Buy Up or Out? | Apartments or Land?
Article by Michael Turner , Director of Young Property Investor
Sydney is growing immensely. So what do you buy, an Apartment or Land? Far out I hate decisions.
What do you pick? Sydney is growing at such a fast and alarming rate, and fast. Areas that were once huge farms and studs are now rapidly transforming into huge urban communities. In the same tone, areas that were once, quiet low residential towns, are going up, with huge towers and apartments being built slowly around them.
So, what do you pick as an investor? What are the benefits or either? Honestly, this is going to be very general advice, and should be taken at face value. There are many different options out there, and it can differ based on where you buy, what you look for, the location of both and much more. Make sure to analyse the situation and tailor it for you.
There is a common misconception among investors, particularly unseasoned investors, that a house with land is always a much better investment, simply on account of a ‘larger’ home, and land size.
Where this was once true in the past, is no longer true. In the days gone past, quarter acre blocks, with a large sizable home was the Australian dream, however as the building gets further out (and the blocks sizes smaller), this dream has changed.
So what is the right choice? What should we consider?
Houses do increase in value by a little more than apartments over a long term period. Over 10 years, median apartment prices went up 72 percent, where as houses over the same period by 81 percent. A 9% differential there, but what else should you consider?
More money must be spent on houses generally than units, and generally, when calculated over a long term period, this equates to much more than your standard strata levies.
This capital growth also takes into account houses in inner-city areas. These areas are hotter markets, closer to the city. Most housing that is generally considered affordable by First Home Buyers are in the Greenfield Areas, and these areas are further out than these.
The Sydney suburb of Schofields is a great example. Thousands of new dwellings are being built in the North West suburb, however when they are all complete, there are far too many rentals on at any one time. The area doesn’t have the hot rental market, or demand, just yet, and not for a long time, while supply continues to pour into the market. Factor in that it is almost an hour to the CBD of Sydney, and there are often better options.
For the price point, $650,000 could get you a house and land package on the fringe of Sydney, or an apartment in the Inner-West/Parramatta.
Which one is worth more to you potentially? An apartment closer to the CBD is always going to attract more demand.
New Builds – The Dynamic
When they do mass rezonings of suburbs in the outer fringes of a city, they often begin developing, building houses and roads, however other infrastructure is often delivered after all the housing is built.
Schools are the last, as are parks, shops often come years later. So what is the appeal for a renter? Being slightly cheaper to rent of course is a benefit, but that’s no help to you and your cash flow as an investor.
On the flipside, an Apartment complex, new, is often build in existing areas with enough infrastructure (generally pending an upgrade too).
These areas generally have a railway station, bus networks, shops, schools and parks around.
These are immediately more interesting to a renter than a house.
Do your research
I say it a lot, but it is true. Nobody really has the exact same investment circumstance. For some, a home may be a better option for investment for your portfolio, whereas an apartment may be better for another.
Just do your research, and see which one achieves your goals for you.
Be diligent, and critical. There is no right or wrong answer, but there is more appropriate options.
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Michael Turner is a Partner of Young Property Investor (YPI), as well as AUD Property Group. He currently manages three other business ventures which have a keen focus on projects, development, residential property and future growth centres. He based in Sydney Metro and can often be heard on various radio mediums talking about Football and Property. You can find him on Twitter @blameturner or email him directly at [email protected]