increased tremendously and somewhat abnormally. The most recent jump in the price gap was led by the sudden hike in demand for houses that COVID has caused.

Since most people continue to work from home, they want a bigger and better living space. This has caused the demand for houses in the property market to shoot up while the supply has remained the same, hence increasing prices. Apartment prices have also increased but not as much.

If you are buying a house for yourself to live in, the price gap between a house and a unit may not be as important for you. But, for someone purchasing an investment property, the price gap can make a massive difference in the profit, which could make an apartment the better choice for some.

How Much Will I Save Buying An Apartment?

The table below shows the price gap between houses and apartments in the Sydney suburbs in 2021. This will give a general idea of the price gap between houses and apartments in Australia.

Average Saving Made Buying An Apartment Instead Of A House (Sydney Suburbs, 2021)
Centennial Park 87%
Vaucluse 80%
Bellevue Hill 77%
Mosman 76%
Strathfield 73%
Double Bay 72%
Killara 71%
Kensington 70%
Lane Cove 69%
Rose Bay 68%

Source: realestate.com.au


Different Generations Make Different Choices

Apartments appeal to a younger generation living by themselves. Only a quarter of the people who own apartments in Australia have families with children. Instead, people in their early 20s form the majority of the apartment population.

Units are convenient for youngsters who’d prefer paying less rent, having roommates, or simply living alone. Younger people often do not want the added responsibility of mowing yards and paying for extra rooms they do not require. They often prefer exploring cities and new places until they figure out where they want to settle later in life. So, apartments are their preferred living quarters.

As for people over 30, most prefer living in a house. The added responsibility of a newborn and the desire to settle into a place long-term are two common reasons people shift from an apartment to a house. In another trend, Millennials in their late 20s have also started moving out of apartments for a better living situation.

As an investor, you must be clear on which cohort of tenants suits your needs and preferences best.

If you can make a significant investment on a house and prefer long-term tenants for stability, renting to people over 30 is the best option. However, you’ll be reliant on your tenants to maintain your property, which can be risky. Also, the rental yield may not be as much as for an apartment.

If you want to make a smaller investment and do not mind short-term tenants, renting out your property to Millennials is a great choice, you will probably make significant profits from the rental income. But Millennials typically enter only short-term contracts, so you can expect to have to go through the process of finding appropriate tenants frequently.


Still Not Sure Whether To Invest In An Apartment Or A House?

Our mortgage brokers can access your case to help find a property that best suits your profile.

Please call us on 1300 889 743 or enquire online to get started with the process of acquiring your preferred investment property.

Why use us?

We aim to set an example by delivering what we promise: a higher level of service, better advice and better home loans.

pin_drop

Australia-wide services

We finance properties anywhere in Australia for people anywhere in the world.

monetization_on

Get incredible interest rates

Our relationships with our panel of lenders allow us to negotiate your interest rate.

thumb_up

We get tough loans approved

We can help you navigate the often complex pre-approval and application process.

favorite

Our customers love us

We receive hundreds of love letters from our customers.

Discover more reasons to use Home Loan Experts

How we find you the right solution

We get a complete understanding of where you’re at and what your ultimate goals are.
You’ll get a recommendation in just a few simple steps.

free assessment
1

Complete our free assessment form or call us.

situation
2

We assess your situation.

options
3

We look at all the options from our panel of lenders.

suitable home loan deals
4

We will find you the most suitable home loan deals.

Testimonials for Home loan experts

Facts
about us

50+

lenders on
our panel

$4B+

lent Australia-wide
and counting

Westpac
ANZ
Nab
AMP
Qudos
Firstmac
Common Wealth
St George
ING
Homeloans
Macquire
Suncorp
Pepper Money
Me Bank
Bankwest
75%

of our borrowers get
approved with a major bank

95%

of our borrowers get a discount
below the bank standard variable rate