Getting a Home Loan in Australia if you're living overs...
29 Nov 2023
Thinking about buying an apartment but not sure whether it’s the right move? Buying an apartment can be an easier first step onto the property ladder or even a more affordable way to expand your property portfolio. Whether you’re an owner occupier or an investor, buying an apartment definitely has its perks.
But there are still things you need to consider before taking the leap. Below are some of the pros and cons of buying an apartment.
Firstly, let’s discuss some of the benefits of buying an apartment or unit.
As briefly mentioned, buying an apartment will typically come with a cheaper price point than buying a house. This is evident in Australia’s median house price currently sitting at over $1 million, while the median unit price is just over $800,000 according to Domain.
This could potentially make buying a unit more affordable than buying a house. Not only will you need to save up less of a deposit to reach that 20% mark, you may find servicing the loan easier too.
You’ll find many units and apartments located within highly populated cities and beachside sanctuaries. If you want to live in these locations but can’t afford to buy a house, buying an apartment may be a suitable option. For example, the median house price in Sydney is $1.6 million, while the median unit price is $800,000 according to Domain - so the price of a house is double the price of a unit. If you want to live in a popular city, but can’t afford to buy a house, a unit could be a cheaper alternative.
Alternatively, if you want to buy an investment property, you may find that units are popular for renters. Be sure to do your research on the rents and vacancy rates of the area you’re looking to buy in order to work out what your rental yield could be.
Units will typically require less maintenance than a house. For example, there are no lawns to be mowed or hedges to be trimmed. Most maintenance issues - other than your typical plumbing or electrical mishap - will be taken care of by the strata committee. However, you’ll need to pay fees to cover things like:
With these pros in mind, it’s also important to look at the other side of the story. There are cons to buying an apartment that should be considered before deciding whether it’s the right investment for you.
While it’s usually cheaper to buy an apartment, you’re not likely to see the same capital gains. This is because, generally speaking, the value of a home is in the land, and apartments are usually on much smaller blocks than houses.
For context, house prices increased by 25.2% over 2021 according to Domain, while units increased by 7.7%. So, while it can be a cheaper entry point to the housing market, you are also not likely to see the same increase in value you’d see if you purchased a house.
Another potential con of apartment living is that you’re likely going to have shared living spaces, and you’ll have no space between you and your neighbours. You may end up sharing common areas like the carpark, lifts, pool, gym, or any other amenities available to all residents. You probably won’t have your own backyard (but you may have a balcony), and your walls will also be your neighbours walls. Meaning, you may not have the same amount of privacy you’d have living in a house.
When you live in an apartment with a strata scheme, as mentioned, you’ll need to pay some fees. Strata fees can range and are typically contingent on the services provided. For example, if you live in an apartment with an onsite manager, pool, gym, lifts, BBQ, and ample gardens; you will likely need to pay higher strata fees than someone living in a small apartment complex with little to no amenities.
You may also be restricted when you want to make changes to your apartment. If you plan on renovating or upgrading your new home, you’ll need to run this past the strata committee - and they will approve (or reject) your plans. You may not be able to make major changes to the structure of the apartment, especially if the complex’s plumbing or electricity is shared.
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