Should you buy a house or an apartment?

What do you see when you think of the typical Australian dream? Not so long ago, a house on a decent sized block of land was at the top of the list. As our needs and wants change and our priorities shift, the classic quarter acre block with a picket fence no longer works for everyone.

Census data shows there “has been a steady increase in the number of apartments since 1991.” Apartments are often cheaper than their detached house-equivalents, making them a more practical choice for first time buyers and those looking to save on their purchase. According to Domain, the median price for an apartment in Sydney in December 2019 was $735,387, compared to $1.14 million for a house.

Apartments have their drawbacks though, with limited outdoor space compared to a house, and strata rules and regulations to follow. Houses offer more freedom to impart your style and personality, and room to grow should your needs change.

So which one will you choose?

Here are some things to think about.

Price and location

If you’re all about location, location, location then be prepared for price, price, price. The most sought after areas will also attract a higher price tag due to demand – everyone else wants to live in the trendy new suburb, too.

Location doesn’t have to be the new hot spot. Your location decision can be based on how close you want to live to work, or where you want your kids to go to school.

You’ll need to strike the right balance between price and location during your property search. Having a clear idea of what you need and want out of your new home, and how much you can afford to spend will help you make sense of your options.

How much you can spend will likely be the deciding factor on where you live and what you buy. Saving the magic 20% deposit number is one of the biggest hurdles to entering the property market many buyers face, but the good news is there are options to help you get into your new home sooner.

Lenders Mortgage Insurance (LMI) is one route you can take if you don’t have the full 20% deposit. While it is an extra cost on top of your loan, it could help you get into your own home much sooner than you would have otherwise.

There are also government grants and schemes such as the First Home Guarantee which can help take some of the pressure off saving up a deposit.

Lifestyle

How you live your life is another important factor to think about. There are trade-offs with each and they should be considered in your decision-making process. If you’re after low-maintenance, then apartment living is a good option to consider because you won’t have to spend your days off mowing the lawn and tending to the garden.

Apartment life may also give you access to extra amenities such as pool, gym or other community areas you may not have in a house.

Houses have more space comparatively, but that also means more areas to heat and cool, more furnishings to buy and more rooms to clean.

Apartments will also have strata by-laws which may restrict how you use your space, and ongoing fees you’ll have to pay to your owners’ corporation. That’s not to say houses don’t have ongoing costs for repairs and upkeep, but you’ll be able to make your own decisions on how you use your space and what changes you might like to make.

There is also the privacy aspect to consider. Living in close proximity to your neighbours in an apartment means you might know more about their lives than you’d like to, and vice versa.

Room to grow

In addition to more living space from the outset, a house will give you the freedom and flexibility to add on to or renovate as your family grows or your needs change. You’ll have to work within council and building codes, but you won’t have to get permission from any strata or owners’ bodies to upgrade your kitchen or bathroom.

What about investing?

Using your property to earn investment income can change the equation completely, and whether you decide on an apartment or house will depend on your investment strategy and goals.

Two additional factors to those above you’ll want to consider are rental income and capital growth. You’ll need to do plenty of research to determine how they fit within your strategy, and take into account the constant flux of the property market so you can withstand any major market shifts.

Making the right decision

Whichever option you decide, it’s important to plan ahead. While no one knows exactly what the future holds, if you’re planning on starting a family in a few years, will you want more space and flexibility than an apartment can provide? Or if the kids will be moving out soon, do you need the extra bedroom and study space?

Once you’ve got a good idea of your needs and budget, you’ll be in a good place to make the apartment vs. house decision.

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