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House, Townhouse or Apartment?

House, Townhouse or Apartment?

When purchasing a property in Melbourne, you will typically be making a choice between houses, townhouses and apartments. This article will explore the advantages and disadvantages of each type. While each option offers its own benefits, there are some broad considerations to always keep in mind.

Location is key, a strategically situated property can make all the difference whether you’re an investor or an owner-occupier. It’s important to consider that while you may make monetary savings in outer areas, you pay for it in the longer time it takes to get anywhere and do anything. Look at our Ultimate Guide to Buying Off The Plan for more discussion of location. 

Based on census data, the percentage of Australians living in medium and high-density residential dwellings has increased from 21 to 26 percent between 2012 and 2016, this is a staggering figure of 6,370,000 Australians now living in apartments and other higher density dwellings. This increase matches up with the growing preferences for the price, amenity and locational advantages of apartments. 

If you choose to purchase an apartment, a house or a townhouse, you will encounter different amenities and financial considerations.

House

A house refers to a single or multi-storey detached dwelling on land. Typically houses will have a garden or another type of outdoor area. 

Back in the old days, a house with a large quarter acre block was an integral part of the Australian Dream. However, as our lifestyles are changing and the property market becomes much more expensive, townhouses and apartments are becoming increasingly competitive with houses.

A house can offer the maximum privacy, space and independence for the purchaser, with slightly higher capital growth rates in comparison to apartments and townhouses. Having a garden and buying into the Australian Dream is an attractive idea but has become increasingly difficult to attain without significant compromises.

With the price increases of the last few years, houses have become more and more expensive. Long gone are the days of a $500,000 home in a central and convenient suburb. In turn, we have seen much higher interest in houses in the outer suburbs. While this is one way to get onto the property market, it often leaves you in an isolated suburb with few accessible amenities as well as higher exposure to market fluctuations in comparison to more central and well appointed areas.

Purchasing house and land packages can also be a risky endeavour. Depending on the builder, certain lower quality and cheaper packages can include foam cladding and waffle slabs (concrete/foam slab) which can lead to serious unforeseen maintenance costs further down the line.

Another key consideration with houses are the hidden costs of maintenance. While townhouses and apartments have a body corporation (strata) arrangement to share maintenance and upkeep costs between residents, the owner of a house is responsible for all upkeep and maintenance costs whether foreseen or unforeseen.

Townhouses

A townhouse refers to a single or multi-storey semi-detached dwelling. Townhouses may be accompanied by a garden or a courtyard on the property.

Townhouses can be a great option if you want to find a central location at more affordable prices. While you can access the location you would like, there remain some considerations. 

Townhouses offer a measure of privacy as well as better locations in central suburbs. The smaller footprint of townhouses in comparison to detached houses leads to lower upkeep and maintenance demands. 

When purchasing a townhouse, it is important to consider the developer – townhouses are  commonly developed by smaller scale, ‘mom and pop’, developers who may not understand the complexity of building projects and the financing of these projects. 

In order to compensate a narrow footprint, townhouses will often be two or three storey properties. This layout may prove to be less attractive over time, especially if children or older people will be living in the property. 

Oftentimes, townhouse developments will involve a body corporation to maintain the exterior and shared spaces in the project. While decision making will need to be more collaborative, this also allows inhabitants to share costs and responsibility for repairs. 

Apartment

An apartment refers to a residence that, along with other apartments, is part of a larger structure. Apartment projects may offer shared or private gardens as well as balconies and other amenities.

Like townhouses, apartments have become increasingly popular in Australian cities as they offer great locations and cheaper prices in comparison with detached housing. Apartments are only getting better to live in with higher quality developments ensured by improvements in design standards as well as developers independently responding to a more diverse market.  Increasingly, developers are creating boutique, medium density projects that comprise 3 to 5 floors- a big difference to large scale and sometimes impersonal skyscraper developments. 

Apartments can be great for investors as well. The State Government committed to funding construction and improvement of infrastructure in activity centres in its Plan Melbourne 2017-2050 report. This has led many local governments to zone for higher density apartment developments in these highly sought after locations close to education, business and entertainment precincts. 

Apartments generally offer higher rental returns than houses with lower maintenance costs. With higher returns, you can utilise positive gearing to increase lending capacity and in turn build your property portfolio steadily and securely through financing. 

With the increased affordability of apartments, you can access great areas, amenities and connections. Especially if you’re transitioning from renting to owning, an apartment can be a great way to remain in the area where you’ve found and built your community. 

With a smaller, generally single level footprint, apartments are a great opportunity to decrease the time and money spent on maintenance and upkeep. We would all love a dust and a vacuum to last only ten minutes instead of thirty! As with townhouses, a body corporate will organise and maintain the upkeep of the exterior and shared spaces – in turn allowing ongoing costs to be shared by residents. 

With increased diversity in the apartment market, you will be able to find the perfect one for you that hits the ‘Goldilocks’ zone of design, location and amenities. You will be able to remain in the areas that you love as well as build new communities with your fellow residents.  

Disclaimer: The information published on this website are of  a general nature only and does not consider your personal objectives, financial situation or particular needs and should be constituted as financial or legal advise.  We make no warranty as to the accuracy, completeness or reliability of the information, nor do we accept any liability or responsibility arising in any way from omissions or errors contained in the content. We strongly recommend that you obtain independent advice before you act on the content.

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