29 Jun Houses vs Units: Which is Best?
When new homebuyers looking to enter the market all are faced with the question of not only where to buy but also what to buy.
The main consideration is normally between a house or unit. If you’ve got a growing family then the choice might have already have been made for you, however, if you’re tossing up which is best as an investment, then it’s worth looking at the advantages and disadvantages of both and then you can begin the conversation with you mortgage broker in Melbourne.
Houses
Over a long period of time house prices have outperformed units in terms of price gains. If you think about it land is scarce but apartments are not. As the population of Australia increases, there are always going to be more people in need of a home which requires land.
Houses are also normally required if you’ve got a growing family and simply need space.
However, houses are more expensive than units. If you need to be close to the city then houses in Melbourne might be out of your price range.
Similarly, if you are buying as an investment, the high price of houses, means that they are likely to attract a far lower rental yield. That means you will need to borrow more and also have a bigger gap between your rental income and your repayments. A classic negatively geared investment.
That said, there are houses available that are cheap, but these are normally in the outer suburbs. Many first home buyers fall into the trap of buying a new house in a new housing estate.
While this is a house, there is little or no scarcity in these areas and plenty of land, so there will likely be limited capital growth for many years.
If you’re looking at a house, it might be better to try to find a middle ground. Buy an older house in an established suburb as close to the city as you can afford. The first thing to do here is to speak to your mortgage broker in Melbourne to determine what sort of budget you have to work with.
Units
Units are often far more appealing to investors than owner-occupiers because they are cheaper and also have higher rental yields.
They are also a good way to get into the market for a first home buyer who wants to be as close to the city as possible for the great lifestyle that it provides.
However, as we already know, you will likely not see the same level of growth in units as you would with housing.
If you are looking to buy a unit, you are far better off buying into a small complex with no strata fees. This way you can often get a great location, without the costs.
Many unsuspecting buyers opt to buy into a high-rise apartment building, off the plan and then fall into the trap of not getting any growth for a long time while also having a lot of trouble selling it when they do want to upgrade.
Generally, rental yields are higher for investors, but you must factor in the high strata fees that come with units. This can often kill your yield as an investor and adds significantly to your costs as an owner-occupier.
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