Do you dream of a house on a mythical quarter-acre block complete with a Hills Hoist?
- Home ownership in Australia
- What to consider before buying
- Buying a detached house
- Buying an apartment
- Buying a townhouse
- Which one to invest in?
Maybe you’re more keen on the inner city lifestyle with bars, cafes and restaurants on your doorstep.
Or perhaps you just like the idea of having a gym and a pool in the building while being on top of the busway and right next to Aldi.
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
Smart Booster Home Loan
- Discount variable for 1 year <=80% LVR
- No ongoing fees
- Unlimited redraw facility
Monthly repayments: $1,476
- Discount variable for 1 year
- No ongoing fees
- Unlimited redraw facility
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
Home ownership in Australia
Home ownership in Australia is changing. Once the domain of singles, young couples and downsizers, apartments are now home to growing families too.
In 2010, just 27% of homes being built were apartments. Compare that to nearly ten years later where apartments account for almost half (46%) of all homes built, according to CommSec data.
The most recent census found that there is now one occupied apartment for every five occupied separate houses in Australia - compared with one to every seven back in 1991.
But while apartment living is statistically ahem, on the rise (pun intended!), the good old detached house still remains the most popular property type among us Aussies.
Townhouses might soon overtake. ABS data shows approvals for townhouses has consistently been increasing since 2011. In some areas, the growth has been exponential. Townhouse approvals in New South Wales and Victoria grew by around 120% over the six-year period from 2011 to 2017 – highlighting a growing appetite for semi-detached dwellings and townhouses from homebuyers.
Detached homes are predicted to lose dominance over the other dwelling types, accounting for less than half of Sydney’s housing stock by 2026, according to a CoreLogic report.
When it comes to choosing your first home, one of the big decisions is likely to be which kind of property you should go for – an apartment, a townhouse, or a typical detached home?
There’s no easy answer because each option has its benefits and drawbacks. As a home buyer, it depends on your individual needs.
What to consider before you start looking for a home
Deciding which type of property to buy isn’t always an easy decision.
When choosing between a house, an apartment, or a townhouse, there are quite a few factors to consider. These include whether you’ll need more space in the future if you’re planning on starting a family, if you plan on living in the property, or are buying it as an investment property to rent out.
Here are a few questions you should ask yourself before you start your property hunt to help determine which property type is best for you.
Questions to ask yourself:
- Where do you want to live?
- How big is your family?
- What can you afford?
- Do you mind paying body corporate fees?
- Is a garage essential?
- Do you want a backyard?
- Do you have pets?
- Do you mind sharing facilities like a pool/gym?
- Do you want facilities like a pool or gym?
- Will you need to upsize or downsize in the future?
- Do you want to do renovations?
- What are you or aren’t you prepared to compromise on?
- Do you want to own land?
- Do you mind living close to your neighbours?
- Will you be an owner-occupier forever? Or will you rent out the property at some point?
- If so, will renters find the property appealing?
What is a detached house?
A detached house is your typical stand-alone dwelling where the buyer is purchasing the land on an individual title.
Detached houses are easily the most popular property type for owner-occupiers in Australia, with 72.9% of the population living in one in 2016, according to the most recent census figures.
Detached homes offer the most flexibility, space and privacy compared to apartments and townhouses. They do have their drawbacks though, namely the higher utility bills, more space to maintain, and the often higher cost.
Pros of buying a detached house
1. More space
If it’s space you’re after, houses offer a lot more room to move than apartments and townhouses. This makes detached houses a good option if you’ve got a big family or want room to grow.
2. Outdoor space
Unlike apartments, most houses come with a front and rear backyard. If you’ve got a green thumb, want to expand the footprint of the house, or have kids that need room to roam, a backyard is a good thing to have. You can build a pergola or entertaining space, and add a pool if you’ve got enough outdoor space.
3. More privacy
A big benefit of living in a house instead of an apartment is that you’re (usually) not living in close proximity to the neighbours.
No need to worry about overhearing your neighbours’ late night activities (wink) through the paper-thin walls, and then awkwardly running into them the next morning in the lift.
When you live in a house, the only time you have to give your neighbour Shirley a wave is when she’s watering the yard as you pull out of the driveway.
If you own your house, you can more or less do whatever the heck you like (within reason of course). As long as you keep council and building regulations in mind, you’re pretty much free to renovate your home however you want.
Always dreamed of having a bright pink bathroom with carpet and a gold bathtub? I’m seriously questioning your interior design choices (and so will potential buyers if you ever try to sell) but you can pretty much renovate your home as you please.
You can also extend the footprint of the house by tacking on additional rooms – something you definitely can’t do in an apartment.
Cons of buying a house
1. Bigger bills
Living in a house is generally more expensive than living in an apartment, simply because you have more space to heat and cool (oh hey there, big electricity bill), and more furniture to buy.
2. More maintenance
I have enough trouble maintaining my tiny two-bedroom apartment (mostly because I am extremely lazy) – but a house? You’ve got lawns that need mowing, gutters that need to be cleaned, trees that need to be trimmed, windows that need washing, patios that need to be swept… and we haven’t even started on the inside jobs yet. Maintaining a house is a lot of work. If you love spending your weekends gardening, doing a bit of DIY and getting your hands dirty – go for it.
If you love the low maintenance lifestyle and would rather spend your weekends brunching and binging telly in bed, apartments are infinitely more appealing.
3. More expensive
Houses are, generally speaking, more expensive than other property types in the same area. In Wooloowin, an inner-city suburb in Brisbane, the median house price is $818,000 while the median unit price is $330,000, according to Domain. Similarly, in Melbourne’s inner suburb of Richmond, the median house price is $945,000 while the median unit price is a much more digestible $390,000.
That’s because the land detached houses are on appreciates in value as the population increases. Buildings, on the other hand, depreciate in value through wear and tear, and need to be maintained. Houses also have greater potential to grow in value through renovations, extensions or a rebuild.
What is an apartment?
Apartments have long been a popular option for those who either can’t afford to or simply don’t want to live in a detached house. An apartment is a self-contained flat that’s part of a bigger complex. When you own an apartment, you’re on a strata title. This means the apartment belongs to you, but ownership of the common property (the hallways, rooftop space, lobby, etc.) is shared with the different owners.
Being on a strata title also means you belong to a body corporate and have to comply with certain bylaws. You’ll need to pay body corporate fees to cover the wear and tear of the common areas.
Because they’re generally more affordable than houses and are often in convenient locations, apartments are favoured among first home buyers and property investors.
Pros of buying an apartment
There are some exceptions to the rule, but most apartments are cheaper to buy than houses. Not only are they more affordable, but you’re spoilt for choice.
Big cities like Sydney, Brisbane and Melbourne are in a boom of new property developments – apartments are popping up faster than you can say ‘flammable cladding’.
2. More secure
Would-be thieves often have to pass through several layers of security to get to your apartment door.
Many apartment buildings will have locked security doors at their entrances as well as secure parking garages that can only be accessed if you have a swipe card or remote.
Lots of buildings also have secure lifts where you need a swipe card to access floors, and you can only access the floor you live on.
3. Low maintenance
If you hate spending your Sunday afternoon vacuuming and mopping room after room, apartment living might be the low maintenance solution to your cleaning woes. Hooray for less space to clean!
Chores like repainting the outside of the house, mowing or cleaning gutters will become a thing of the past. When you own an apartment, the only outside space you have to worry about is the balcony. Easy peasy.
Apartment living can give you access to a range of amenities you may not otherwise get with a house. Think swimming pool, indoor gym, rooftop entertaining, covered parking and a security system. Plus, you don’t even have to maintain the pool! Win-win.
Cons of buying an apartment
1. Parking can be limited
Not every apartment comes with a parking space, especially small one-bedroom units. Most apartments only come with one car spot, so if you’ve got multiple cars, you may have to pay a premium for parking or put up with endlessly circling the block looking for street parking.
Parking can also be a challenge for visitors – my building only comes with three visitor spots and next to no on-street parking.
2. There’s less space
The big reason apartments are often more affordable than houses is because they’re a lot smaller. While this means less cleaning, it also means less storage space for all your stuff. While this may not be an issue for someone living alone, the lack of storage space isn’t ideal for a bigger family.
My apartment doesn’t even come with a pantry for who knows what reason. I live alone so it’s not a huge issue, but imagine a family or even a sharehouse trying to manage without one. Nightmare!
3. Privacy and noise
Because you live in such close proximity to your neighbours, you’re going to see and hear them a lot more – whether it’s someone above you having a party on a Friday night or the couple next door having a domestic, you’re going to hear it all.
4. Strata/owners’ corporation by-laws
Ah, strata schemes. Love them or hate them, when you buy an apartment you immediately become part of one. As part of a strata scheme, you’re responsible for a share of the upkeep and maintenance of communal areas of the property, including the gardens, rooftop space, elevators, stairwells, halls, etc. This comes in the cost of paying strata fees.
Living in an apartment also means playing by the rules imposed by the owners’ corporation, like not hanging your washing over the balcony or sweeping rubbish onto your neighbour below (which you probably shouldn’t really do anyway). Any renovations or modifications you want to make to your apartment may also need approval first.
What is a townhouse?
If you can’t decide between an apartment or a house, a townhouse has a bit of both worlds.
A townhouse is a multi-level building that’s designed to mimic a house that is owned on a strata title. You own the dwelling but share the land with others.
Townhouses usually offer the space and privacy of a house, with outdoor space and room for the family to move. You still face similar restrictions to an apartment though, as you still have a body corporate.
Townhouses account for 12.7% of residential homes in Australia, according to the 2016 census.
Pros of buying a townhouse
1. More space than apartments
Townhouses usually have two stories, sometimes three, making them roomier than most apartments. Because of this, they’re ideal for families who need more space than what they can get in an apartment but can’t afford a house. They’re also good for downsizers, and they normally allow pets.
Unlike apartments, townhouses don’t have any shared areas and offer (almost) the same amount of privacy as a house – minus the shared wall/s. End townhouses that only share one common wall are usually more popular among buyers when the time comes to sell – but it also means they’re usually the first to go if you’re buying into a development.
Townhouses are normally cheaper than houses but more expensive than apartments. You are on a strata scheme though, so don’t forget to factor in the costs of maintenance and repair of common areas of the property.
Cons of buying a townhouse
1. No individuality
Townhouses in a development all tend to look… exactly the same. They usually have the same interior layout and exterior design, and much like apartments, owners’ corporation by-laws mean major renovations or changes to the exterior are out of the question. You may be able to make some interior changes, but it’s highly likely you will need approval first.
2. Less space than a house
While they’re bigger than apartments, townhouses obviously don’t have the same amount of space as a house.
3. Small land size
Just as the interior space is smaller than a house, the overall lot size for a townhouse is also smaller, which can be a sticking point for some people.
4. Shared title
Just like apartments, you’re also on a strata scheme when you buy into a townhouse. This means paying strata fees for the upkeep and maintenance of communal areas of the property.
Better to invest in a house, apartment or townhouse?
If you’re buying an investment property, the house versus apartment versus townhouse question is quite different. It comes down to your overall investment strategy and your goals. When you’re considering purchasing a property as an investment, rental income and capital growth are the two key things to keep top of mind.
As a general rule, houses tend to generate better long-term capital growth, while apartments tend to generate better rental returns. However, much of this is dependent on the state of the property market and the economy.
Rental yield of apartments
Apartments offer an affordable entry point into the market in locations that may otherwise be beyond an investor’s budget if they were looking at houses. It’s all about location for tenants, so inner-city areas are more attractive, in return offering higher rental yields and investment security. If it’s high rental yield over capital growth you’re after, inner-city high-rise apartments can be ideal.
Insurance, maintenance and upkeep are often provided by the body corporate, so if you want to maximise rental income while minimising expenses, an apartment might be a better fit.
Capital gains of houses
If you’re after capital gains – i.e. a rise in the property’s value – bear in mind that historically, houses tend to command better long-term capital growth than apartments. Capital growth equals greater equity in the long run, which can give you a leg up on the property ladder later on.
Land is the major component that boosts the long-term capital growth of a house rather than the building itself, because a block of land is widely considered to hold more value than the floor space of an apartment. Of course, this doesn’t hold true in every case. For example, a block of land out near the desert is unlikely to be more valuable than the floor space of a penthouse overlooking Sydney Harbour. Location and other factors can have a much bigger impact.
So while a property’s type (i.e. house, apartment, or townhouse) might be a major consideration when assessing it as a potential investment, other elements need to be thought through, such as:
- Facilities (e.g. pool, gym, lifts)
- Nearby amenities (e.g. shopping centres, public transport)
- Demand for rental accommodation in the area
- Demographic of renters in the area (e.g. mostly uni students, young professionals, or families?)
Savings.com.au’s two cents
Whether you’re buying a property as your primary place of residence or as an investment, there are a lot of things you need to take into consideration when weighing up the house vs townhouse vs apartment conundrum.
If you’re looking for a home to live in, what are your short and long-term goals? Do you want to start a family in the next few years? Maybe your kids have moved out and you’re looking to downsize. Or you want a house with a self-contained granny flat for the purpose of renting it out so you can pay off your mortgage quicker.
Narrowing down your property options is easier when you know exactly what you need in a home or an investment property.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
- If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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