updated 4th October 2016
Generally speaking in recent times there has been an increasing acceptance of apartments relative to houses to cater for our accommodation needs. Families are getting smaller; people have less time on their hands to maintain gardens etc. Investors need to be mindful that tenants gravitate to properties that meet their needs. These needs will largely depend on how they prioritize and weigh up each of the above advantages and disadvantages; how they feel about the notions of space, time, enjoyment and money in relation to a specific property.
Houses have typically shown more consistent growth over the long term in established areas. Therefore purchasing properties with high land content is a one way to increase your chances of securing better future growth if it is in an established area.
You usually own the land and so therefore you also have greater control over what you want to do with it. This means there are more options open to you (depending on Council regulations in the area you are purchasing) to modify the property and add value.
Because of the above, houses are typically more sought after and therefore it is usually easier to get finance. However townhouses are now getting popular as family sizes decrease and the number of retirees increase.
Big houses sometimes can be hard to get good rent. So be careful as sometimes houses do offer lower rental returns as a percentage of their value. There can also be higher maintenance costs.
One of the main advantages with apartments (or units) is that they tend to have higher rental as a percentage to their price.
Moreover, apartments frequently achieve just as good returns as houses in areas that are fully built up with height limit restrictions on further development.
Over the last decade we have also seen these types of assets start to become popular with the younger generation & empty nesters. They meet the needs of these demographics as lifestyle trends change. Partly because they typically are less labour intensive in terms of maintenance and so there is generally less time involvement and they also have potential benefits over houses because of the shared benefits of many apartment complexes from community/group services e.g. pool, tennis court, gym, activities, etc.
The main disadvantage is that apartments typically show less consistent growth in areas that are not fully built up. Owners of apartments also typically have less control over their asset as any changes they want to make to their property usually requires approval from a Body Corporate. So the opportunity to add value is restricted. Owners have to contribute to the running of the Body Corporate, so compulsory fees are generally higher.
It is also hard to get good finance for some type of apartments. Mainly company title properties and very small apartments (under 40 m2). So watch out for these types of properties!