Considering an Apartment to Enter the Property Market?

Considering an Apartment to Enter the Property Market?

Want to jump into the property market but don’t have the budget for a house? A unit or apartment might be your ideal starting point. According to CoreLogic data, unit values are rising faster than house values in over half of all Australian suburbs.

Besides being more affordable than houses, apartments offer several benefits. Let’s explore the pros and cons of investing in an apartment versus a house.

Pros of Investing in an Apartment

1. More Affordable Entry Point

The median house price in Australia’s capital cities is $975,592, while the median unit price is $669,434. This significant price difference means you’ll need a smaller deposit (usually around 20% of the purchase price) and might find it easier to service the loan on an apartment.

2. Fewer Maintenance Responsibilities

Owning a house means you cover all repair and maintenance costs. In contrast, apartment maintenance costs for common areas are shared among unit owners through a body corporate scheme. Typically, there’s less maintenance required for a unit, and you might avoid tasks like lawn mowing.

3. More Affordable Expenses

Certain expenses, such as council rates, are usually lower for units than for houses. Lower fees can result in higher returns on your investment.

4. Potentially Higher Rental Yield

Units often offer higher rental yields than houses because you can invest less money for a similar rental income. This may improve your ability to cover mortgage repayments and other expenses.

Cons of Investing in an Apartment

1. Strata Fees

Owning an apartment in a strata scheme means you’ll pay body corporate fees, which can be substantial and may increase over time. Apartments with more amenities, like pools and gyms, typically have higher fees.

2. Restrictions

Renovations may require approval from the strata committee, especially for changes affecting the exterior or shared utilities. There could also be pet restrictions, limiting your pool of potential tenants.

3. Oversupply Concerns

In areas with many new high-rise apartment blocks, oversupply can impact your property’s capital growth, rental yield, and tenant demand. Experts recommend seeking low-rise or boutique apartments in areas with strict planning rules limiting new developments.

Discuss Your Finance Options

Whether you’re considering a small studio apartment, a larger unit, or a house, we can help you explore your finance options. We’ll guide you through available investment loans and identify which ones suit your financial situation and goals.

Get in touch today to learn more.