The pros and cons of buying an apartment or unit
As property prices in Australia continue to soar, more and more people are considering apartments as a viable option. This is evidenced in CoreLogic data that shows over 91,000 apartments were sold during the year ending July 2016, despite a slow down in the market.
If you're considering buying a home in the near future, apartments may be worth looking twice at, thanks to the considerable benefits they offer. These might include access to a better location, less time spent maintaining the property and higher rental yield for investors. On the other hand, an apartment may have a few negatives worth noting, from less space, to the potential of low capital gains.
Let's have a closer look and weigh up these pros and cons, with the simple purpose of helping make your next property purchase the right one.
Less maintenance is required
In an apartment, your strata or body corporate fees will often cover all exterior and building maintenance, including plumbing, wiring and several other things. All you'll have to worry about is pushing the vacuum cleaner around once a week and maintaining the space inside your unit.
A low-maintenance home is perfect for those who lead a busy life, such as ambitious professionals or travellers, providing a convenient place to relax in. On the other hand, a smaller space may not be ideal for those with pets, or a family to raise.
Additionally, if you want to customise the space to your needs, the owners corporation may oppose any renovations or modifications. As a result, when you purchase, finding interior structures and appliances to your liking is essential, because it's unlikely you'll be able to change them.
According to Your Home, if you do your research it may be possible to find a more relaxed body corporate, with more flexible rules. If you do, they may allow small modifications to your home upon request, or even agree upon some before purchase so that you can customise the space to your liking.
The median unit value is almost $180,000 less than that of houses.
The costs involved
When purchasing an apartment, it may be a good idea to purchase a strata inspection report. This is essentially a summary of all available research and information on the building's owners corporation and strata title, which will help ensure that you're fully aware of what's in store for you. My Body Corporate Report quotes a full strata report at at $249.95.
Purchasing such a report will help ensure that you're not surprised by an unreasonably costly special levy and that the owner's corporation is both trustworthy and reliable.
These costs are all offset by the fact that apartments are generally more affordable than houses. In fact, CoreLogic's monthly indices show that in Australia's biggest cities, the median unit value is almost $180,000 less than that of houses. For first home buyers and those looking for affordable property, this will make units an and apartments an extremely attractive option.
Supply increases and price drops
According to Commbank Property Insight Reports, apartment approvals reached a record high in Australia last year. Over 80,000 were under construction in our major cities at the start of summer and a further 117,000 were approved.
The market is beginning to see the effects of these increases in apartment development, and supply is catching up to demand. This has placed downward pressure on prices, causing value growth in units to slow and even grind to a halt. As a result, an NAB report shows that units only experienced value growth in Sydney and Melbourne of 1.5 and 3.5 per cent respectively, during the year ending July 2016.
This growth rate is set to slow even further, according to forecasts in a QBE report, which show Sydney units decreasing in average value by 2.7 per cent in 2017 and 3.5 per cent in 2018. Melbourne shows similar declines, dropping by 1.9 per cent in 2017 and a further 3.9 per cent over 2018.
The combination of record approvals and price drops should help ensure that there is a wide selection of affordable apartments throughout Australia.
Apartment development may provide a way back into the market for those who want to live near the city centre.
Location and convenience
The majority of developments and high-density apartments are focused on urban areas near the centres of large cities such as Sydney and Melbourne.
According to the Economist Intelligence Unit's 2015 Liveability Report, these two cities are amongst the top 10 most liveable in the world and, perhaps as a result, boast fairly high property prices.
Apartment development may provide a way back into the market for those who want to live near the city centre, but can't afford the $1 million necessary to buy a detached house in the area. This will allow every-day Australians to continue to access the many conveniences and efficiencies that central living offers.
If you're considering purchasing an apartment, get in touch with Cohen Handler. We know the Australian apartment market's ins and outs, and will put our extensive resources and market knowledge to task to guide you through the entire buying process.